After waiting for 4 years, Nezha Automobile's IPO plan finally ushered in substantial progress.
On June 26, Nezha Automobile's parent company, Hezhong New Energy, officially submitted a listing application to the Hong Kong Stock Exchange, if the IPO is successful, Nezha Automobile is expected to become the fifth new car-making force listed on the Hong Kong Stock Exchange after Weilai, Xiaopeng, Li and Leap.
As early as July 2020, Nezha Automobile actively promoted multiple rounds of financing plans, aiming directly at the Science and Technology Innovation Board to achieve the goal of listing. Although Nezha Automobile ultimately failed to achieve its wish, its pursuit of the capital market did not stop. In the following years, Nezha Automobile reported several times that it would IPO in Hong Kong.
This time, Nezha Automobile submitted an IPO application in the Hong Kong stock market, which finally made substantial progress in its four-year listing road.
Two months ago, Nezha Automobile raised 5 billion yuan from a number of institutions. Zhou Hongyi, as one of Nezha's major shareholders, has also frequently brushed his face and traffic for Nezha Automobile this year. It can be seen that Nezha Automobile has made full preparations for this IPO.
According to the prospectus of Hezhong New Energy, the company's book cash is only 2.84 billion yuan, and the loss in fiscal year 2023 will reach 6.867 billion yuan, and the book funds are not enough to support the loss in the next six months.
Seeking listing is one of the important ways for enterprises to develop and grow, but for Nezha Automobile, the significance of listing is not only to grow and develop, but also to solve the current urgent needs.
The more you sell, the more you lose
Judging from the data disclosed in the prospectus, there are some challenges in the performance and sales of Nezha Automobile in recent years.
From 2021 to 2023, the company's operating income will be 5.09 billion yuan, 13.05 billion yuan and 13.55 billion yuan respectively. However, the company's net loss in the same period was 4.84 billion yuan, 6.666 billion yuan and 6.867 billion yuan respectively, and the cumulative net loss was as high as more than 18.3 billion yuan. This long-term and widening loss situation has put significant pressure on Nezha Automobile's short-term cash flow.
According to the prospectus, in the past three years, Nezha Automobile's operating cash flow was -2.99 billion yuan, -5.41 billion yuan and -4.35 billion yuan respectively. At the same time, as of the end of 2023, Nezha Automobile's cash and cash equivalents on its books are only 2.84 billion yuan.
Although it is the norm for new forces to lose money in car manufacturing, like Nezha Automobile, there are not many people who continue to have negative cash flow. This year, Nezha Automobile's book capital is only 2.84 billion yuan, and in the future, in the case of unsmooth financing, it will not be enough to support its losses in the next six months.
As a comparison, in 2023, the cash reserves of Ideal, Xpeng, NIO, and Leap will be 103.67 billion yuan, 45.7 billion yuan, 57.3 billion yuan, and 19.4 billion yuan respectively, which will not only have positive cash flow, but also have abundant reserves.
Nezha Automobile also mentioned in the prospectus that the company will use available financial resources, including existing cash and cash equivalents, unused bank financing and estimated net proceeds, to supplement its fundraising capacity (including government funds) to meet the company's current and next 12 months working capital needs.
It can be seen that Nezha Automobile has come to a critical crossroads in the development of its enterprise, and it urgently needs to be listed to solve short-term capital needs and ensure long-term competitiveness.
In the past three years, Nezha Automobile's gross profit was -1.748 billion yuan, -2.939 billion yuan and -2.014 billion yuan respectively, and the gross profit margin was -34.4%, -22.5% and -14.9% respectively, which still failed to turn positive.
According to the rough calculation of the loss amount and sales volume, the average loss of Nezha Automobile will exceed 50,000 yuan for every car sold in 2023.
Looking back on the past, the development process of Nezha Automobile has been slightly ups and downs. From 2021 to 2022, the delivery volume of Nezha Automobile reached 64,000 and 152,000 respectively, and in 2022, Nezha Automobile won the annual sales championship of new car-making forces. But in 2023, Nezha's car sales have declined significantly, and the annual delivery volume has dropped to 124,000 units.
Judging from the latest delivery situation, Nezha Automobile delivered 10,113 units in May this year, a year-on-year decrease of 22.4%, and the situation is still not optimistic.
At the beginning of this year, Nezha Automobile officially set an annual sales target of 300,000 units, however, according to the latest data, the total delivery of Nezha Automobile in the first five months of this year was 43,000 units, accounting for only 15% of the annual target. This figure is significantly lower than expected. According to this calculation, it is not easy for Nezha Automobile to achieve the annual sales target.
In the prospectus, Nezha Automobile made a full reminder of future risks: due to the limited business history, it is difficult to evaluate the business and future prospects; Vehicle performance may not meet user expectations, and the outlook is limited by many uncertainties.
In addition, Nezha Auto also stressed that it may be forced to cut or terminate operations if it cannot obtain external financing to continue its business because it requires a large amount of capital for its business development plan.
Zhou Hongyi "took flying", and Nezha survived in a desperate situation
Nezha Automobile's development this year does not seem to be so smooth, not only was it revealed that the "year-end bonus" was delayed, but the Nanning factory also fell into a state of shutdown for a time.
At the beginning of this year, first Nezha Automobile's employees questioned Nezha Automobile's year-end bonus gaffes on social platforms, and soon after, according to a visit by "Leopard Change", Nezha Automobile's Nanning factory has been suspended, and only the factory in Tongxiang, Zhejiang Province is running.
The continuous decline in sales, coupled with operational risks, has made Nezha Automobile's situation more and more difficult.
However, at the beginning of April, Zhou Hongyi suddenly officially announced that he had entered the automobile circle, auctioning Maybach, engaging in car evaluations and other behaviors made him become the top of the car circle. Zhou Hongyi also did not forget to promote Daniel Zhang, bluntly criticized Daniel Zhang's marketing strategy in the live broadcast, and suggested that he learn from Xiaomi.
In Zhou Hongyi's criticism and suggestions, Nezha Automobile has been on many hot searches within two months, which not only earned enough traffic, but also allowed Nezha's new car to get a good result of 30,000 yuan.
In late April this year, the Nezha L extended range version launched a total of 4 models, with a price range of 129,900 to 159,900 yuan. Within 35 days of listing, the number of orders exceeded 30,000 units, of which 95% of users chose the top 310 flash charging red-coated version. However, due to the somewhat conservative sales estimate, the production capacity of Nezha Auto's supply chain could not keep up, and Daniel Zhang also publicly reflected on Weibo.
Driven by Zhou Hongyi, Nezha Automobile's new round of financing has also been successfully put in place.
In mid-April this year, Tongxiang State-owned Capital, Yichun Jinhe and Nanning Minsheng Tripartite Capital and Hezhong New Energy jointly signed the "Joint Agreement on the High-quality Development of Hezhong Automobile". According to the agreement, the signatories will jointly provide a total investment of no less than 5 billion yuan to Hezhong New Energy. Since then, Nezha Automobile has been able to temporarily get out of the predicament.
A person familiar with the matter said that in addition to helping Nezha sell cars on the surface, Zhou Hongyi also made a lot of efforts in private. Nezha Automobile was able to get out of the same predicament as Gaohe Automobile and get a lot of investment, which has a lot to do with Zhou Hongyi's endorsement.
On Nezha Automobile, Zhou Hongyi invested real money.
In 2021, Zhou Hongyi invested 2.9 billion yuan through 360 Company, becoming the second largest shareholder of Nezha Automobile, with a shareholding ratio of 16.594%. Although Zhou Hongyi's latest shareholding ratio has dropped to 9.12%, at least more than half of the original investment has not been withdrawn, and it is still the fourth largest shareholder of Nezha Automobile.
According to the prospectus, Nezha Automobile has received 10 rounds of financing since its establishment, with a total financing of 22.844 billion yuan. There are many well-known enterprises such as 360 and CATL, as well as state-owned funds from Zhejiang, Jiangxi, Sichuan, Anhui and other places.
After going public, where is Nezha's road?
The prospectus also disclosed Nezha Automobile's overseas situation. In 2023, Nezha Automobile's overseas revenue will be 1.62 billion yuan, accounting for 12% of the total revenue.
Nezha Auto said that the IPO financing will be mainly used for strategic expansion in overseas markets, while strengthening its sales, service and charging infrastructure network in China, as well as meeting the general use of the company's funds. The overseas market will undoubtedly become a key area for the future development of Nezha Automobile.
Last year, Nezha Automobile's overseas sales exceeded 20,000 units, a year-on-year increase of 567%, accounting for 15.7% of its total sales, ranking first among domestic new car companies. The prospectus mentions that in 2023, the Nezha AYA series will rank first in the small pure electric vehicle market in Southeast Asia, with a market share of about 52%.
From January to May this year, Nezha's exports have reached 16,400 units, close to the overseas sales of last year, ranking fifth in the export volume of new energy vehicles of car companies.
However, whether it is the expansion of overseas markets or the deep cultivation of the domestic market, Nezha Automobile needs to improve its profitability. For example, by increasing the scale of sales or increasing the price of products, we can reduce costs and enhance competitiveness.
In the early stage, Nezha Automobile was mainly in the low-end market of less than 100,000 yuan, and Nezha V was the hot-selling main model, with a price of between 66,800 and 99,600 yuan after subsidies. However, the profit margins of low-end models are limited, and the intensification of market competition has further compressed profits.
At the beginning of this year, the aggressive pricing strategies of competitors such as BYD set the tone for the price war in the market in 2024. Faced with this challenge, Nezha Automobile began to deliberately avoid the low-end market and instead launched higher-priced models.
Judging from historical data, Nezha Automobile's single car price has been increasing, from 71,000 yuan in 2021 to 109,000 yuan in 2023, and it has reached 113,000 yuan in the first four months of this year. With the mass delivery of new models such as the Nezha L, it is expected that the price of a single vehicle will increase further.
Nezha Automobile's overseas layout is not only sales, but also includes the construction of local factories, which reflects its long-term development considerations. In May this year, Nezha Automobile's Indonesian plant was put into production, and the Thailand plant was officially put into operation in March this year, and Nezha's overseas model NETA V-II was fully delivered in Thailand on June 26. In addition, Nezha Automobile has built a plant in Malaysia, which is scheduled to start production in January 2025.
Looking back on the development of Nezha Automobile in the domestic market in the past 7 years, although the sales volume has not yet ranked among the forefront, by gradually shifting its focus to overseas markets, Nezha Automobile is expected to embark on a different development path from that of domestic new energy vehicle companies. The growth rate of overseas markets and the support for Nezha Automobile will be a key test in the future.