In a significant move demonstrating both ambition and resilience, Hezhima Intelligent, a company specializing in automotive-grade System on Chips (SoCs), announced a financing plan on February 19, 2024, amidst expectations of a turn toward profitabilityThis strategic initiative comes as the company, which has been operational since 2016, gears up for its long-anticipated listing on the Hong Kong Stock Exchange, slated for early August 2024. The unfolding financial narrative reveals a journey of growth, challenges, and optimistic forecasts.

According to the disclosed announcement, Hezhima plans to issue 53.65 million new shares at a price of HKD 23.2 per share, aiming to raise approximately HKD 1.24 billionThis capital infusion is earmarked primarily for advancing the company’s research and development efforts, pursuing strategic investments, and bolstering its general operational fundingDespite facing financial losses, the company’s projected revenue for 2024 is promising, estimated to be between HKD 450 million and HKD 500 million, along with a net profit forecast of no less than HKD 100 millionThese figures represent a marked transformation from previous years, with income growth from HKD 60.5 million in 2021 to an anticipated HKD 312 million in 2023, coupled with an adjustment of net losses increasing from HKD 614 million to HKD 1.254 billion over the same period.

In their latest release, Hezhima explicitly noted that the share placement has been carefully crafted in light of prevailing market conditions, classifying it as an appropriate option for financing that supports sustained growth and aligns with the broader interests of shareholdersThe financing arrangement stipulates that if the placement is successful, the total gross proceeds from this issuance would approximate HKD 12.447 billion, with net proceeds reaching around HKD 12.374 billion.

The plan highlights a commitment towards advancing core technology development, particularly focusing on next-generation automotive autonomous driving chips and core intellectual properties, enriching the company's capability for commercialization, and selectively pursuing strategic investments

Advertisements

Hezhima’s aim is to enhance operational efficiency and innovation within its field.

Li Jinqing, an analyst at Bida, remarked on the commonality of share placements among publicly listed companies, noting the swift capital access they offer, balanced against the potential dilution of existing shareholders' equityThe implications of this financing strategy are profound, especially in a highly competitive market where technological advancement is a race against time and expertise.

Upon the completion of these placements, shareholding patterns will witness a notable shift, with new investors collectively holding 8.55% of the company, while founder and CEO Shan Jizhang’s stake will see a decrease from 21.5% to 19.66%. Public shareholders will also experience a dilution in their holdings, dropping from 78.5% to 71.79%. While dilution often raises concerns among current shareholders, it can also be viewed as a necessary step towards securing growth capital in a dynamic and evolving sector.

Beyond the financing news, Hezhima has set a hopeful tone with its annual profit forecast, projecting revenues between HKD 450 million and HKD 500 million for the fiscal year ending December 31, 2024. This forecast denotes a significant increase from the previous year's figures, estimating a growth of approximately 44% to 60% against last year's numbers, where the company reported a net loss of about HKD 485,500. The anticipation surrounding these projections reflects a growing confidence in the company's direction and market positioning.

As of February 19, 2024, Hezhima's stock closed at HKD 27.15, marking an impressive 6.7% increase from its opening price of HKD 25.45 earlier that dayThis uptick brings the company’s market capitalization to HKD 15.453 billionFor context, on the day the company debuted on the stock market on August 8, 2024, shares opened at HKD 18.8 and closed at HKD 20.45, attributing a market value of HKD 11.64 billion at that time.

In the context of the competitive landscape, Hezhima ranked fifth among autonomous driving chip suppliers in China as of 2023, holding a 2.2% market shareThe top competitor boasts a commanding 27.5% market shareAdditionally, in the category of high-performance autonomous driving SoC shipments within China, Hezhima ranked third with a market share of 7.2%, trailing behind the market leader, which holds a staggering 72.5% of the shareThis data vividly highlights the challenges Hezhima faces in a heavily saturated market and underscores the critical importance of their forthcoming strategies to carve out a more significant portion of the market.

Advertisements