The electronic components and sensors industry is an ever-changing and ever-evolving industry. The continuous development of industry standards is also driving the ability of related companies to evolve to respond to changing market demands.
On December 11, Hong Kong-based Yusheng Electronics ***e I L Holdings Limited (hereinafter referred to as "Yusheng Electronics") officially submitted a listing prospectus to the U.S. ** Exchange Commission (SEC), intending to apply for NASDAQ listing for "EIL".
Founded in 1992, Yusheng Electronics is a leading provider of value-added electronic components, sensors and engineering solutions. The company provides customers with sensors and electronic components, engineering solutions and reference designs, as well as professional logistics services that connect customers in the electronics industry with electronic component manufacturers.
It is reported that the company plans to raise up to $10 million. Among them, about 20% of the proceeds from the fundraising will be used to expand the research and development of Yusheng ElectronicsApproximately 20% will be used to enhance the company's position in the industry and strengthen its business development, approximately 25% will be used to strengthen its project and engineering team to expand the scale and scope of engineering and project development, approximately 25% will be used to improve its pre-sales and after-sales support by expanding its engineering support center (office) and strengthening its technical expertise, while the remaining funds will be used primarily for general administration and working capital.
Although the rapid changes in the industry drive Yusheng Electronics to continue to evolve and iterate, the "business undercurrent" hidden under the prospectus still surfaced with the company's submission of the table.
Revenues fluctuate and cash flow is tight.
Zhitong Financial APP has learned that Yusheng Electronics has been focusing on identifying, purchasing, selling and distributing electronic components from the best merchants in Asia, Japan, South Korea, Europe and the United States since its establishment. At the beginning of 2000, after establishing a business relationship with a Belgian company, it expanded its product range and entered the sensor market.
It is reported that in order to serve the growing electronic components market in Chinese mainland, the company has established a network of sales and/or representative offices in four cities in Chinese mainland, and plans to open more representative offices in other key strategic locations in the Asia-Pacific region. The revenue of its sensor product line also increased from 10% in 2003 to 64% in 2022.
Breaking down the business structure further, the Company's electronic component products include capacitors, resistors, inductors, EMI materials, switches, telecommunications integrated circuits ("ICs") and power supply ICs, while sensor products include pressure sensors, Hall sensors, photoelectric sensor sensors, thermal sensors, current sensors and pulse sensors. These products are mainly used in automobiles, industrial automation, computer and communication systems, household appliances, health care and other fields.
However, it should be noted that although Yusheng Electronics has a long history of establishment and a rich product line, from its fundamental point of view, the company also has development risks such as revenue fluctuations and tight cash flow.
According to the prospectus data, as of the first half of 2023, the company achieved revenue of 3HK$5.4 billion, a year-on-year decrease of 1155%, the decline in income is mainly due to lower consumer spending due to inflation and rising interest rates in the global economy in 2023;Foreign exchange rates fluctuate due to the strengthening of the US dollar against most major currencies;As well as chain disruptions leading to some type of inventory shortage.
Moving the timeline forward, Yusheng Electronics' operating income is also more volatile - in 2021 and 2022, the company recorded revenue of 6HK$6 billion, HK$6HK$6.2 billion, a year-on-year decrease of about 3% in 2022.
Looking at the net profit, compared with the fluctuating revenue, the net profit of Yusheng Electronics is to maintain a continuous improvement trend. In 2021 and 2022, the company recorded a net profit of 198780,000 Hong Kong dollars, 3418HK$140,000, increasing year by year. As of the first half of 2023, the company recorded a net profit of 2002090,000 Hong Kong dollars, compared with 1748 in the same period last yearWith a net loss of HK$6.1 billion, it turned a significant loss.
Data**: Yusheng e-prospectus).
However, although the net profit maintained positive growth, the cash flow of Yusheng Electronics was not as abundant as imagined.
According to the prospectus data, as of the first half of 2023, the company's net cash provided by operating activities was only 26HK$580,000 and cash and cash equivalents at the end of the period were HK$4,456HK$10,000. At the same time, the company's debt level is also at a high level, and the company's total assets during the period are 3HK$200,000 and total liabilities of up to 2HK$4.6 billion, which may have some debt repayment pressure.
In view of the above, it seems that it is not difficult to understand the "original intention" of Yusheng Electronics to be listed on the NASDAQ.
The industry continues to expand, but there is no shortage of competitive pressure.
From the perspective of the market space of electronic components and sensors, the "living environment" of Yusheng Electronics is not so easy.
In terms of the sensor market, according to PrecedenceResearch, the global sensor market size was approximately USD 204.8 billion in 2022 and is expected to reach approximately USD 5086 by 2032$400 million, with a CAGR of about 84%。
Among them, the Asia-Pacific region accounts for about 40% of the global sensor market. The Asia-Pacific region is the fastest-growing region and will account for about 42% of the global sensor market share by 2032. Compared with developed countries, due to the development trend of smart devices and industry, the application of sensors in the Asia-Pacific region is still developing and expanding, and the main sensor markets in the Asia-Pacific region are countries such as Chinese mainland and Japan.
Take the automotive sensor market as an example, due to the stricter regulations on harmful gas emissions, as well as the application of pressure sensors in the automotive field and the increasing use of custom-designed electronic devices in vehicles, the demand for sensors in the automotive industry is increasing significantly - it is reported that the global automotive sensor market size in 2022 is 403900 million US dollars, and it is expected to reach around 67.2 billion US dollars by 2030, with a compound annual growth rate of 657%。
Data**: Yusheng e-prospectus).
In terms of electronic components, the active and passive electronic components market is expected to grow at a CAGR of around 879%, while the Asia-Pacific region is expected to be the fastest-growing market.
From this, it can be seen that the sensor and electronic components track in which Yusheng Electronics is located are in a state of continuous expansion.
But in fact, as mentioned above, the competitive environment faced by Yusheng Electronics is not so optimistic.
On the one hand, the company may not be able to keep up with the rapid technological changes, and thus may be at risk of being squeezed out of the competition by its peers. Specifically, the electronic components industry is characterized by rapid technological change, evolving industry standards, frequent introductions and enhancements of new products and services, and changing customer needs. The introduction of new technologies and the emergence of new industry standards may make Yusheng's services obsolete and uncompetitive. In addition, the Company's inability to adversely market trends and technological changes may also adversely affect the Company's competitive advantage.
On the other hand, the company operates in a highly competitive market, which can lead to a decrease in the company's profit margins. Yusheng Electronics said in the prospectus that although the company has established long-term and lasting relationships with major customers, there is no guarantee that some of the company's competitors will not have more financial and human resources, more competitive pricing strategies or closer relationships with electronic component manufacturers than Yusheng Electronics. If the Company's competitors offer cheaper alternatives, adopt aggressive pricing to increase its market share, or have the ability to offer products with superior performance, functionality or efficiency, the Company may lose customers, which may adversely affect the Company's business, financial condition and results of operations.
According to the prospectus data, in the first half of 2023 and the first half of 2022, Yusheng Electronics will be about 3HK$10.7 billion and HK$3HK$08.1 billion revenue came from existing customers, accounting for 99% and 98% of the company's total revenue, respectively. In this regard, Yusheng Electronics bluntly said that the competition in the electronic components industry is very fierce, and the company's ability to obtain purchase orders is one of the key factors for success. The success of the company requires the company to maintain good relationships with existing customers and develop new relationships with potential customers. However, if the Company is unable to successfully acquire existing customers and obtain a sufficient number of recurring and/or new purchase orders, Yusheng Electronics' operating results may also be adversely affected.
To sum up, whether from the perspective of fundamental performance or industry competitive advantage, the strength of Yusheng Electronics to the capital market is not very eye-catching. This also means that the company's attractiveness to investors is relatively limited, and it still needs to continue to build core competitive advantages and brand effect to strengthen its "muscles".