Zhaowei Electromechanical initiated its global offering on February 27, with pricing set for March 5 and listing on the Hong Kong Stock Exchange scheduled for March 9. The maximum offer price is HK$73.68 per share, with a base offering of approximately 26.75 million shares. The offering does not include an over-allotment option (greenshoe) or an offer size adjustment mechanism, capping the maximum fundraising amount at HK$1.97 billion. Amid the wave of A+H listings, Zhaowei's IPO discount stands out as attractive among concurrent offerings. The participation of prominent institutions as cornerstone investors and the company's steady earnings growth fundamentals are key market focal points. However, the absence of a greenshoe mechanism for market stabilization and underlying operational concerns hidden behind the earnings growth introduce significant uncertainty into this Hong Kong listing.
Regarding the offering price, the upper limit of Zhaowei's Hong Kong share price represents a discount of approximately 42.9% compared to its A-share closing price of 114.21 yuan on March 4. This discount level is relatively attractive among the three concurrent A+H listing projects. However, considering A+H listings since 2026, several companies with market capitalizations exceeding hundreds of billions, such as Montage Technology and GigaDevice, have also seen issuance discounts exceeding 40%, suggesting the market appeal of Zhaowei's discount still faces challenges.
Furthermore, this offering does not include an over-allotment option, meaning there is no dedicated market stabilization fund. In current A+H listing practice, many companies voluntarily forgo the greenshoe mechanism. A core consideration is that its omission allows for potential inclusion in the Hong Kong Stock Connect on the listing day, prioritizing the incremental liquidity support from southbound capital over the traditional market stabilization role of the greenshoe. Historical cases show that companies like Guoen Technology, Jinhong Holdings, and Wolong Resources, which listed without a greenshoe, saw their shares rise on their debut without breaking the issue price. In contrast, companies like Seres Group, Haitian Flavouring, and Zhongwei New Materials, which utilized greenshoes, still faced intraday pressure below the issue price early in their listings, barely maintaining the offer price only through greenshoe-supported buying at the market close.
Notably, recent market volatility has intensified due to heightened geopolitical risks, leading to cautious overall sentiment and a significant increase in stock price fluctuation risk. In this context, the short-term market stabilization importance of the greenshoe mechanism has become more prominent. Against this backdrop, Zhaowei's pricing strategy, which forgoes the greenshoe and relies entirely on Hong Kong Stock Connect liquidity, implies its stock price will be more directly exposed to market volatility tests in the initial listing period.
Regarding cornerstone investment, Zhaowei's IPO attracted 21 cornerstone investors committing a total of approximately HK$650 million, accounting for 33.1% of the base offering size. While this cornerstone proportion is not particularly advantageous among concurrent offerings, the presence of several major institutions makes the cornerstone lineup more noteworthy compared to peers, though it still exhibits a clear polarization trend.
Among financial investors, VVC Technology, an entity associated with Singapore's sovereign wealth fund Temasek, invested $2 million. Long-term foreign fund Mirae Asset invested $5 million. Prominent Chinese private equity firms Hillhouse Capital and GAO YI Capital invested $15 million and $6 million respectively. Chinese mutual fund companies Dacheng Fund and GF Fund invested $3.5 million and $3 million respectively. Additionally, active multi-strategy funds in the Hong Kong market, including REX Capital, Jump Trading, and Factorial, also participated in the cornerstone investment. The concentrated participation of these leading institutions reflects professional investors' recognition of the company's leading industry position and development potential.
Taihu Jingu, backed by Suzhou state-owned capital, invested $5 million, demonstrating local government strategic recognition and policy support for the relevant industry and project. Industrial partner Topstar also participated, subscribing with an investment of 30 million yuan, further solidifying the cornerstone investor group.
Conversely, the significant presence of individual investors in the cornerstone list is a notable feature. Apart from individuals like He Maoling and Luo Jie subscribing directly in their own names, institutions wholly owned or controlled by individual investors, such as Twin City Capital, Shenzhen Hengbang, Wenying Investment, and Cunran Capital, also participated. These individual investors collectively committed over HK$190 million.
While regulations do not prohibit individual investors from participating in Hong Kong IPO cornerstone investments, and highly reputable individual investors might boost market confidence, excessive participation by individuals may indicate that the company did not achieve comprehensive and sufficient recognition from institutional investors during its preliminary market promotion.
As China's largest and the world's fourth-largest provider of integrated micro transmission and drive system products, Zhaowei holds a leading industry position with a 3.9% domestic market share and a 1.4% global market share in 2024. Its recent financial performance has shown steady growth.
From 2022 to 2024, the company's revenue was 1.15 billion yuan, 1.21 billion yuan, and 1.52 billion yuan respectively, achieving a three-year compound annual growth rate of 15.0%. Revenue for the first three quarters of 2025 reached 1.26 billion yuan, an increase of 18.7% year-on-year, primarily driven by continuous breakthroughs in automotive product sales.
Profit performance was also strong. Net profit attributable to owners from 2022 to 2024 was 150 million yuan, 180 million yuan, and 230 million yuan respectively. For the first three quarters of 2025, it recorded 180 million yuan, and the company forecasts its full-year 2025 net profit to be no less than 250 million yuan. Profitability improved steadily, with the gross profit margin rising from 29.1% in 2022 to 32.7% in the first three quarters of 2025, while the net profit margin remained at a relatively high level above 13%, indicating robust core profitability metrics.
However, behind the apparent strength of earnings growth, multiple operational concerns have emerged, including capital occupation, collection efficiency, overseas business, and compliance issues, becoming focal points for market attention.
The total accounts receivable for 2022-2024 and the first three quarters of 2025 were 407 million yuan, 466 million yuan, 618 million yuan, and 623 million yuan respectively, showing a year-on-year increasing trend. This growth significantly outpaced revenue growth during the same periods. By the end of the third quarter of 2025, total receivables accounted for over 20% of current assets, indicating increasing pressure on capital occupation.
This issue is directly related to the company's high customer concentration. The revenue contribution from the top five customers during the same periods was 38.2%, 50.7%, 46.6%, and 44.2% respectively; the largest single customer accounted for 13.0%, 16.3%, 17.6%, and 16.6% respectively. The company's relatively limited bargaining power with large customers forces concessions on payment terms, directly leading to extended collection cycles. The days sales outstanding (DSO) increased from 111 days in 2022 to 123 days in the first three quarters of 2025, indicating persistently low collection efficiency. This pressured cash flow, with net cash from operating activities dropping 35% to 100 million yuan in the first three quarters of 2025 from 160 million yuan a year earlier, highlighting liquidity pressure on the funding chain.
Overseas business expansion has fallen short of expectations, contradicting global expansion plans and failing to align with the expectations of Hong Kong's international investors. Although the company claims successful entry into the supply chains of several industry leaders in Europe and America, overseas revenue scale and proportion have weakened. Overseas revenue for 2022-2024 was 150 million yuan, 160 million yuan, and 210 million yuan respectively, but fell to 150 million yuan in the first three quarters of 2025, a decline of nearly 15% year-on-year. The revenue contribution from overseas markets dropped from 16.1% in the first three quarters of 2024 to 11.6% in the same period of 2025, showing持续疲软. Listing in Hong Kong will expose the company to more international investors. The weak performance of its overseas business creates a significant gap with international investors' core expectations for global expansion and overseas earnings growth, potentially becoming a major obstacle to their recognition of the company.
On the compliance front, the company faces issues with unpaid social security and housing fund contributions. The total amount of unpaid social security and housing fund contributions for 2022-2024 and the first three quarters of 2025 was 26.9 million yuan, 34.7 million yuan, 30.1 million yuan, and 24.8 million yuan respectively. The maximum potential late payment penalties for the corresponding periods could reach 3.1 million yuan, 7.7 million yuan, 5.1 million yuan, and 1.2 million yuan respectively.