The Star board's smart manufacturing market has just seen a new player enter the fray. In the current sluggish market, generally affected by the coronavirus, the smart manufacturing industry may encounter an ‘unexpected’ opportunity.
Two robotic hands are working on the production line. Credit: Unsplash.
Risong Technology (688090: SH), a smart-machine and solution provider, was listed on Shanghai Stock Exchange Science and Technology Innovation Board today, at an issuance price of CNY 27.55 per share for a total amount of CNY 375 million. Underwritten by Guangfa Securities, Risong Technology closed at CNY 104.1, 277.86% higher than its issuance price. (6.9792 USD/CNY, as of 6:10 a.m., GMT)
Based on the prospectus released on February 5, Risong Technology plans to allocate the money from the IPO on its ongoing projects in industrial robotics and smart equipment and intelligent technologies for R&D, design, and production purposes.
The company owns a very integrated production line, from research and manufacturing to the selling phase for its core products: robotic production lines, robotic workstations, and robotic parts. Risong Technology has mainly served business customers from high-tech industries, including automobile, automobile parts, 3C, machinery, elevators, motorcycles, ships, and others.
Founded in 2012, it raised three rounds, from CNY 20 million (USD 2.9 million) in Series A (2015) to CNY 30 million (USD 4.3 million) in Series C (2018). This IPO can help Risong Technology release financial stress by granting CNY 375 million ( USD 53.74 million). One of the leading companies in the auto welding field, it has bolstered its long-term businesses with auto, elevator and ship companies, including Toyota (丰田), Honda (本田), Mazda (马自达), BYD (比亚迪), Hitachi Elevator (日立电梯), and China Ship Huangpu (中船黄埔) by continuously advancing its automation and intelligence technologies.
For the smart machinery business, R&D expenses always take a large share. According to the financials in the prospectus, for the fiscal years 2016 to 2018, Risong Technology had R&D expenditure of CNY 2.4 million, CNY 2.9 million and CNY 2.9 million, which was 3.65%, 4.07% and 3.98 % over each operating revenue respectively. Considering the “15% red line” (a benchmark set by SSE) of R&D over sales on the Star Board, the company seems to lag behind the fierce technology tussle. Its prospectus clarifies that the company will use the newly raised fund to invest CNY 140 million (USD 20 million ) in the industrial robots and smart machine manufacturing production base, and CNY 135 million (USD 19.3 million ) in the R&D center construction.
Our recent report pointed out the company had a rather high debt to asset ratio, 55.3%, as of June 2019 in its prospectus. This ratio reflected its massive demand for working capital and tremendous continuous investment in PP&E (Property Plant and Equipment). The new money injection will help repay the bank loans of CNY 60 million (USD 8.6 million ) and replenish working capital to CNY 40 million (USD 5.7 million).
Risong’s relevance may experience further strengthening. At the frontier of the anti-coronavirus war in Wuhan, robots have greatly helped doctors work efficiently while reducing human physical contact. According to Jazzyear report, more than 11 robotic companies have joined in allocating robots to the front line, helping with sterilization and human temperature measurement, easing the stress from the insufficient labor force, and reducing the risk of cross-infection. The impressive performance of robots may bring more attention to this industry.
As the outbreak of coronavirus impacts the macroeconomy and unleashes bad effects on the financial market, slowdowns look set to continue. A slump open in the market in 2020 showed investors are getting more risk-averse, while the surging prices in overall healthcare companies indicated the public are actively looking into a timely opportunity.
As of February 17, 6 p.m., the Hang Seng Mainland Healthcare Index (HSMHI) had increased to 5286 points . Will the smart machinery businesses, which can also make impressive contributions to this anti-virus war on behalf of human beings, follow a similar path? Let’s wait and see.