By hmimcu 
Recently, the ChiNext board IPO of New Henghui Electronics Co., Ltd. (hereinafter referred to as “New Henghui”), which is controlled by Yu Renrong, a chip tycoon with a value of nearly 100 billion, was successfully held!
Xinhenghui plans to publicly issue no more than 59.8889 million shares on the Shenzhen Stock Exchange Growth Enterprise Board, accounting for no less than 25% of the total share capital after the issuance. This issuance does not involve the public offering of shares by the original shareholders. Xinhenghui plans to raise 519 million yuan and invest the raised funds in high-density QFN/DFN packaging material industrialization projects and R&D center expansion and upgrading projects.
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01. “Chip Rich” Joins Hands with “Former President of Ziguang Guowei” to Start a New Business
Established only 4 years ago, the shareholder lineup behind New Henghui is very strong. According to enterprise investigations, Yu Renrong and Ren Zhijun, who are well-known in the field of integrated circuits, are the first and second largest shareholders of New Henghui, with respective shareholding ratios of 31.41% and 16.21%.
Chip tycoon Yu Renrong can be said to be a true “entrepreneurial legend”.
Yu Renrong is a graduate of the EE85 class at Tsinghua University. He also enrolled with Zhao Weiguo, Chairman of Ziguang Group, Shu Qingming, one of the founders of Zhaoyi Innovation, Feng Chenhui, co-founder of Zhuosheng Microelectronics, Zhao Lixin, founder of Geke Microelectronics, and Zhao Lidong, founder of Suiyuan Technology.
Yu Renrong founded Weir Corporation at the age of 32. Initially, he only worked as a chip agent, but with his keen business acumen and diligent work attitude, he quickly achieved success. In the first year, he earned 10 million yuan, and then his wealth rapidly increased, becoming one of the leaders in the Chinese chip industry.
Yu Renrong, as the helm of the listed company Weir Shares (with a current market value of 111.1 billion yuan), currently holds 30.2897% of Weir Shares. On the 2021 China Rich List released by Hurun Wealth, Yu Renrong ranked 63rd with a value of 80 billion yuan; In 2022, Yu Renrong ranked 197th on the 2022 Forbes Global Billionaires List with a wealth of $10 billion.
In 2021, the new research-oriented university “Dongfang University of Science and Technology”, which was built with a budget of 20 billion yuan, was located in Zhenhai, Ningbo, and even compared to “West Lake University” by the outside world. The donor behind it was also Yu Renrong.
Ren Zhijun, the legal representative of Xinhenghui, is a fellow villager and classmate of Zhao Weiguo. He has taught at universities such as Tsinghua University and the School of Telecommunications at Beijing University of Posts and Telecommunications, and has held positions such as Executive Vice President of Ziguang Group, Vice Chairman of Ziguang Guowei, and President. From a timeline perspective, Ren Zhijun joined New Henghui after leaving Ziguang Guowei in January 2018.
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02. New Henghui Breakthrough the Growth Enterprise Board, with IC card packaging capacity ranking second globally
According to the author’s understanding, Xinhenghui was established in December 2017. The company is an integrated circuit enterprise that integrates lead frame, module packaging, wafer thinning and testing, with industry-leading production equipment and research and development environment. It has established efficient production capacity and high-level process technology, as well as a complete upstream and downstream industry chain support, capable of producing contact, non-contact, and dual interface products; Multiple series of IC card packaging frameworks and module products with dozens of specifications, including gold and palladium plating.
The company has the ability to produce 2 billion pieces of IC card metal frames and 1 billion pieces of IC card modules per year. It is one of the three global companies that produce IC card packaging frames, and its production capacity ranks second in the world.
At present, the company has become an important partner of well-known domestic and foreign security chip design manufacturers such as China Electronics Huada, Ziguang Guowei, Samsung Electronics, Shanghai Fudan Microelectronics, Datang Microelectronics, etc. Its products are widely used in fields such as communication, finance, transportation, identity recognition, Internet of Things, and public safety.
Looking back on the journey of the IPO launch of New Henghui, the application draft of the prospectus was submitted and accepted since June last year. Until recently, the company replied to the implementation letter of the audit center’s opinions, which only took 274 days!
According to the prospectus, Xinhenghui achieved operating income of 413.8022 million yuan, 388.203 million yuan, and 548.0326 million yuan from 2019 to 2021, and net profit attributable to the parent company was 74.4527 million yuan, 43.9895 million yuan, and 100.5432 million yuan, respectively.
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(Data source: New Henghui Prospectus, OFweek Wikipedia Electronic Engineering Drawing)
In the first nine months of 2022, Xinhenghui achieved a revenue of 482.6887 million yuan and a net profit attributable to the parent company of 76.2047 million yuan. The company expects to have a revenue of 670 million to 690 million yuan in 2022, a year-on-year increase of 22.26% to 25.90%, and an expected net profit attributable to the parent company of 101 million to 110 million yuan, a year-on-year increase of 0.45% to 9.41%.
Among them, New Henghui experienced significant fluctuations in operating profit from 2019 to 2020, with a 40.23% decrease in operating profit compared to 2019. The company stated that the reasons for this were a decrease in revenue due to product prices, a decrease in sales revenue to its largest customer, and a continuous increase in investment in two new businesses, etching lead frames and IoT eSIM chip testing, in 2020.
The author notes that from 2019 to June 2022, the sales revenue of the company’s largest customer, Ziguang Tongxin, accounted for 34.31%, 19.04%, 14.68%, and 17.74% of the operating revenue, respectively, maintaining a relatively high level. In addition, from 2019 to June 2022, the company’s sales revenue to the top five customers accounted for 66.98%, 53.25%, 45.07%, and 49.50% of operating revenue, respectively. If there is a change in cooperation between the company and its main customers, it may affect the company’s performance.
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From the prospectus, it can be seen that Xinhenghui’s main businesses include smart card business, etching lead frame business, and IoT eSIM chip testing business. Among them, the traditional core business of the company, smart card business, accounts for a relatively large proportion of revenue and is the main source of revenue and profit for the company. The proportion of the company’s total revenue in 2019, 2020, 2021, and January June 2022 was 100.00%, 97.91%, 77.44%, and 79.70%, respectively.
However, in 2021, the company’s overall main business revenue increased by 39.72% year-on-year, mainly due to the contribution of two new businesses, etching lead frames and IoT eSIM chip testing, to revenue.
It can be seen that etching lead frames has become the second largest main business of the company since 2021. However, it is worth noting that in 2020, 2021, and January June 2022, the production capacity of New Henghui etching lead frames was 481100 pieces, 7.1673 million pieces, and 7.4437 million pieces, respectively. The production capacity utilization rates were 73.98%, 88.68%, and 43.47%, respectively. In the first half of 2022, there was a shortage of short-term orders and a decrease in production capacity utilization.
In the context of declining capacity utilization and low yield, the New Henghui fundraising project still plans to expand production by 50 million units through fundraising based on the production capacity of 7.4437 million units from January to June 2022, with an additional capacity of 6.72 times the existing capacity. It is also uncertain whether such a huge capacity can be smoothly dissipated.
03. Hundreds of companies queuing up, semiconductor IPO popularity remains high
There are many domestic semiconductor companies in the IPO process, similar to Xinhenghui. According to incomplete statistics, as of March 1 of this year, there are still more than 100 semiconductor companies in the process of IPO among A-share IPO applicants, including those that have registered and become effective, passed the listing committee, newly accepted, inquired, suspended or terminated, with a total planned fundraising amount of approximately 120 billion yuan, covering the industrial chain links of chip design, manufacturing, materials, equipment, and testing.
It is not difficult to find that after nearly a year of downturn in the global semiconductor industry, news of layoffs, optimization, reduction of capital expenditures, and price cuts has flooded the entire industry. However, in China, the development of the semiconductor industry is showing a good growth trend along with the increasing demand for domestic substitution.
This is also thanks to the strong support of national policies for domestic semiconductors. The Ministry of Industry and Information Technology stated that the development of the chip industry faces both opportunities and challenges, and it is necessary to strengthen cooperation globally to jointly build the chip industry chain. The government will provide strong support at the national level; The 14th Five Year Plan also proposes to focus on supporting key “bottleneck” links in the semiconductor industry chain, mainly including advanced manufacturing processes, high-end IC design and advanced packaging technology, key semiconductor equipment and materials, and third-generation semiconductors.
It is undeniable that capital is an important driving force behind the IPO of semiconductor companies. However, no matter how the capital market fluctuates, semiconductor companies should focus on their own technological products and businesses, constantly polishing them, in order to face the market and deliver more satisfactory answers.
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