Affected by the improvement in macroeconomic quality and the slowdown, the development pace of China's construction machinery industry has slowed down in recent years, with sales of products in multiple segmented areas declining. However, it is under this backdrop that the new energy construction machinery has emerged, maintaining strong growth momentum over the past few years. Data shows that from 2019 to 2023, the market size of China's major new energy construction machinery categories increased from 16.4 billion yuan to 45.8 billion yuan, with a corresponding compound annual growth rate of up to 29.2%.

In the rapid expansion process of the industry, there are naturally players within the competition who can seize the opportunity, leverage advantages, and achieve scale upgrading through their own efforts. Take Borita, which recently updated its prospectus, for example. As a manufacturer focused on designing and developing construction machinery powered by new energy, in less than 10 years since its establishment, it has achieved vigorous development. Based on the shipments in 2023, the company ranks third and fourth respectively in China's new energy loader and wide-body dump truck manufacturers. In that year, Borita's revenue had reached 0.464 billion yuan.

Over the past three complete fiscal years, Borita's revenue has doubled successfully. However, behind the surface success, the company's losses have been widening annually. Behind the increased revenue without increased profits, what kind of business is Borita really doing? Knocking on the door of the Hong Kong Stock Exchange once again, can Borita capture the capital market's favor?

Stepping into the wind, the 'new star' among construction machinery manufacturers

Construction machinery includes various types of mechanical equipment, tools, and vehicles designed and used for various activities in industries such as construction and mining. In this industry where traditional giants are clustered, Borita, established at the end of 2016, can secure a place mainly due to its precise grasp of the opportunities for electrification and intelligence transformation in the construction machinery industry.

As traditional construction machinery relies on diesel internal combustion engines for power, this has posed many challenges to the world's economy and environment. Against this background, new energy technologies have gradually been widely promoted in the field of construction machinery in recent years, with particular rapid development in new energy loaders and new energy wide-body dump trucks.

As one of the few domestic manufacturers who have successfully developed and mass-produced new energy loaders, Borita introduced its first electric loader to the market in 2019, after which the company has maintained a fast pace of research and development and production.

It is also thanks to the increasing number of products being launched that Boreton's scale has achieved rapid growth. The prospectus shows that from 2021 to 2023, the company achieved revenues of 0.201 billion yuan, 0.36 billion yuan, and 0.464 billion yuan, doubling its scale over three years. In the first half of this year, Boreton's revenue reached 0.267 billion yuan, with a year-on-year increase of 65.9% on the same basis.

Further analysis shows that Boreton's revenue mainly comes from the domestic market, and in recent years, the company's product revenue structure has undergone significant changes.

According to the prospectus, in 2021, Boreton's revenue mainly came from the sales of electric loaders and electric tractors, with the latter accounting for 43.8% of the revenue, making it the company's largest product at the time. However, by 2023, electric loaders had become the most contributing product to the company's revenue, accounting for approximately 60.6%; followed by electric wide-body dump trucks at 27.3%; while the revenue from electric tractors had shrunk from nearly 90 million yuan two years ago to 28.551 million yuan, accounting for 6.1%.

In the first half of this year, Boreton achieved a revenue of 0.145 billion yuan solely through the sale of electric wide-body dump trucks, with a staggering 215.5% year-on-year growth in scale; at the same time, the company achieved revenues of 0.11 billion yuan for the sale of electric loaders and 1.456 million yuan for electric tractors. In addition, Boreton also generates some revenue from the sale of parts, providing services, and rental income, but the scale is relatively small.

While overall revenue continues to grow rapidly, Boreton has not been able to solve the challenge of profitability. During the reporting period, the company's gross profits were 7.325 million yuan, 8.173 million yuan, 9.279 million yuan, and 8.312 million yuan respectively, with corresponding gross margins of only 3.7%, 2.3%, 2%, and 3.1%. Looking at net profit indicators, Boreton's losses have been expanding year by year, reaching -97.467 million yuan in 2021, -0.178 billion yuan in 2022, and -0.229 billion yuan in 2023. As of 2024, the company's profit performance in the first half of the year has not shown improvement, with Boreton recording a high net loss of -0.154 billion yuan.

The industry's broad prospects for listing to 'replenish blood' and seek development?

According to the Zhitong Finance APP, although profits seem to have no timetable, considering the industry outlook, Boreton may currently be more inclined to sacrifice profits for scale growth in the fast-expanding new energy construction machinery sector to establish a greater competitive advantage.

According to the prospectus, Torch Insight Consulting predicts that the compound annual growth rates of China's new energy loaders and new energy wide-body dump trucks from 2023 to 2028 will reach 50.1% and 45.7% respectively, significantly higher growth rates compared to the overall performance of the construction machinery industry.

Although the industry's "cake" is large enough, it doesn't seem so easy for Boredon to ensure that they always stay in the center of the stage.

During the reporting period, the company's net cash flows from operating activities reached 0.271 billion yuan, 0.29 billion yuan, 0.194 billion yuan, and 0.184 billion yuan respectively. By comparison, during the same period, Boredon relied on cash flows from financing activities of 0.336 billion yuan, 0.522 billion yuan, 0.531 billion yuan, and 68.397 million yuan respectively. As of the end of each period, Boredon's cash and cash equivalents were 61.298 million yuan, 0.27 billion yuan, 0.422 billion yuan, and 0.257 billion yuan. It is not difficult to see that over the years, the company's operational development heavily relied on external financing activities. This may explain why Boredon is determined to list on the second market.

Certainly, a successful listing will undoubtedly help provide the "ammunition" that Boredon urgently needs for further development at this stage. However, from the perspective of secondary market investors, at least for now, Boredon still has a long way to go to realize the continuous growth of leveraging its first-mover advantage and scale advantage in the field of new energy construction machinery into profit. The uncertainty of this growth will undoubtedly reduce the company's attractiveness to those more conservative investors.