GoerTek's Pre-IPO investors may be more anxious.

"Investor Network" Jordan.

Recently, GoerTek Inc. (002241.SZ) released the latest announcement regarding the GoerTek Micro spin-off listing plan.

According to the official statement on September 14th, GoerTek Inc. plans to spin off its subsidiary GoerTek Micro and list it on the Hong Kong Stock Exchange, marking a strategic step for the company after attempting to independently list GoerTek Micro on the Growth Enterprise Market in 2021. Previously, due to various factors such as changes in the market environment, GoerTek Inc. decided in May 2024 to terminate the process of listing GoerTek Micro on the Growth Enterprise Market, formally withdrawing all related application materials.

Four months later, GoerTek Micro has once again initiated the listing plan. Given its current operating status with its parent company GoerTek Inc., and considering the concerns of investors in the Pre-IPO round of 2.15 billion yuan financing about the future exit path, this has put significant pressure on GoerTek Micro, making a Hong Kong listing a necessary choice.

Listing is an inevitable choice

For Pre-IPO round investors of IPO companies, a successful listing is usually the best exit path, and this is no exception for investors in GoerTek Micro.

According to the announcement, GoerTek Micro, as the only subsidiary under GoerTek Inc. focused on research, production, and sales of MEMS devices and microsystem modules, listing in Hong Kong will help solidify its leading position in the global MEMS devices and microsystem modules field, enhance international influence, thereby strengthening GoerTek Inc.'s overall competitiveness.

goertek inc.'s main customers include global renowned consumer electronics brands such as apple, honor, and xiaomi. The prospectus shows that goertek inc.'s sales from the top five customers account for over 70%, with the sales proportion to the apple industry chain alone exceeding 50%. The economies of scale from these customers have brought advantages to goertek inc. According to statistics, in 2021 and 2022, goertek inc.'s MEMS acoustic sensors market share were 29% and 26% respectively, ranking first globally for two consecutive years.

goertek inc.'s advantage in the apple industry chain has made it a sought-after investment in the capital markets. According to Qichacha, in 2021, goertek inc. completed a round of Pre-IPO financing with investment institutions including china securities co.,ltd., cicc qichen, cornerstone capital, jufeng sci-tech, industrial bank co., ltd., china merchants capital, and rongcheng city investment and development co., ltd., with a total financing of 2.15 billion yuan.

According to the prospectus disclosure, in March 2021, 14 institutional shareholders including qingdao innovation, gongqing chengchunlin, qingdao henghuitai and others, along with Tang Wenbo, increased their investment in goertek inc. by 2.15 billion yuan, with a corresponding increase price of 35.49 yuan per share, totaling a shareholding ratio of 10.41%. By calculation, goertek inc.'s valuation exceeded 20 billion yuan at that time. Qichacha shows that the above-mentioned investment parties are still on goertek inc.'s shareholder list.

Given goertek inc.'s position in the apple industry chain and the market expectations it carries, its IPO process has always been highly anticipated. However, the withdrawal of the GEM listing application and the subsequent pressure from potential investor exits may prompt goertek inc. to accelerate its pivot towards listing on the Hong Kong Stock Exchange to seek new development opportunities and capital support.

It is worth noting that when goertek inc. initiated Pre-IPO financing, goertek inc.'s market cap was at a high level, reaching 92.2 billion yuan. However, the market situation is unpredictable, and goertek inc.'s current market cap has since declined to around 63.7 billion yuan. Belonging to the 'fruit chain,' this trend in market value changes may indicate that goertek inc.'s valuation in the current market is also facing some uncertainty, and its valuation prospects may no longer be as optimistic as before.

The multiple challenges in the 'fruit chain'

At the performance level, goertek inc. also faces challenges, as its high dependence on major customers poses certain risks.

According to the prospectus released by goertek inc. in October 2022, the sales from the top five customers account for over 70%, with the sales proportion to the apple industry chain alone exceeding 50%. The high concentration of this customer structure makes goertek inc.'s performance highly vulnerable to fluctuations in major customer demand.

And this risk has already been reflected in Goertek Inc.'s performance. The company mentioned in its response to inquiries that in the first half of 2023, due to the decline in shipments of Apple's smart wireless headphones, the revenue and sales price of MEMS acoustic sensors in the headphone field both showed a significant decrease. Subsequent performance data showed that Goertek Inc.'s revenue slid from 3.348 billion yuan in 2021 to 3.015 billion yuan in 2023, and net income also decreased from 0.329 billion yuan to 0.226 billion yuan, reflecting the company's sensitivity to changes in large customer orders.

Turning to Goertek Inc., the challenges it faces are even more complex and diverse. As an important part of Apple's industry chain, Goertek Inc.'s performance is closely linked to Apple. In 2022, the company suffered a major blow to its performance as a certain overseas major customer paused the production of a certain smart acoustic integrated product, widely interpreted as an action by Apple to reduce orders. Since then, Goertek Inc.'s performance has been subject to significant fluctuations.

From 2022 to 2023, Goertek Inc.'s revenue decreased from 104.9 billion yuan to 98.6 billion yuan, with year-on-year changes of -34% and -6% respectively; while net income dropped significantly from 1.749 billion yuan to 1.088 billion yuan, with year-on-year declines of 59.08% and 37.8% respectively, indicating significant challenges in the company's profitability.

In the first half of 2024, there were signs of a certain degree of recovery in Goertek Inc.'s performance. Despite a 10.6% year-on-year decline in revenue to 40.4 billion yuan, net income saw a substantial growth of 190.44%, reaching 1.225 billion yuan, partially attributed to the lower base effect of the same period last year. However, compared to the mid-2022 net income of 2 billion yuan, the current level is still insufficient, and the company will need more time to fully recover.

In addition, Goertek Inc. is facing liquidity pressures. In the first half of 2024, the company's cash and cash equivalents amounted to 15.5 billion yuan, while short-term borrowings, notes payables, accounts payables, and current liabilities due within one year totaled 30.9 billion yuan. On other operational fronts, according to its 2023 annual report, several major investment projects failed to achieve expected returns, including the True Wireless Smart Headphones project, AR/VR and related optical module projects - AR/VR project, and AR/VR and related optical module projects - optical module. The cumulative investment in these projects has reached 3.2 billion yuan. All of the above collectively constitute the complex challenges currently facing Goertek Inc. (Produced by Think Finance)■