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Chinese Industrial Internet of Things Pioneer Neoway Goes Public on Star Market
COVID-19 and China
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Neoway (有方科技, A17088:SH) is something new for the Shanghai Stock Exchange Sci-Tech Innovation Board – China's Nasdaq-style trading platform that is also known as the Star Market (we said a lot about it in our latest report – download). Not because of the company's exceptional business model or a rockstar-software-firm financial performance, but due to effective trend-tracking behavior and an interesting private equity backers' lineup.

A number of wealth managers have added Neoway to their portfolios by pumping money into the Shenzhen-based manufacturer, including Jinding Capital (金鼎资本), which is focused on consumer high-tech, automotive sector investor BAIC Capital (北汽产业投资), the firm's hometown government’s project Shenzhen Capital Group (SCGC) and Kun-Lun Stone Capital (昆石资本), which is renowned for pretty scattered fields of interest, ranging from intelligent manufacturing to Technology, Media and Telecommunications (TMT).

The list looks diverse. This often means one of two things. It's either a gem that everyone's willing to bet on or it may just be a company that urgently needs working capital and doesn't consider investor homogeneity to be critical. In the first scenario, the financing parties involved are, almost always, those from the headlines. Here, this is not the case. Quite the opposite, industry insiders barely know these names outside of China. We are thereby more likely to attach a label of the second kind to the company.

However, when it comes to investment decisions in the financial world, nothing is more reliable than the core business model and audited financial results (we tend to be idealists). Here are a couple of paragraphs on these two aspects.

Founded in 2006, Neoway is an electronic component producer active across several verticals, including communication system modules (2G, 3G, 4G and, probably, 5G – very soon). It also provides complete solutions for a gamut of industries such as smart energy, retail and intelligent manufacturing. Further adding to the list of in-vogue concepts, we find a claimed connection to smart cities. The aforementioned 'backers' puzzle' is apparently getting clearer.

After a dozen years of development, Neoway has grown into a mid-size company with over 400 employees, more than half of whom are involved in various R&D-related activities. With offices in Europe, North America and Southeast Asia (not to mention the firm's homeland), it claims to have 51 software copyrights, 18 utility-model and four invention patents.

Leveraging these capabilities has been positively affecting its money-making process: the operating revenue grew at a 30.31% CAGR between 2016-2018, reaching an annual value of CNY 557.14 million (USD 80 million) by the end of this period.

Meanwhile, Neoway has some rivals on the Chinese wireless hardware scene. The Internet of Things (IoT) module provider Fibocom (广和通, 300638:SZ) and Shanghai-based Quectel (移远通信, 603269:SH) are two examples of such companies.

ANALYST
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