Another IPO has emerged in the smart automobile sector.

It is learned from the report that Guangdong Hongjing Optoelectronics Technology Co., Ltd. (referred to as "Hongjing Optoelectronics") recently submitted the prospectus for initial public offering of stocks and registration documents for listing on the Growth Enterprise Market (GEM), with going public being just a step away.

Hongjing Optoelectronics' main products include smart automobile optical lenses and camera modules, emerging consumer optical lenses and camera modules, which are used in areas such as smart cabins, smart driving, smart home, cameras, among others.

The company has established cooperative relationships with many Tier 1 and EMS manufacturers, and its products have entered well-known domestic and foreign brands including Daimler-Benz, Nissan, Honda, Chery, BYD, Geely, Great Wall, EA, NIO, Xiaopeng, Xiaomi, etc.

What kind of company is this? Today, let's find out.

01

Desay SV Automotive and Allwinner Technology acquire shares.

Hongjing Optoelectronics, formerly known as Zhongshan Hongjing Optoelectronics Technology Co., Ltd., was established in 2012 in Zhongshan, Guangdong Province. It was jointly funded by Zeng Wei and Rao Longjun, with Zeng Wei's contribution ratio being 90%. Zeng Wei holds the shares on behalf of Zhao Zhiping.

During the development process, Hongjing Optoelectronics received multiple rounds of financing from investors including Kunshi Wealth, Qinhe Venture Capital, Desay SV Automotive, and other institutions.

Before this issuance, Zhao Zhiping, the controlling shareholder and actual controller of Hongjing Optoelectronics, directly held 28.0971% of the company's shares. He indirectly controlled 57.0052% of the voting rights of the company through being the executive partners of Hongyun Investment, Hongkuan Investment, Hongda Investment employee stock ownership platforms, and by signing the "Joint Action Agreement" with Zhou Dong. Desay SV Automotive, Qinhe Venture Capital, Liwan Investment, and Allwinner Technology are all shareholders of the company.

Zhao Zhiping, born in 1969, with a master's degree, previously served as the Manufacturing Department Chief and Quality Assurance Department Manager and representative at Dongguan Xintai Optics Co., Ltd. He also held positions as the General Manager of Phenix Optics (Guangdong) Co., Ltd., General Manager of Sunny Optical (Zhongshan) Co., Ltd., and Chairman of Sunco Optics (Tianjin) Co., Ltd. Since May 2016, Zhao Zhiping has been serving as the Chairman and General Manager of Hongjing Optoelectronics.

Zhou Dong, born in 1974, with a Bachelor's degree, previously worked as a Quality Supervisor at Dongguan Xintai Optics Co., Ltd., and subsequently held positions such as Deputy General Manager of Manufacturing at Shanghai Laudasi Sanitary Ware Co., Ltd., Vice General Manager of Sales at Sunny Optical (Zhongshan) Co., Ltd. Since May 2016, Zhou Dong has been serving as a Director and Executive Vice General Manager of Hongjing Optoelectronics.

02

Expected revenue to exceed 1 billion yuan in 2024.

Hongjing Optoelectronics' main products are optical lenses and camera modules, including two main product lines: smart automobile optical lenses and camera modules, and emerging consumer optical lenses and camera modules.

Among them, the company's smart cockpit products include in-vehicle video driving recorder system (DVR) lenses and camera modules, driver monitoring system (DMS) lenses and camera modules, and passenger monitoring system (OMS) lenses and camera modules.

The company's smart cockpit products, image source: prospectus

Intelligent driving products include advanced driver assistance system (ADAS) lenses and camera modules, panoramic monitoring imaging system (AVM) lenses and camera modules, electronic rearview mirror (CMS) lenses and camera modules.

Emerging consumer products include smart home optical lenses and camera modules, panoramic/sports camera optical lenses and camera modules.

Specifically, from the first half of 2021 to the first half of 2024, the revenue proportion from smart automobile optical lenses and smart automobile camera modules has been declining, while the revenue proportion from emerging consumer optical lenses and emerging consumer camera modules has been increasing.

In the first half of 2024, the revenue proportion of emerging consumer optical lenses and emerging consumer camera modules was 33.45% and 47.60%, respectively, accounting for a higher proportion.

The company's main business income is broken down by product, image source: prospectus

Benefiting from the trend of high-end traditional devices such as cameras, smartphones, microscopes, and the rapid development of emerging applications such as smart automobiles, smart homes, smart security, the optical lens market has grown rapidly in recent years.

According to data from Hua Economics Industry Research Institute, the global optical lens market size reached 68.28 billion yuan in 2023, the size of China's optical lens market was 14.036 billion yuan in 2021, with a compound annual growth rate of 10.85% from 2017 to 2021.

Image source: Prospectus

Against the backdrop of the continuously expanding optical lens market, as a manufacturer of optical lenses and camera modules, Hongjing Optoelectronics' performance is also showing a growth trend.

The prospectus shows that in 2021, 2022, 2023, 2024, and January to June 2024, Hongjing Optoelectronics' revenue was approximately 0.252 billion yuan, 0.446 billion yuan, 0.773 billion yuan, and 4.5 billion yuan respectively, with net profits of 15.2581 million yuan, 56.4537 million yuan, 0.116 billion yuan, and 68.5244 million yuan for the same periods.

The company is expected to achieve revenue of approximately 1.078 billion yuan in 2024, a year-on-year increase of 39.46%; the net profit attributable to the owners of the parent company is expected to be approximately 0.165 billion yuan in 2024, a year-on-year increase of 41.88%.

03

In 2022, it is the sixth largest car optical lens manufacturer in the world with a market share of 3.7%.

Hongzhong Optoelectronics' main products are optical lenses and camera modules, positioned in the middle of the optical industry chain. The downstream industry mainly includes consumer electronics, automotive electronics, security monitoring, machine vision, and other industries.

Industry chain of optical lenses and camera modules, image source: prospectus.

The company's downstream customers are mainly well-known consumer electronics brand manufacturers, Tier 1, EMS manufacturers. The top five customers include RockChip Innovation, AZTECH, Hawking Technology, Hangzhou Hikvision, Foxconn Industrial Internet, Shengda Electronics, etc.

During the reporting period, Hongzhong Optoelectronics' sales to the top five customers accounted for 48.79%, 59.46%, 77.65%, and 78.43% of revenue respectively. In 2023 and the first half of 2024, sales revenue from RockChip Innovation accounted for over 45%, which is relatively high, posing a concentration risk.

The market concentration in the emerging consumer panorama/sports camera sector downstream of the company is relatively high.

According to Frost&Sullivan's data, the leading companies in the global consumer-level panorama camera sector include China's Insta360, Ricoh from Japan, and gopro from the United States. In 2022, the market shares of these three companies were 50.7%, 19.7%, and 17.8% respectively. These brands typically only choose one lens module supplier for the same model of product, and the main competitors in the optical lens and camera module field include Hongjing Optics, Lianchuang Electronic, and Sunny Optical Technology.

In recent years, with the continuous expansion of the application fields of optical lenses, the optical lens and camera module market have experienced rapid growth. Meanwhile, the promising prospects in the industry have attracted more new entrants, leading to intensifying market competition.

In the smart home sector, according to AiRui Consulting data estimates, by 2023 Hongjing Optics is projected to have a 9.95% market share in the global household camera (including visual doorbells) optical lens field. In the panorama/sports camera sector, according to Frost&Sullivan data estimates, Hongjing Optics is expected to have a market share of over 25% in the global panorama camera lens module market in 2023.

In the smart automobile sector, due to the high reliability requirements of the automotive industry on components and the lengthy certification period, once certified, car manufacturers generally do not easily switch suppliers.

According to TSR report, in 2022, in the automotive camera market, Sunny Optical Technology's lens shipment volume ranked first globally with a market share of 36.2%; followed closely by overseas manufacturers such as Maxell from Japan, Nidec Sankyo from japan, and Sekonix from South Korea. Hongjing Optics had a 3.70% market share in the global automotive optical lens market in 2022, ranking sixth globally, indicating the company's certain market position in the segmented field.

From 2021 to the first half of 2024, Hongjing Optics' main business gross margin was 28.12%, 27.03%, 30.75%, and 30.81% respectively. Among them, the company's main business gross margin was lower than Xiamen Leading Optics, Phenix Optics, and Zhongrun Optical, and higher than Sunny Optical Technology, Dongguan Yutong Optical Technology, and Lianchuang Electronic.

Comparison of the gross margin situation of the company's main business with comparable companies in the same industry, image source: prospectus

04

Epilogue

In recent years, against the backdrop of the expanding scale of the optical lens market, Hongjing Optoelectronics' performance has also shown a growth trend. The company holds a certain market position in global automotive optical lens and panoramic camera lens modules and other segmented areas. If it successfully enters GEM, it will be beneficial to obtain a long-term fund to support the company's development and enhance the company's reputation. However, the optical lens and camera module industry where Hongjing Optoelectronics is located faces fierce market competition, and it will not be easy to increase market share in the future.