The stock price fell by 48% on the two days of listing, how to start the "long-distance running" of the zero-running car next

On September 29, Zhejiang Zero Run Technology Co., Ltd. landed on the Hong Kong Stock Exchange, becoming the fourth new car-making force listed in Hong Kong after "Wei, Xiao, Li". At the same time, Zero Run is also the first new power car company to use the Hong Kong Stock Exchange as the place of initial listing.

From the submission of the prospectus by Zero Running Automobile in March this year, to the IPO listing on the Hong Kong Stock Exchange on August 19 and approved by the Securities Regulatory Commission, and then to the listing hearing of the Hong Kong Stock Exchange on August 29, the landing of Zero Running Car on Hong Kong stocks is almost a smooth ride.

However, judging from the final IPO price and the results of the placement, the capital market does not seem to be enthusiastic about zero-run cars.

During the public offering phase, Zero Cars were not fully subscribed and received a total of 3,151 valid applications during the Hong Kong public offering phase, representing approximately 0.16 times the initial subscription available under the Hong Kong public offering, while the international offering was oversubscribed to approximately 1.33 times. In contrast, Ideal and Xiaopeng were oversubscribed by 5.5 times and 14.73 times respectively when they landed on Hong Kong stocks. In the end, Zero Run Auto raised a net investment of HK$6.057 billion through this public offering.

On the first day of listing on the Hong Kong Stock Exchange, the zero-running car suffered a break, falling by more than 33% on the first day. On the second day of listing, the stock price continued to fall by 22.26%, closing at HK$24.8, which was 48% lower than its HK$48 offer price, evaporating more than 20 billion market capitalization in two days, with a total market value of HK$28.3 billion at present.

Zhu Jiangming, founder and chairman of Zero Run Automobile, said that listing at this time is indeed not a good time node, because the global situation is turbulent and the international financial market is in a downward channel. But he also pointed out that zero-running cars do not care about the current time period, "building cars is long-distance running, we still have a long way to go." ”

In fact, in the current economic downturn, the successful issuance of this book proves its value to a certain extent.

Different from other new car-making forces, Zero Running Auto will use the Hong Kong Stock Exchange as the initial listing place, on the one hand, because the previously sought after US stock market is not very friendly to Chinese stocks, on the other hand, Hong Kong is a special market, where Chinese, European and American capital blossoms everywhere, and financing channels are diversified. Not only that, the Hong Kong stock market is suitable for new power car companies, because it is friendlier to startups and more tolerant.

Strictly speaking, zero-running cars also belong to cross-border car-making, which is the second entrepreneurship of its founder Zhu Jiangming. In 1993, 26-year-old Zhu Jiangming and his friend Fu Liquan jointly founded Hangzhou Dahua Electronic Equipment Factory with 5,000 yuan, which has since evolved into Dahua Shares, which is now the second largest enterprise in the global security market.

The story circulating in the industry about his founding of the zero-car car is that in 2015, Zhu Jiangming saw the Renault electric car on the street during a Spanish tour and had the idea of building a car. Then he teamed up with Fu Liquan to create a zero-run car.

Counting the C01, a zero-run medium- and large-scale pure electric sedan that was released on September 28, the company currently has a total of 4 models. The other three are S01, T03 and C11. In fact, when its first model, the S01, was launched, the slightly non-mainstream styling and the company's security background were once considered by the industry to be playing tickets. Sales were far from players such as Weilai and Weima at that time.

Official data shows that in 2020, a total of 11,391 cars were sold in the zero run. In 2021, a total of 43,121 cars were delivered for the zero run. From January to August 2022, Zero Running delivered a total of 76,600 vehicles. Among them, the sales volume in July and August this year exceeded that of Wei Xiaoli, becoming the biggest dark horse this year.

Continued sales growth is undoubtedly one of the essential elements of its successful listing. However, looking at its sales composition, it can be found that the zero-running model focuses on cost performance, and there may be a gap with the new forces in terms of profitability. For example, in 2022, the sales volume of zero-running T03 will be 10,266 units, accounting for 90% of total sales. In 2021, T03 accounted for 91%.

Time into 2022, the medium-sized SUV C11 with a price range of 180,000-230,000 yuan to give 8155 chips, more than 2900mm wheelbase, Nappa leather, bezel-less doors and other advanced configurations, still through the cost-effective conquest of the market. Although C11 sales are good, T03 is still its main sales force this year, accounting for more than 58%.

The problem posed by the cost-effective route is the lack of profitability. From 2019 to the first quarter of 2022, zero-running cars achieved revenue of 117 million, 631 million, 3.132 billion and 1.992 billion yuan, respectively. During the same period, its gross profit margin was -95.7%, -50.6%, -44.3% and -49.4%, respectively. The problem encountered by zero running is the same as that of Xiao Peng, making sales but not making money, but zero running is more obvious.

So how does Zero Run improve profitability next? The newly launched C01 medium and large sedan is one of its important initiatives. The price of 180,000-270,000 yuan has finally entered the mainstream price range of the current new forces.

It also said in the prospectus that new energy vehicles are becoming more and more popular among mainstream mass consumer groups, and it is expected that the high-end mainstream market with a price of 150,000-300,000 yuan will become the largest and fastest growing segment of China's new energy vehicle market from 2022. Zero-car cars will further penetrate the above market segments.

R&D expenses have also become the key to improving profitability in the next step of zero running. If you only look at the figures disclosed in the prospectus, from 2019 to 2021, the R&D investment of zero running cars is 360 million yuan, 290 million yuan and 740 million yuan, respectively, and the proportion of R&D expenses in total revenue is declining. The gap with "Wei Xiaoli" is not small. This, in Zhu Jiangming's view, is the "unique advantage" of zero running.

"Our cost is really not high," Zhu Jiangming said, "We released 3 cars before, spending 1.4 billion yuan on research and development, with an average of 500 million yuan per car." The most we save in research and development is the electronics part, because that's what we're familiar with. In Zhu Jiangming's view, the electronic part is their strong point, and other families hold high in Silicon Valley to establish a research and development team of hundreds of people, in his view, zero running does not need to spend this "unjust money". Therefore, "the previous 3 cars spent 1.4 billion yuan on research and development." ”

Based on this logic, the research and development cost of zero running does not look high, but it can achieve "global self-research". Zhu Jiangming believes that the entire platform-based architecture of the zero-running car, the entire core components are developed by themselves, manufactured by themselves, and a car is manufactured as an electronic product, similar to the model of BYD and Tesla. To put it simply, Zero Run wants to form a relatively complete industrial chain closed loop on its own. At present, in addition to the battery cells are purchased, the zero run has realized the self-development of major systems such as powertrain, BMS, and CTC modules. According to the plan, 40% of the funds raised from the listing of zero-run Hong Kong stocks will be used for research and development, including expanding the portfolio of intelligent electric vehicles and recruiting more research and development personnel.

"Going to sea" is an important part of the future business development of Chinese car companies. Thanks to the internal volume of the Chinese market, the competitiveness of China's electric vehicle products is ahead of most overseas brands, which creates favorable conditions for export business. In this regard, the zero run has been planned in detail.

At present, Zero Run has entered the Israeli market, followed by France. "This year will achieve a relatively large number of exports, this is our first step." Zhu Jiangming said. Europe is friendly to electric vehicles and mostly has a left-hand drive, so it is the first stop for most of China's electric vehicle exports. In contrast, although Southeast Asian countries have great potential, they are mostly right-hand and it is not worth spending additional modification investment in advance.

On the other hand, the European market safety and quality standards are the most stringent, if you can stand here, it is undoubtedly an endorsement of the quality of their own products, and this is precisely the label that Zero Run is trying to establish. "We want zero-run products to be the safest." Zhu Jiangming said.

For zero-running cars, going public is not the end, but a new beginning. In our opinion, the next zero car needs to do two things. The first is to increase the sales ratio of C11 and C01 high-end models and increase gross profit margins. The second is to sit on the brand label, the main safety or not, to the global self-research as the highlight, throughout the current head of the new forces, such as Weilai good service, Xiaopeng technology is strong, intelligent and self-control is good, they all have a distinct label. In this day and age, moderation may be a sign of failure.