Company background:

Itali Holdings is a company whose main business is investment holding. Currently, its main business is the automobile business, which mainly provides distribution and after-sales service for Italian brand cars in China. In February 2023, the company completed the 51% share acquisition of Wuhan Junyi; the property investment business, the main business revenue comes from an industrial building in Hong Kong, a discontinued factory, and an office building in Scotland invested by the company. In 2023, the company achieved revenue of 47.504 million yuan, of which the automobile business was 15.839 million yuan, accounting for 33%; revenue from the property investment business was 31.665 million yuan, accounting for 67%.

Deal description:

On September 11, 2024, the company announced the acquisition of 100% of the shares in Hudson Auto Technology for HK$0.166 billion. The company will issue 0.8 billion shares to the original shareholders of Hudson at a price of HK$0.13 (accounting for 13.13% of the expanded issued shares), and also issue acceptance notes totaling HK$61.9 million to the original shareholders of Hudson. Henderson promised that the consolidated revenue for 2025 will not be less than HK$0.464 billion. If it falls below the promised value, it will pay compensation with the company. Henderson's main business is an asset-light new energy commercial vehicle R&D, production and sales company. Currently, it is mainly sold in the European market.

After the acquisition of Henderson, the company will expand its automobile business, extending a single automobile sales and after-sales business to OEM automobile manufacturers integrating R&D, production and sales of complete vehicles, bringing more sustainable growth to the company.

Business model and business

Henderson makes full use of China's automobile production capacity and supply chain advantages, uses an asset-light model to give full play to its advantages in overseas markets, and integrates domestic resources to achieve R&D and manufacturing of new energy logistics vehicles. In 2023, the company signed a “strategic cooperation agreement” with Dongfeng Motor and signed a cooperation framework agreement with JAC. On the R&D side, the company passed the existing mature logistics models of traditional car manufacturers as prototypes, and the company developed differentiated R&D and product certification of core components and European standards.

The production side uses OEM, overseas asset-light investment in KD factories, and the sales side company cooperates with mature local distribution channels to sell products. The company's asset-light model will effectively improve the efficiency of capital use, reduce capital expenses on fixed assets, and shorten the R&D cycle.

Company advantages

The company drastically shortened the R&D cycle and early investment through an asset-light model. Taking the company's first new energy logistics vehicle eBOLD as an example, the company used Dongfeng's Yufeng products as the base model. There was no need to invest in developing the chassis, body, electronic and electrical architecture and vehicle design, and only customized and upgraded battery packs, intelligent UI, and regulations for European countries. The new model development cycle has been greatly shortened. It only takes 1 year from project establishment to delivery, and the initial investment is less than 0.1 billion yuan, reducing risk and the company's break-even point, and improving return and market fault tolerance. The company is expected to make a profit by selling 2,500 vehicles in '25.

The company's R&D uses a 7+N model, that is, the company currently has 7 core employees who are technical backbone, and N is temporarily employed from R&D institutions. Currently, there are 40 people. We will invite people to R&D institutions according to demand. Next year's job will be renamed, and its own R&D staff will be increased by about 10-15 people. The R&D cost rate is 13% next year and 7% the following year. Own core backbone: 2 people for the car body, 3 for electronic appliances and automation, the main technical backbone; chassis: 2-3 people. These are all leaders. People who need specific work will be drawn from outside, and every department will increase in the future; autonomous driving departments will also be added.

Furthermore, with China's mature new energy vehicle supply chain and production capacity, the company has a significant cost advantage over European automobiles. Currently, the total purchase cost of the company's products is about 0.195-0.217 million yuan, and the recommended retail price in Europe is 0.05 million euros, which is 10% lower than the actual purchase price of major European traditional logistics vehicle competitors. It also reduces the cost of use by 50% throughout the entire life cycle of use. Currently, the company has received orders for 800 vehicles in 2024, and plans to order 2,000 vehicles per month in 2025.

The penetration rate of the European logistics vehicle market is low, and there is plenty of room for growth

As the impact of the Russian-Ukrainian war gradually diminishes, the European economy has been recovering year by year. The number of newly registered commercial vehicles has increased year by year since 2021. The number of newly registered vans in Europe in 2023 was 1.47 million, an increase of 15% year on year; the number of new registrations from January to September 2024 rose 8.5% year on year. However, the share of new energy vans is still as low as 7%. The European Climate Law currently introduced by the European Union sets out the target: the carbon dioxide emission standards for passenger cars and light commercial vehicles will require the average carbon dioxide emissions of new vehicles to be reduced by 55% from 2030 and 100% from 2035 on the basis of 2021 levels, thus accelerating the transition to zero emissions. Therefore, the market space for new energy vans is still huge.

Looking at the current level of van sales in Europe, France, Germany, Italy, and Spain are the four largest sales countries. The sales volume in 2023 was 0.38 million, 0.26 million, 0.2 million, and 0.15 million, respectively. The sales volume of new energy vans was 0.03 million, 0.02 million, 70, and 0.01 million, with a share of new energy sources of 8%, 4%, and 7%, respectively. They are all lower than 19.92% of the EU's overall NEV penetration rate. The low penetration rate of new energy commercial vehicles is mainly due to 1) the high concentration of the European commercial vehicle market and the lack of intense competition; 2) from the cost side, due to the high cost of the overall new energy supply chain in Europe, the price of new energy commercial vehicles has no price advantage over traditional diesel vehicles; 3) European commercial vehicles have a long renewal cycle, and demand is stable, and there is no urgent need to centrally replace new energy commercial vehicles, so the replacement of new energy commercial vehicles will continue to be a smooth transition. 4) The market is smaller than the passenger car market, and the regulations are strict, and it has not been taken seriously by Chinese overseas new energy manufacturers.

Therefore, until 2035, whether from an environmental carbon emission perspective or an economic perspective, there is still huge room for growth in European NEVs, and Europe has not introduced any tariffs or trade sanctions on imported commercial NEVs.

summed

The acquisition of Henderson is a landmark for the company and marks the company's transformation into a new energy commercial vehicle manufacturer. Furthermore, with the company's asset-light model and China's mature NEV supply chain, it can quickly enter the European NEV blue ocean market. It provides a positive cycle for the company's rapid development, but compared to other European car companies or domestic overseas car companies, the company still has disadvantages in capital, technology, and brand influence. It is expected that in the future, the company will still need more investment in technology accumulation and expansion of brand influence in order to occupy a larger share of the market.

Significant risks

1) Macroeconomic development falls short of expectations; 2) European policy risks to imported commercial vehicles; 3) Increased industry competition