Shenzhen Business Daily Reading Client Reporter Ma Qiang
According to the latest news on the official website of the Hong Kong Stock Exchange, Zhengxin Optoelectronics Technology Co., Ltd. (hereinafter referred to as Zhengxin Optoelectronics), the world's third largest photovoltaic module manufacturer and an innovative company on the New Third Board, submitted a listing application to the main board of the Hong Kong Stock Exchange, with Huatai International as its sole sponsor.
Screenshot source: Zhengxin Optoelectronics prospectus (Hong Kong stocks)
▍It is planned to issue more than 180 million H shares to open up financing channels in the international capital market
Zhengxin Optoelectronics previously announced on June 17, 2024 that the company's sixth extraordinary general meeting of shareholders in 2024 deliberated and passed relevant proposals, in order to promote the company's leapfrog development and open up financing channels in the international capital market, the company intends to apply for an initial public offering of H shares and listing on the main board of the Hong Kong Stock Exchange. The number of H shares to be issued by the Company shall not exceed 25% of the total share capital of the Company after the completion of the issuance, i.e. no more than 184.3 million shares (without considering the exercise of the over-allotment option).
Screenshot source: Zhengxin Optoelectronics announcement (new third board)
Some market analysts believe that in the context of fierce competition in the industry and the current tightening of A-share IPOs, listing on the Hong Kong stock market has become the first choice for Zhengxin Optoelectronics. And the actions of peers may also be "inspired" by the company. Previously, TOPCon cell leader Junda Co., Ltd. announced its listing in Hong Kong, and passed the IPO filing in only 83 days, which is expected to become the first A+H share photovoltaic cell listed company, which undoubtedly made a demonstration for Zhengxin Optoelectronics.
▍The world's third largest professional manufacturer of photovoltaic modules, last year's revenue and net profit "double decline"
According to public information, Zhengxin Optoelectronics is a veteran photovoltaic enterprise, the company was listed on the New Third Board in 2016 (code 838463), the largest photovoltaic enterprise on the New Third Board, and currently has four production bases in Changzhou, Suqian, Yunnan and Indonesia.
According to the prospectus, Zhengxin Optoelectronics is the world's leading professional manufacturer of photovoltaic modules, with a sales network covering more than 60 countries and regions around the world, and is a widely recognized photovoltaic brand in the international market. Since 2015, Zhengxin Optoelectronics has been ranked among the world's first-class photovoltaic module manufacturers by Bloomberg New Energy Finance. According to iResearch, Zhengxin Optoelectronics is the world's third largest professional manufacturer of photovoltaic modules in 2023, with annual shipments of 2.7GW. In addition, according to the information consulted by iResearch, Zhengxin Optoelectronics is also one of the earliest companies in Chinese mainland to enter the field of photovoltaic hydrogen production.
According to the company's 2023 annual report, Wang Guifen and Wang Yingchun, father and son, indirectly control a total of 93.47% of the company's shares through Zhengxin Investment and China Zhengxin New Energy Technology Co., Ltd., which has a significant impact on the resolution of the company's shareholders' meeting. Therefore, the actual controllers of the company are Wang Guifen and Wang Yingchun.
According to the prospectus, the company's customers mainly include IPP, EPC contractors and photovoltaic module trading companies. In 2021, 2022 and 2023, revenue from the top five customers together accounted for 38.6%, 32.8% and 39.2% of the total revenue of the same year, respectively. In 2021, 2022 and 2023, the largest customer contributed 9.3%, 12.1% and 10.9% of the total revenue for the same year, respectively.
According to the prospectus, Zhengxin Optoelectronics' revenue mainly comes from the photovoltaic module business (including photovoltaic module sales and the provision of photovoltaic module processing services) and the construction and operation of photovoltaic power plants. In terms of financial data, the prospectus shows that in 2021, 2022 and 2023, Zhengxin Optoelectronics' revenue will be approximately RMB2.813 billion, RMB4.172 billion and RMB3.579 billion respectively, and the company's annual profit during the same period will be approximately RMB25.568 million, RMB150 million and RMB93.914 million respectively. Judging from the data, the overall performance of Zhengxin Optoelectronics is not stable.
Screenshot source: Zhengxin Optoelectronics prospectus (Hong Kong stocks)
In terms of the latest annual report, the 2023 annual report disclosed by Zhengxin Optoelectronics (838463) on the New Third Board on April 26 this year shows that during the reporting period, the company achieved operating income of 3.588 billion yuan, a year-on-year decrease of 14.08%; Net profit The net profit was 92.2349 million yuan, a year-on-year decrease of 38.47%. This was mainly due to the decline in sales revenue and gross profit in the current period.
Screenshot source: Zhengxin Optoelectronics 2023 annual report (New Third Board)
In the Hong Kong stock prospectus, Zhengxin Optoelectronics gave a more detailed explanation of the decline in revenue in 2023: if divided by business line, the company's revenue decreased by 14.2% from RMB 4.172 billion in 2022 to RMB 3.579 billion in 2023, mainly due to the decrease in sales revenue of photovoltaic modules. The Company's revenue from the sale of photovoltaic modules decreased by 20.7% from RMB3,675 million in 2022 to RMB2,914.5 million in 2023. The decrease in sales revenue of PV modules was mainly due to the decrease in sales volume and average selling price of PV modules sold to overseas customers amid fierce international competition. Specifically, the sales volume of PV modules sold by the Company to overseas customers decreased from 1.8GW in 2022 to 1.4GW in 2023, while the average selling price (net of tax) of such PV modules sold overseas decreased from approximately RMB1.72/W in 2022 to RMB1.38/W in 2023.
In the company's 2023 annual report, Zhengxin Optoelectronics reminded of the risk of bad debts in accounts receivable. At the end of the reporting period, the book value of the company's accounts receivable was 638.77 million yuan, accounting for a relatively high proportion (15%) of total assets. Although the company's customers are enterprises with good credit status and strong strength, if there are adverse changes in the macroeconomic environment and customer operating conditions, the company will face the risk of bad debts.
Screenshot source: Zhengxin Optoelectronics 2023 annual report (New Third Board)
It is worth noting that the 2023 annual report also shows that Zhengxin Optoelectronics' monetary funds at the end of the current period decreased by 39% compared with the end of the previous year, and the company explained that the main reason was the decrease in the amount of margin at the end of the current period.
▍The industry market is highly competitive, and faces trade barriers and trade frictions
In the prospectus, Zhengxin Optoelectronics also talked about the pain points of the industry, that is, there is fierce market competition in the industry itself, and it is also facing the challenges of trade barriers and trade frictions.
The PV industry is experiencing a continuous rise in market demand, resulting in a more competitive landscape for global PV module manufacturers. To stay ahead of the curve, global PV module manufacturers are expanding their production capacity to strengthen their market position. This has led to a downward trend in the industry's capacity utilization rate in 2023. In this highly competitive environment, technologies and products that cannot keep up with the trend will inevitably be obsolete. As a result, the competition among global PV module manufacturers is expected to become more intense in the future.
China's PV industry dominates the world and continues to supply high-quality PV modules, but its internationalization process is facing increasing complexity and unpredictability. For example, the US Section 301 tariff measures, the European Union's proposed Net Zero Industry Act (NZIA), India's Model and Manufacturer Approved List (ALMM), and Indonesia's Ministry of Energy and Mineral Resources' ("MEMR") new regulations on private rooftop solar panel systems aim to strengthen the position of the local PV manufacturing industry. In addition to policy barriers, Chinese PV module companies also need to deal with anti-subsidy and anti-circumvention investigations, as well as various tariff barriers, which further compress profit margins and raise barriers to market entry.
▍The revenue of overseas markets has accounted for as high as 46%, and the gross profit margin of photovoltaic power plants has steadily increased into a bright spot
According to the prospectus, Zhengxin Optoelectronics sells products in Chinese mainland and overseas markets (mainly to countries and regions in Asia, Europe and the Americas). If revenue is broken down by geography, the majority of the Company's revenue during the Track Record Period came from product sales in Asia. In 2021, 2022 and 2023, the Company's revenue from Chinese mainland accounted for 26%, 26% and 44.6% of the Company's total revenue, respectively, and revenue from other Asian countries and regions (excluding Chinese mainland) accounted for 46.4%, 38.3% and 28.7% of the Company's total revenue, respectively.
Screenshot source: Zhengxin Optoelectronics prospectus (Hong Kong stocks)
It is worth noting that the prospectus shows that despite the volatility of the industry, the gross profit margin of Zhengxin Optoelectronics (especially the gross profit margin of the construction and operation of photovoltaic power plants) has increased steadily during the track record period. In 2021, 2022 and 2023, the Company recorded gross profit margins of 12.1%, 14.4% and 14.9%, respectively. During the Track Record Period, the gross profit margin of the photovoltaic power plant business was generally higher than that of the photovoltaic module business due to the difference in cost structure. Specifically, the cost of the photovoltaic power plant business is mainly related to depreciation, while the photovoltaic module business mainly includes the cost of raw materials and manufacturing expenses. In 2021, 2022 and 2023, the gross profit margin of the Company's photovoltaic module business was 10.5%, 12.9% and 11.4%, respectively, while the gross profit margin of the photovoltaic power plant construction and operation business was 45.3%, 45.4% and 57.5%, respectively.
Screenshot source: Zhengxin Optoelectronics prospectus (Hong Kong stocks)
Review: Tan Lugang