Laser display equipment producer Appotronics (光峰科技) is going public on the Shanghai Stock Exchange sci-tech board, also known as the STAR Market, in the next few weeks. Having a projected market valuation of CNY 7.9 billion (USD 1.15 billion), the Shenzhen-based company priced its initial public offering at CNY 17.5 (USD 2.55) per share.
The firm’s main business is built around production and marketing of consumer electronics such as laser TVs, home theaters, cinema and education projectors. Tianfeng Securities estimates that the company's domestic market share in 2018 exceeded 30%. To stay afloat, Appotronics throw heaps of money at research and development: almost CNY 300 million (USD 43.6 million) has been invested in tech improvement since 2016.
Among the first batch of applicants only five companies can boast the three-year return on net assets of over 30%. Appotronics is one of them. As shown in the prospectus, it has been growing in scale lately: total operating income almost quadrupled, soaring from CNY 355 million (USD 51.6 million) in 2016 to CNY 1.39 billion (USD 202.1 million) in 2018. Net profit jumped from insignificant CNY 18 million (USD 2.6 million) to CNY 212 million (USD 30.8 million) over the same period.
According to the forecast made by Essence Securities (安信证券), locally renowned financial services provider, Appotronics’s revenue will grow in the following years, reaching CNY 1.84 billion (USD 268 million), CNY 2.41 billion (USD 350 million) and CNY 3.06 billion (USD 445 million) in 2019, 2020 and 2021 respectively. Such a positive view is based on several things including the fact that the company is scaling recently – number of employees almost doubled since 2016; and the same can be said about the R&D-related personnel: the research workers headcount leaped from 141 to 309 within the last two years.
Industry landscape doesn’t seem to be so smooth though. According to a brokerage company Guolian Securities (国联证券), household electric appliances market in China is in downtrend. It’s simply shrinking: total industry output is expected to drop another 1.9% in 2019. Essence Securities reported that Chinese consumer electronics producers’ shares delivered an absolute return of -12.43% in the last six months.