The performance of Binding Shadow Stone Innovation has surged, and Hongjing Optoelectronics will meet on the GEM this week

Image source: Visual China

Blue Whale News, October 11 (Reporter Shao Yuting) On the evening of October 8, the official website of the Shenzhen Stock Exchange disclosed that it would review the initial offering of Guangdong Hongjing Optoelectronics Technology Co., Ltd. (hereinafter referred to as "Hongjing Optoelectronics") on October 14.

Hongjing Optoelectronics submitted an application on June 26, 2023, and the proposed public offering of no more than 15,886,700 new shares and raising 488 million yuan will be used for optical lens and module capacity expansion projects, R&D center construction projects and supplementary working capital, and the sponsor is Shenwan Hongyuan.

In the early days of its establishment, Hongjing Optoelectronics originally focused on the smart car market, until 2022, when it "embraced" the thigh of Yingshi Innovation and converted to the track, and its performance surged. However, before the submission of the statement, Hongjing Optoelectronics had a VAM that did not meet the standard, and the investors did not ask for a repurchase, and after the performance commitment period, a number of investors invested in the shares to push up the valuation of Hongjing Optoelectronics, and Hongjing Optoelectronics entered the IPO fast lane.

From in-vehicle cameras to action cameras, the performance of the company has surged

In August 2012, Zhao Zhiping founded Hongjing Optoelectronics, producing optical lenses and camera module products, focusing on the smart car market, and the products have entered the supply chain of well-known domestic and foreign automobile brands such as Mercedes-Benz, Nissan, BYD, Geely, etc.

According to the prospectus, from 2021 to 2023, Hongjing Optoelectronics will achieve operating income of 252 million yuan, 446 million yuan, and 773 million yuan respectively, and deduct non-net profit of 14.971 million yuan, 50.5689 million yuan, and 116 million yuan respectively.

In 2022, Hongjing Optoelectronics' operating income increased by 77.38%, and the net profit after deducting non-attributable to the parent company increased by 237.78% year-on-year, mainly due to the impact of the large-scale purchase of major customer Shadowstone Innovation Technology Co., Ltd. (hereinafter referred to as "Shadowstone Innovation"), a panoramic camera company with a global panoramic camera market share of more than 50%.

According to the prospectus, in 2020, Yingshi Innovation entered the list of the top five customers of Hongjing Optoelectronics, ranking second, and the main procurement products were consumer camera modules, with a purchase amount of 31.0406 million yuan, accounting for 13.20% of Hongjing Optoelectronics' operating income that year. In 2021, Yingshi Innovation did not enter the list of the top five customers of Hongjing Optoelectronics. Subsequently, in 2022, Yingshi Innovation purchased consumer camera module products worth 144 million yuan from Hongjing Optoelectronics, which sought to be listed this time, accounting for 32.20% of the latter's operating income, and became the largest "gold owner" of Hongjing Optoelectronics, and this large order directly pushed up Hongjing Optoelectronics' operating income.

In 2022, the two parties signed a strategic cooperation agreement, in which Hongjing Optoelectronics promised that the products it supplied to Yingshi Innovation would give the most preferential support in terms of cost, and the profit margin would not be higher than that of similar products cooperating with other customers. In 2023, the purchase amount of Yingshi Innovation from Hongjing Optoelectronics will increase to 354 million yuan again, accounting for 45.84% of the revenue.

The cooperation between the two has also changed the product structure of Hongjing Optoelectronics.

Hongjing Optoelectronics mainly has four major products, including smart car optical lenses, smart car camera modules, emerging consumer optical lenses, and emerging consumer camera modules.

From 2020 to 2023, the sales revenue of smart car optical lenses will be 76.1185 million yuan, 123 million yuan, and 140 million yuan respectively, accounting for 36.45%, 54.83%, and 18.27% of revenue, respectively, and the emerging consumer camera modules will be 15.5366 million yuan, 152 million yuan, and 356 million yuan respectively, accounting for 6.94%, 34.91%, and 46.48% of revenue, respectively.

Therefore, in the two inquiries, the regulator focused on the stability of the company's cooperation with its major customer, Shadowstone Innovation. In this regard, Hongjing Optoelectronics replied that the dependence on Shadow Stone Innovation is commercially reasonable, in line with the operating characteristics of the industry, and does not constitute a material adverse impact on the company's ability to continue operations, but if Shadow Stone Innovation requires the company to reduce the unit price of products, it may lead to a decline in the gross profit of the company's panoramic / action camera optical lens and camera module products, which will adversely affect profitability.

There have been VAM failures, and the valuation of many shareholders doubled due to the capital increase before the submission of the statement

Since its establishment, Zhao Zhiping's Hongjing Optoelectronics has attracted a lot of attention from capital, and has received four rounds of financing, including Kunshi Chengchang, Kunshi Fortune, Yonghui Chemical, etc., and the company's valuation has increased from 230 million yuan to 1.19 billion yuan.

It is worth mentioning that in each round of financing, Hongjing Optoelectronics has signed VAM agreements with various investors, and before the IPO, Hongjing Optoelectronics has not completed the VAM agreement.

According to the prospectus, when the A round of financing was carried out in 2018, the investor signed a supplementary agreement with Hongjing Optoelectronics, stipulating that the investor enjoyed special shareholder rights in terms of share repurchase rights and anti-dilution rights. In addition, the VAM clauses signed in Series B, Series C and Series D financing all stipulate that if Hongjing Optoelectronics fails to formally submit a listing application before December 31, 2024 or fails to be listed on the public securities exchange market before December 31, 2026; The capital increaser/transferee has the right to request the company's founding shareholder/transferor to repurchase all or part of its equity.

Hongjing Optoelectronics promised that from 2018 to 2020, the company's net profit would not be less than 15 million yuan, 23 million yuan and 34 million yuan respectively, and if the amount was less than 80% of the net profit amount promised in the agreement, the investor had the right to require the company's shareholders to jointly acquire all or part of the shares held by them according to the agreed calculation method.

In February 2017, Hongjing Optoelectronics was listed on the New Third Board, according to the annual report disclosed at that time, from 2018 to 2020, Hongjing Optoelectronics' net profit was 6.1363 million yuan, 12.9321 million yuan, and 14.9058 million yuan respectively, which did not reach the amount agreed in the agreement, so the repurchase clause was triggered. However, on November 19, 2020, the company was delisted from the New Third Board and began to sprint to the A-share market.

Perhaps because the IPO matter was on the agenda, although the profit requirements of the VAM agreement had not been completed, the Series A investors did not request a buyback. According to the prospectus, Hongjing Optoelectronics, the actual controller and the relevant shareholders have signed the VAM Agreement with the investors, in which the special rights clause of the Series A investors will be terminated from the date of signing the Termination Agreement, and will be invalid and irresumible from the beginning. The special rights clauses for Series B, C and D Series investors have also been lifted from the date of acceptance of this IPO, and are invalid and irrestorable from the beginning.

Even, after the previous performance commitment period, a number of shareholders increased their capital, and the valuation of Hongjing Optoelectronics more than quadrupled from 230 million yuan to 1.192 billion yuan.

According to the prospectus, in February 2021, Wei Qingyang increased the capital of Hongjing Optoelectronics at a price of 5.86 yuan per share, and after the completion of the capital increase, the company's valuation was 230 million yuan. In December of the same year, Kunshi Wealth, Haining Junma, Chuanxin Future, Torch Group, Torch Huaying, and Ningbo Jincan increased their capital at a price of 13.77 yuan per share, and the company's valuation increased to 600 million yuan.

In August 2022, Desay SV and Qinhe Venture Capital increased their capital at a price of 19.8 yuan per share, and in October, Liwan Investment and Allwinner Technology increased their capital at a price of 25 yuan per share, and after completion, the company's valuation soared to 1.192 billion yuan again. At the same time, Desay SV and Qinhe Venture Capital increased their capital, and in the same month, they also acquired part of the shares of Hongjing Optoelectronics held by the founder Zhao Zhiping, directors Zhou Dong and Yi Xijun through equity acquisition, with a purchase price of 18.37 yuan per share and a total transfer consideration of 36.74 million yuan.

From 2021 to 2023, the company's transaction amount with Desay SV is 149,000 yuan, 2,208,200 yuan and 18,071,600 yuan respectively, showing a year-on-year growth trend. In 2023, Desay SV will also be the fourth largest customer of the company's accounts receivable balance, with account balances of 10.8391 million yuan, accounting for 6.31% of the current accounts receivable balance.

As of the date of this prospectus, Zhao Zhiping directly and indirectly controls 57.01% of the voting shares of the Company and is the controlling shareholder and actual controller of the Company, Desay SV holds a total of 5.6651% of the equity of Hongjing Optoelectronics, making it the fifth largest shareholder of the Company, and Qinhe Venture Capital holds a total of 3.7768% of the equity of Hongjing Optoelectronics, making it the sixth largest shareholder of the Company.