When will Nezha Automobile's urgent listing of "blood transfusion" become "hematopoiesis"?

Following "Wei Xiaoli Zero", another new car-making force launched a sprint to the Hong Kong stock IPO.

On June 26, the Hong Kong Stock Exchange documents showed that Nezha Automobile's parent company, Hezhong New Energy Automobile Co., Ltd., officially submitted a listing application to the main board of the Hong Kong Stock Exchange, with CICC, Morgan Stanley, CITIC Securities, ABC International, and CMB International as joint sponsors, which is expected to become the fifth new car-making force to successfully land on the Hong Kong Stock Exchange.

According to the prospectus, the financing of the IPO will be mainly used for the strategic expansion of overseas markets to enhance the global influence of the Nezha automobile brand; Enriching product portfolio and enhancing smart vehicle hardware and software technologies; Expand the sales, service and charging infrastructure network in China, as well as conduct digital marketing and operate a user community; For working capital and other general corporate purposes.

Since 2020, the company has sought to be listed on the Science and Technology Innovation Board and Hong Kong stocks through multiple rounds of financing, but in the end, it has failed. Although a detailed listing timetable has not been given for the time being, Nezha Automobile's four-year tortuous listing road has finally ushered in substantial progress.

The loss in three years exceeded 18 billion

According to the prospectus, in 2021~2023, Nezha Automobile's revenue will be 5.087 billion yuan, 13.050 billion yuan and 13.555 billion yuan respectively, and the net loss will be 4.840 billion yuan, 6.666 billion yuan and 6.867 billion yuan respectively, with a cumulative loss of 18.373 billion yuan in three years, and the gross profit margin has improved in the past three years, but it has not returned to normal, -34.4%, -22.5% and -14.9% respectively; Negative operating cash flow was RMB2,991 million, RMB5,408 million and RMB4,354 million, respectively.

Nezha Automobile, which is mired in losses, has also had to rely on external financing to "transfuse" it in recent years. It has set its sights on the capital market in search of greater development opportunities, but its road to listing has been quite bumpy.

In July 2020, Nezha Automobile officially announced that it had launched a C round of financing and planned to complete its listing on the Science and Technology Innovation Board in 2021, but under the new policy of the Science and Technology Innovation Board on the review of the "scientific and technological content" of enterprises, the listing plan was forced to be suspended; In November 2021, there was news again that Nezha Automobile was considering an IPO in Hong Kong, which could raise about $1 billion, but since then, the capital market has not seen Nezha.

"Nezha Automobile will raise 10 billion yuan in 2022, and there will be billions of yuan in financing in 2023 this year, and there are currently more than 10 billion funds on the books, and there is no rush for an IPO." In October 2023, Daniel Zhang, CEO of Nezha Automobile, said in an interview with the 21st Century Business Herald reporter that the current market is not ideal, and it is of little significance to not be listed.

Even though the CEO claims that "not bad money", Nezha Automobile, which has not yet had the ability to "hematopoiesis", is still actively looking for "grain and grass" in the next six months, and ushered in multiple rounds of key capital injections to accelerate its pace into the capital market.

At the end of August 2023, Nezha Automobile announced that it had completed a crossover round of financing totaling 7 billion yuan, and the specific investors and details have not been disclosed. It is reported that the Crossover round of financing is similar to the "bridge financing" before the IPO, usually to allow the company to achieve the IPO faster.

In February this year, the Hong Kong SAR government signed a contract with Nezha Automobile to provide it with a subsidy of HK$200 million and assist in the cornerstone round investment of US$200 million. In April, Nezha Automobile was pleased to mention the financing of no less than 5 billion yuan of state-owned assets of Tongxiang State Investment, Yichun Jinhe and Nanning Minsheng, and it was specifically mentioned in the multi-party agreement that the three parties would "coordinate relevant resources to support Hezhong Automobile to achieve IPO as soon as possible".

According to the prospectus, since 2017, Hezhong New Energy has completed 10 rounds of financing, with a total financing of 22.844 billion yuan. In addition to the endorsement of state-owned assets, the lineup of shareholders behind it is also quite luxurious, including CATL, 360 Group, Huading Capital and other enterprises.

In the current new energy car manufacturing track, "burning money" car manufacturing has become a common situation, coupled with the impact of the "price war", the survival situation faced by enterprises is becoming more and more severe, in addition to the ideal to start making a profit, the remaining 4 are due to losses in the "survival red line", there is no "second generation" behind the backer, can only reach out to the capital market "money".

On the eve of the decisive battle, having sufficient financial support is an important guarantee for car companies not to be eliminated, NIO received 2.2 billion US dollars in financing from Abu Dhabi, Volkswagen increased its capital by more than 5 billion yuan to Xpeng, and Leap obtained 1.5 billion euros from Stellantis Group, all of which show the desire of new forces for funds.

Some industry insiders told the 21st Century Business Herald reporter that new car companies seeking to go public can further expand the channels of fund raising, supplement funds, improve their financial situation, and provide guarantee for the next participation in the more fierce competition market of new energy vehicles.

In the prospectus, Nezha Automobile also mentioned that the company will use the available financial resources, supplemented by its fundraising capacity, to meet the company's current and next 12 months working capital needs.

If it can land in the capital market as it wishes, it will also further enhance the confidence of Nezha Automobile in the white-hot "knockout competition" of new energy vehicle manufacturing.

According to the cross-round investment disclosed in the prospectus, the four investors acquired 8.08% of the equity of Hezhong New Energy at a consideration of RMB 3.426 billion, and the valuation of Hezhong New Energy has reached RMB 42.4 billion.

Bucking the trend

Looking for Nezha Automobile, which has been on the market for 4 years, there have been ups and downs. In 2022, it won the "sales championship" of the new car-making force with the attitude of "dark horse", and in 2023, it will fall behind as the last player in the "top five" of the new force, and it is still in a downturn in the first half of this year. How to stay at the table is a key question for 2024.

At this time, it may be imperative to seek support from the capital market, but it is difficult to say that it is a good time to tell a story in the capital market.

In 2023, Nezha Automobile will deliver a total of 127496 new cars, a year-on-year decrease of 16%, despite the outstanding overseas sales results, the total volume is still unspeakably outstanding, and the sales volume will be cut in half, and the "sales crown" of 152,100 units in 2022 will no longer be the only player in the new car-making force with sales "reversed".

At the beginning of 2024, Gaohe Automobile will come to a standstill, the building will collapse, and who will fall next on the cruel car-making track? Nezha Automobile became the most nominated new energy vehicle brand.

Previously, when he was condemned by employees for delaying the payment of year-end bonuses, Daniel Zhang also responded frankly that "it is necessary to spread the cold to everyone".

Since the beginning of this year, Nezha's automobile sales have continued to decline, and the sales volume of all models of Nezha Automobile in the first quarter was 24,434 units, only 8% of the annual sales task of 300,000 yuan was completed.

In the "price war" like boiling oil, Nezha Automobile, which has hit a wall in high-end, and the main low-end models have ushered in a strong hedging of brands such as BYD, and with the release of Xiaopeng's new sequence MONA for the 150,000-level market, the test faced by Nezha Automobile will become more and more acute, and large-scale growth is not easy.

Regarding the decline in sales, Nezha Automobile stated in the prospectus that Nezha Automobile's efforts to rationalize and simplify its domestic production capacity and global supply structure during this period to further promote its internationalization measures have temporarily affected the production of Nezha Automobile.

Different from the downturn in the domestic market, Nezha Automobile's overseas expansion strategy has achieved certain results. According to the data, in 2023, the proportion of Nezha Automobile's revenue in overseas markets will jump from 1.8% in the previous year to 12%; From January to May 2024, Nezha Automobile exported 16,458 vehicles, ranking first in the export list of new power car companies.

Southeast Asia is the key market for Nezha Automobile. According to a report by CIC Consulting, Nezha Automobile is one of the top three brands of new energy passenger vehicles in Southeast Asia in terms of the number of risks insured in 2023. In March and May this year, Nezha Automobile's plants in Thailand and Indonesia started production respectively, and the construction of a plant in Malaysia began in January this year.

The outstanding performance in overseas markets and the continuous expansion of the layout may help Nezha Automobile gain more attention in the capital market.

Nezha Automobile also made it clear in the prospectus that the purpose of the IPO is to strengthen the overseas layout, further invest in the Southeast Asian market, and rapidly expand potential markets such as Latin America, the Middle East and Africa, improve global operating capabilities, set up branches, further localize overseas supply chains, and set up more stores overseas to expand sales and service networks.

However, it should be noted that the single-line "flowering" of the overseas market is not enough to support Nezha Automobile to enter the "finals", and it is difficult to help it continue to win the favor of the capital market, and the domestic market ranking, product power, brand power, technical power, marketing ability and profitability are all key factors. While giving full play to the advantages of the long board, how to make up for the shortcomings and get a boost in sales and volume is particularly important for Nezha.

Some industry insiders pointed out that the current "knockout competition" of new car-making forces is accelerating, and losses generally continue to expand, and institutional investors are also concerned about it. After successfully landing in the Hong Kong stock market, Nezha Automobile still needs to increase its sales scale as soon as possible, form a "hematopoietic" ability, and tell a good story in the capital market in order to have the opportunity to continue to gain the optimism of the capital market.

In 2024, Daniel Zhang has set a global sales target of 300,000 units for Nezha Automobile, including 200,000 units in the domestic market and 100,000 units in the overseas market.

In the middle of the game, although the target completion rate in the domestic and foreign markets is less than one-third, the critical moment of sprinting for IPO in the middle of the year has ushered in substantial progress on the road to listing. In the second half of the year, perhaps with the assistance of the capital market, Nezha Automobile is also expected to take advantage of the "blood return" in exchange for a lot of chips to continue to participate.

For more information, please download the 21 Finance APP