The First A Share Red Chip Stocks Attacked Huarun To Carry Out The Green Shoe Mechanism

With the promotion of related work in the year, more star companies are getting closer to listing.

In February 12th, Huarun Microelectronics Co., Ltd. (hereinafter referred to as Huarun micro) officially launched the first purchase of the KCR board. According to the announcement, Huarun issued a price of 12.80 yuan / share after its passing inquiry, and if it did not consider the option of excess placement, the price earnings ratio after the issue was 46.56 times higher than that of the reference industry. The price earnings ratio was 0.31 times higher than that of the reference industry.

According to the 293 million shares to be issued, Huarun Microelectronics will raise funds to 3 billion 750 million yuan. If the 15% excess allotment rights are exercised, the total raised funds will reach 4 billion 313 million yuan.

In twenty-first Century, the economic news reporter was informed that many institutions and investors expressed their wishes for the purchase of Huarun micro, because Huarun micro is currently the A share market and even a few domestic chip manufacturing targets. It is worth mentioning that Hua Runwei is also the first company to be listed in the red chip structure, which has attracted much attention from the market.

Scarce chip manufacturing

In February 12th, Huarun officially launched the purchase of "chip making" halo.

According to the prospectus, Hua Runwei also owns the integrated operation capability of chip design, manufacture and packaging. In the view of many buyers, Huarun micro chip "manufacturing business" is very scarce in the A share market.

"Chip stocks are the main chip stocks in A shares, and Huarun microelectronics is different from the chip manufacturing business." "We have already applied for a purchase," he said. "If the price of the listed company has advantages, it may continue to focus on and invest in Beijing."

Chip manufacturing is indeed an important label for Huarun micro. According to the Huarun micro prospectus, in the first half of 2019, chip manufacturing accounted for 71.29% of revenue.

It is worth mentioning that in 2019, after the acceptance of the start-up materials of the science and technology board, the well-known Taiwanese semiconductor manufacturers Union Electric's chip and ship chip is expected to become the first unprofitable chip manufacturing and listing enterprise in China, but for many reasons, the company finally decided to withdraw the first application last year when it was audited, but now Huarun microelectronics has become the first A company to have "chip manufacturing" label.

In fact, before the large-scale absorption of the semiconductor industry by A, there are many listed companies in the A-share market, including Beijing, China, and so on. However, the chip manufacturing industry is still in the "blank". Compared with design links, the assets made by chips are also heavier.

"At present, most of the domestic chip stocks are mainly engaged in design, development and sales, some of which are packaged and tested, but" manufacturing "is very scarce. A semiconductor industry analyst also said, "design is more intellectual intensive, but manufacturing is capital intensive, and assets are much heavier than design."

The asset structure of Huarun micro really reflects this characteristic: according to the prospectus, the fixed assets scale of Hua Runwei reached 3 billion 619 million yuan at the end of the three quarter of 2019, accounting for 72.09% of its non current assets in the same period.

"If it is an advanced process machine, the price may be up to tens of billions, and there is also a purchase quota per year, so the industry barriers to manufacturing are relatively high." The head of the aforementioned private placement said frankly.

It is worth mentioning that the direction of Huarun micro investment is also related to the semiconductor project. It plans to invest 1 billion 500 million of the proceeds to launch the 8 inch high-end sensor and power semiconductor construction project.

However, from the point of view of process technology, the Huarun micro production line mainly concentrates on 6 inches and 8 inches. The annual output of the two category is 2018 and 2 million 470 thousand pieces per year respectively. However, at present, the 28nm-90nm process of the main chip manufacturing process often needs 12 inch factories. Last year, the Xiamen plant of the warship chip is 12 inches factory. Therefore, some analysts have pointed out that Huarun micro manufacturing technology has a certain degree of backwardness, but some investors believe that chip manufacturing is still a scarce industry in the whole, so it has a long performance space.

"Although 28nm and 14nm are more advanced, there are a large number of import substitution requirements for micron chips, and not all chips need nanometer scale processes. This process has great opportunities for Chinese chip production." The head of the private placement said frankly.

Will carry red chips "debut"

From the financial point of view, Huarun microelectronics just realized the "positive" of net profit in 2018, which is also related to the particularity of the chip manufacturing industry.

Prospectus disclosure, Huarun micro from 2016 to 2018 three years of operating income were 4 billion 397 million yuan, 5 billion 876 million yuan and 6 billion 271 million yuan, the same period net profit was -3.02 billion yuan, -1.03 billion yuan, 538 million yuan, showing a turning loss into surplus state. In the first three quarters of 2019, the company's revenue reached 4 billion 132 million yuan and its net profit to parent company was 355 million yuan.

"Chip manufacturing equipment procurement costs are high, often with a depreciation period of up to 6-8 years, the company from loss to start profits, so there is a process, from this financial situation, is now entering the profit period." The semiconductor analyst said frankly, "but if Huarun micro continues to invest in advanced manufacturing processes, such as the next big effort to do 12 inch plants, then the late investment may also intensify, resulting in a loss at the financial level."

It is important to note that Huarun's IPO has multiple auras, for example, it will soon become the first listed company in the A stock market based on the red chip framework. According to the prospectus, Huarun micro's real controller is China Huarun, which is a Chinese enterprise established in the Cayman Islands and carries out the actual business through the domestic holding subsidiaries.

The reason for setting up a red chip structure is not related to Huarun's Micro listing in Hong Kong stock market, but in 2011, Huarun started to withdraw from the privatization of Hong Kong stock market.

In fact, the A share market's inclusion of the red chip structure is mainly due to the release of the regulatory authorities' policy on the listing of innovative enterprises in 2018. According to the exchange standard, Huarun micro application IPO has adopted the standard two for red chip enterprises. "It is estimated that the market value is not less than RMB 5 billion yuan, and the income in the recent year is not less than 500 million yuan".

"Huarun micro issue will be listed as the first red chip company listed on A shares, reflecting the openness, innovation and efficiency of the mainland's securities market." Li Fuli, chairman of Huarun micro, said in the roadshow.

In addition to Huarun micro, the "robot No. nine" in the queue is also a red chip structure, and the time of reporting is earlier than that of Huarun. However, it is still in the state of aborted audit due to the update of earnings.

In addition, Huarun micro will launch the green shoe mechanism in the IPO IPO, becoming the first company to introduce green shoe mechanism in the company, and also the issuer of fifth green shoe mechanism in the history of A shares.

"Green shoe mechanism will help stabilize the stock price after IPO and support liquidity." A successful investment banker close to Huarun micro said, "the successful listing of these companies means that more and more projects like red chips and green shoes will be issued."