The 7-day Lightning Was Approved, And The Richest Man in Chips Received An IPO

Nearly eight years after the listing of Weir shares, its actual controller, Yu Renrong, the "richest man in chips", is about to usher in its second chip listed company to land on the A-share market, which is Xinhenghui.

Xinhenghui submitted for registration nearly two years after the GEM meeting, and was approved only 7 days after submitting the registration.

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Successfully passed the test and was approved for registration

On the evening of March 20, the official website of the China Securities Regulatory Commission issued the "Reply on Agreeing to the Registration of the Initial Public Offering of Shares of Xinhenghui Electronics Co., Ltd.", which was like a pebble thrown into a calm lake, stirring up thousands of waves. This approval means that Xinhenghui has successfully passed the "registration barrier" and obtained the "admission ticket" for A-share listing.

It is worth noting that Xinhenghui submitted for registration after nearly two years of meeting on the GEM, but it was approved "lightningly" only 7 days after submitting the registration, which undoubtedly demonstrates the maturity of its listing conditions and the market's expectations for it.

Two heroes at the helm: Yu Renrong + Ren Zhijun

Xinhenghui is an integrated circuit enterprise integrating R&D, production, sales and packaging and testing services of chip packaging materials, covering smart card business, etching lead frame business and Internet of Things eSIM chip packaging and testing business, and smart card business is its core business.

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As of the signing date of this Prospectus, Yu Renrong and Ren Zhijun are the controlling shareholders and joint actual controllers of Xinhenghui. Yu Renrong holds 31.94% of the company's shares and is the largest shareholder and director; Ren Zhijun holds 19.31% of the shares, is the second largest shareholder and serves as the chairman.

It is worth mentioning that Ren Zhijun once held important positions such as executive vice president of Tsinghua Unigroup Group, and when he acquired the limited equity of Xinhenghui in 2018, the funds mainly came from the loans provided by Yu Renrong, and the close cooperative relationship between the two laid a solid foundation for the development of Xinhenghui.

The global market share of the segment is the second

According to QYResearch, the global lead frame market will reach 35.2 billion yuan in 2029, with a compound annual growth rate of more than 8%.

As the world's largest consumer market for smart cards, China has a strong demand for localized substitution. With the integrated model of "material + packaging and testing", Xinhenghui can not only reduce costs, but also deeply bind with customers to form a synergistic effect, and is expected to get a share of the domestic substitution wave.

From the perspective of performance data, from 2021 to 2023, Xinhenghui's operating income will be 548 million yuan, 683 million yuan, and 767 million yuan respectively, with a compound growth rate of 18.28%;The net profit attributable to the parent company after deducting non-profits was 81.72 million yuan, 103.95 million yuan and 148.55 million yuan respectively, with a strong growth momentum. In the field of segmentation, the global market share of its flexible lead frame products is about 30%, ranking second in the world.

The smart card business is diversified and has great potential

From 2021 to 2023, the sales revenue of Xinhenghui electronic smart card business will be 412 million yuan, 562 million yuan and 583 million yuan respectively, accounting for 77.44%, 84.45% and 78.35% of the total revenue respectively.

The smart card business includes flexible lead frames, smart card modules, and packaging and testing services. Among them, the entry barriers to the flexible lead frame industry are high, and there are only 3 major manufacturers in the world, and the market share of Xinhenghui ranks second.

In addition to traditional financial bank cards and mobile phone SIM cards, the application field of smart cards has been continuously expanded, and it has also expanded to many smart terminals such as smart door locks, smart electricity meters, water meters, and gas meters, and the market demand continues to grow.

Etching lead frame business, opportunities and challenges coexist

From 2021 to 2023, the company's etching lead frame segment revenue will be 92.41 million yuan, 77.41 million yuan and 127 million yuan respectively, accounting for about 17% of revenue, making it the second largest source of revenue.

Although the current capacity utilization rate of this business is low, such as 32.95% and 45.31% in 2022 and 2023, respectively, Xinhenghui intends to further expand and strengthen.

The IPO plans to raise 519 million yuan, of which 456 million yuan will be used for the industrialization project of high-density QFN/DFN packaging materials, which will add 50 million production capacity every year after reaching production.

From the perspective of market size, the global lead frame market has broad prospects, and Xinhenghui is expected to increase its market share in the future by virtue of its technical advantages.

Development concerns need to be cautious

However, there are also some problems in the development process of Xinhenghui.

Its largest customer, Unisplendour Tongxin's affiliated method, Linxens, has become a competitor, and Unisplendour Tongxin's purchase volume and proportion of Xinhenghui will continue to decrease from 2023.At the same time, Ren Zhijun, one of the controlling shareholders, once held an important position in the parent company of Tsinghua Unigroup, and the fairness of his cooperation with Tsinghua Unigroup raised questions. In addition, the etching lead frame business, as a new business that Xinhenghui focuses on, has problems such as low capacity utilization, high return amount, and a gap between the yield rate and mature manufacturers. Xinhenghui needs to properly solve these problems in the future in order to move forward steadily in the fiercely competitive chip market.