Why do new energy car companies compete for IPO Hong Kong stocks to become "hot cake"?

Since 2021, China's new energy vehicle market has shown an irresistible growth trend, with annual sales reaching 3.521 million, an increase of 1.6 times over the same period last year. China Automobile Association predicts that the sales of new energy vehicles will further increase to 5 million this year. Looking forward to 2030, the sales of new energy vehicles will account for about 40% of the total new cars. in this process, the competition in the new energy track will only become fiercer.

Under this trend, many new energy car companies are scrambling to start IPO. A few days ago, it was reported that Hezhong New Energy could conduct an initial public offering as early as the second half of this year and is currently working with financing advisers. Prior to this, auto companies such as Zero, Weimar, Chinese Express and Changan New Energy are also planning IPO, and most of them IPO are targeting Hong Kong stocks. However, at present, apart from Xiaopeng and ideal, no new car companies in Hong Kong have been successfully listed. When it is difficult to land, why do car companies still gather outside the HKEx?

New energy car companies compete for IPO

Car building is a business that costs money for a long time, with a large investment and a long return cycle. at present, even if it is a new force in the head, it is difficult for its own hematopoietic ability to offset losses to achieve profits, and external financing is still an inevitable choice for enterprises to survive. For this reason, new forces in car building have actively applied for IPO this year.

Nezhong Automotive, whose delivery volume has grown strongly in 2021, has been revealed to plan to list in Hong Kong this year. Its parent company, United New Energy, has selected institutions such as China International Capital Corporation and Citic Securities to help it IPO, in Hong Kong, according to foreign media reports citing people familiar with the matter. The company is also working with Morgan Stanley and UBS on initial public offerings, possibly as early as this year.

Not only that, Zero submitted its IPO materials in January this year, and the CSRC website disclosed a few days ago that it has received approval materials for overseas initial public offerings (including common shares, preferred shares and other derivative forms of stocks and stocks) of Zhejiang Zero Technology Co., Ltd., which means that Zero has launched a listing plan.

As early as October 2021, it was reported that Zero was considering a public offering in Hong Kong and had a preliminary discussion with consultants on the issue of IPO, which was expected to be listed as early as 2022, although Zero denied it at that time, but the submission of the above IPO approval materials seemed to confirm that Zero was going to IPO in Hong Kong.

In addition, among the new power enterprises, Chinese Express and Weima are also preparing for IPO. In January, it was revealed that Chinese Express was working with Morgan Stanley and UBS on IPO, which is considering an initial public offering in Hong Kong as early as this year. After Weimar received financing from Hong Kong last year, its founder Shen Hui also served as a non-executive director and co-chairman of the board of directors of 00860 HK, a Hong Kong-listed company, in January. Shen Hui also owns a 28.51% stake in the company. Some investors speculate that Weimar will be listed on the Hong Kong stock market through Lishi.

In addition to the new power enterprises, the traditional car companies recently have a tendency to spin off the new energy vehicle business from the group and launch an independent listing. At the end of 2021, GAC GROUP official announced that GAC Eian officially launched a mixed reform, and the EAN brand will realize asset restructuring and introduce external capital increase. Feng Xingya, general manager of GAC GROUP, has revealed that GAC Ean will comprehensively complete the mixed ownership reform in 2022 and choose the opportunity to go public.

Changan New Energy has been spun off from Changan Automobile, completing nearly 5 billion yuan B round financing in January this year, after which Changan New Energy plans to complete its listing around 2025.

New Power Enterprises aim at Hong Kong Stock IPO

Judging from the above-mentioned car company IPO's plan, the desire of the new power to rush to the capital market is the most urgent, and they all aim at the Hong Kong stock IPO.

In fact, Hong Kong stocks are not the original vision of the new power enterprise IPO. Weima Automobile completed the mentoring work for the listing of Science and Technology Innovation Board as early as February 2021, but a few months later, Weima ran to Science and Technology Innovation Board and finally ran aground. Zero ran also broke into the Guan Kechuang Board in 2021, and it plans to be listed in Science and Technology Innovation Board at the end of 2021 or early 2022.

At that time, Science and Technology Innovation Board's listing regulations broke the shackles of corporate profits and did not require listed enterprises to have profit restrictions. therefore, new power enterprises such as Weima, Zero run, Nezha, Tianjing and other new power enterprises all took Science and Technology Innovation Board as the listing target. However, from the current point of view, there is not a single domestic car company successfully listed in Science and Technology Innovation Board. Some analysts believe that although Science and Technology Innovation Board does not strictly require profitability, he has high requirements for the scientific and technological content of listed companies, and his tolerance for losses is limited. Under such conditions, it is obviously difficult for new power enterprises to meet the standards.

When Xiaopeng and ideal went public in Hong Kong, the new forces who lost collectively in Science and Technology Innovation Board smelled the opportunity of Hong Kong stock IPO. Compared with Kechuang Board, the profitability of Hong Kong stocks to listed companies is relatively loose, and Hong Kong's capital market is a trading market based on China and connected to the world, with diversified international investors, including institutional and retail investors, and stock liquidity is also relatively strong. In addition, Hong Kong stocks have also opened mutual investment channels such as the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect, which is conducive to the proximity of some listed companies to domestic capital.

In addition to the Kechuang board and Hong Kong stocks, US stocks have also attracted new forces IPO, US stocks are more mature in the listing system than Hong Kong stocks, and have a greater influence in the global capital markets. However, if you take into account the uncertainty of Sino-US relations and smart electric vehicle safety data and other factors, the new power to the United States IPO is not the best choice. On the whole, Hong Kong stocks IPO or new power enterprises are currently the most promising.

It is difficult for new forces to gather in Hong Kong stocks.

Judging from the current disclosure of information, the unlisted new forces are pinning their hopes on the listing of Hong Kong stocks, but after Xiaopeng and the ideal, there is a lot of uncertainty about whether there will be new forces landing on Hong Kong stocks.

The listing of Xiao Peng and ideal in Hong Kong is the second listing following the landing of US stocks. The Hong Kong Stock Exchange also has a stipulation treaty for secondary listing of enterprises in Hong Kong. For example, the stock exchange where the enterprises are mainly listed is a qualified exchange, and the business of the enterprise focuses on Greater China. It meets the requirements of innovative industrial companies with a minimum market capitalization of 40 billion Hong Kong dollars at the time of listing. These requirements are relatively easy for Chinese stocks listed in the United States. Through the springboard of US stocks, the probability of success of the secondary listing of Chinese stocks in Hong Kong has been improved.

As early as March 2021, it was revealed that it was interested in listing in Hong Kong. Since then, it has also received a letter of inquiry from the Hong Kong Stock Exchange, but after twists and turns, it has not succeeded in IPO in Hong Kong. Some analysts believe that it failed to return to Hong Kong for IPO or was "dragged down" by user trusts. It is said that Xilai is considering a secondary listing in Singapore, but will not completely abandon its plan to list in Hong Kong.

Compared with the new power of the head, the second echelon of the new power seeks to list for the first time in Hong Kong, and the listing standard is different from that of Xiaopeng and ideal secondary listing. It is understood that enterprises listed on the Hong Kong main board need to have business records for not less than three fiscal years and meet key indicators such as profitability, market capitalization and income. And GEM listing qualification threshold is slightly lower than the motherboard, more suitable for small and medium-sized issuers.

Wang Xianbin, a senior analyst at the Global Automotive Research Institute, believes that the capital market pays more attention to the growth of the enterprise, such as whether it has the potential to become a giant or a unicorn in the future; secondly, it also depends on whether the enterprise has unique product technology and can have sustained product returns; in addition, the composition of the enterprise management team is also the focus of the capital market, which is related to whether the enterprise operation can bring long-term return on investment.

Compared with Xiaopeng, ideal and other head enterprises, the new power second echelon enterprises still have a big gap in terms of delivery scale and product technology, and the market performance of the second echelon enterprises has really come to the fore since the second half of last year. Wang Xianbin believes that if the scale of the new power market is not large enough, corporate valuations will also be affected accordingly.

Cao he, president of Quanlian Automobile Merchants Investment Management (Beijing) Co., Ltd., believes that it will be more difficult for unlisted new forces to IPO in Hong Kong, and it is impossible for many new car-building forces to go public. Even if it goes public, the valuation margin of the company will be greatly reduced. In his view, the enthusiasm of the capital markets for investing in new forces in car-building has waned.

From the perspective of Wei Xiaoli, which listed US stocks, it was reported in May 2021 that the market capitalization of Lulai, ideal and Xiaopeng in the US was US $55.447 billion, US $17.053 billion and US $20.96 billion respectively, but as of February 22, US Eastern time, the market capitalization of US stocks in Ultimate and Xiaopeng has decreased by more than US $20 billion. Although the stock market values of ideal and Xiaopeng have increased, the values of the two Hong Kong stock markets are lower than when they were first listed. And this is already the performance of the new power head enterprise in the case of all-round development, for other new forces, it is not only difficult to land in the capital market, but also difficult to surpass the performance of the new power in the capital market even if listed.