Another Smart Driving Firm Eyes Hong Kong IPO
Another intelligent driving company is making a push for listing on the Hong Kong stock market.
On November 22nd, Furui Technology (Zhejiang) Co., Ltd. (hereinafter referred to as "Furui Technology") submitted its initial public offering (IPO) application to the Hong Kong Stock Exchange, officially launching the process of going public in Hong Kong. CITIC Securities, CICC, Huatai International, and HSBC are serving as joint sponsors.
Established in 2016, Furui Technology's founding team, unlike many young and dynamic teams in the autonomous driving startup scene, boasts seasoned veterans from the automotive industry in its CEO and CTO positions.
The founder and CEO, Zhang Lin, previously held executive positions at Chrysler and Geely Automobile; CTO Shen Junqiang has worked at Delphi Electronics and Safety Division and was responsible for establishing Delphi's active safety development team in China.
The background of the core executives has determined Furui Technology's DNA, which is to start with mass-producible ADAS (Advanced Driver Assistance Systems) features, marking the beginning and focus of Furui Technology's business.
The prospectus shows that as of June 30, 2024, Furui Technology has established business partnerships with 46 OEMs, covering all of the top ten domestic OEMs by 2023 vehicle sales, and has accumulated over 280 designated projects and more than 200 production projects.
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According to data from China Insights Consultancy, in the 2023 Chinese L2 and L2+/L2++ intelligent driving solution market, Furui Technology ranks third among independent suppliers with a market share of 14.6%.
Having sales volume means having the ability to "regenerate." According to the prospectus data, in the first half of 2024, Furui Technology's revenue was 312 million yuan, a year-on-year increase of 33.7%.
However, Furui Technology still faces a common dilemma in the intelligent driving circle: the delay in profitability. In the first half of this year, Furui Technology still faced a loss, with a net loss of 278 million yuan.
At this time, as intelligent driving companies are collectively rushing to go public, Furui Technology is clearly looking to ride the wave.
"New" Company of Old Auto People
As mentioned above, Furui Technology has a "traditional automotive flavor" in its genes, which starts with the background of the core team.
The helmsman, Zhang Lin, is mainly responsible for formulating the company's overall development strategy and business plan, and has been deeply involved in the automotive industry for nearly 30 years. Before joining Furui Technology, he served in Geely Holding Group and was the vice president from April 2011 to February 2016, mainly responsible for Geely's overseas marketing and factory construction.
The "big brother" of technology and the company's executive director and chief scientist, Shen Junqiang, joined in 2018 and is mainly responsible for the company's overall R&D efforts. From 1999 to 2016, Shen Junqiang served as a director at Delphi Automotive Systems (China) Co., Ltd. (now "Aptiv (China) Technology R&D Co., Ltd."); from 2016 to 2018, he was the chief scientist of an autonomous driving system at a global technology leader.
The vice president of product development, He Junjie, joined in September 2023 and is responsible for the company's product development. Before joining, he had served as an executive at BAIC Foton, ZF, and Bosch, and was the director of engineering at Arriver Software GmbH (a Qualcomm affiliate) and Arriver Software GmbH (a Veoneer subsidiary).
At the same time, Furui Technology has established an internal research institute, headquartered in Hangzhou, with three additional R&D centers in Shanghai, Wuzhen, and Chengdu. As of June 30, 2024, the institute consists of 625 personnel, accounting for 73.1% of the total workforce. Among them, 50.6% hold bachelor's degrees, and 47.2% hold master's degrees or higher.
From the above information, it is not difficult to see that the executive team of Furui Technology has, to varying degrees, some background in the traditional automotive circle.
Under this circumstance, Furui Technology's investors are also mainly traditional groups.
The prospectus shows that since its establishment, Furui Technology has completed multiple rounds of financing before the IPO, with investors including Changxing Financial Holdings, PICC Capital, Yuan Chuang Capital, Everbright Financial Holdings, Wuzhen Tourism Investment, Chun Xin Hongtu, China Communications Fund, BAIC Industrial Investment, TCL Venture Capital, Shaanxi Automobile Group, and Geely Group.
On May 30, 2024, after the C3 round of financing, Furui Technology's current valuation has reached 6.06 billion yuan.
According to the content of the prospectus, the funds raised from this Hong Kong IPO by Furui Technology are intended to be used to strengthen the R&D of the company's intelligent driving solutions and products, to expand and enhance production capacity-related capital expenditures over the next three years, to expand the company's sales and service network over the next three years, and for operational funds and general corporate purposes.
Increasing shipments while facing the issue of high customer concentration
As financing continues to increase, Furui Technology's shipments are also on the rise.
Furui Technology initially focused on in-vehicle cameras and gradually expanded to millimeter-wave radars, camera modules, and domain controllers, among other products.
However, at present, Furui Technology's revenue mainly comes from intelligent driving solutions.
In Furui Technology's view, its core competitive advantage lies in its full-stack self-developed capabilities and the ODIN platform. This platform integrates advanced controllers, precision sensors, powerful software algorithms, and a data closed-loop platform, serving as a scalable, reusable, and iterative modular platform that enables the company to quickly iterate and optimize intelligent driving solutions.
Based on the ODIN platform, Furui Technology has launched three major solutions: FT Pro, FT Max, and FT Ultra, with intelligent driving capabilities ranging from Level 0 to Level 3.
Among them, the FT Pro solution covers Level 0 and Level 1 intelligent driving capabilities, which can effectively reduce potential collision risks through real-time monitoring and warning systems, and provide emergency intervention through automatic emergency braking to slow down or stop the vehicle, preventing or reducing the occurrence of accidents.
The FT Max solution focuses on Level 2 intelligent driving capabilities, mainly relying on integrated machine and radar sensors to provide functions such as Lane Keeping Assist (LKA), Lane Departure Warning (LDW), Automatic Emergency Braking (AEB), Adaptive Cruise Control (ACC), and Forward Collision Warning (FCW).
The FT Ultra solution covers Level 2+ and Level 3 intelligent driving capabilities, equipped with an array of sensors and controllers, supporting high-speed NOA (Navigation On Autopilot) and urban NOA functions.
Information from the prospectus shows that as of June 30, 2024, Furui Technology has established business partnerships with 46 OEMs, covering all of the top ten domestic OEMs by 2023 vehicle sales, and has accumulated over 280 designated projects and more than 200 production projects.
At the same time, according to the prospectus data, the revenue share of FT Pro is continuously declining, while FT Max and FT Ultra are showing a fluctuating upward trend.
In response, Furui Technology explained that this is mainly due to the optimization of strategic resources to meet the growing demands of the L2 solution customer base.
However, like many startups, Furui Technology also faces the issue of high customer concentration.
Data shows that for the years ended December 31, 2021, 2022, and 2023, and the first half of 2024, the revenue from the top five customers accounted for 84.0%, 73.6%, 76.4%, and 85.9% of total revenue, respectively; the revenue from the single largest customer accounted for 43.5%, 22.0%, 43.3%, and 36.5% of total revenue, respectively.
Although Furui Technology did not explicitly state it, the aggregated information reveals that its single largest customer is Geely Holding.
As mentioned above, Geely Group is a capital provider for Furui Technology, and as of the last practicable date, Geely and related parties hold a significant proportion.
The prospectus also specifically points out in related party transactions that for the years 2021, 2022, and 2023, and the first half of 2024, the amount of products and services provided by Furui Technology to Geely Holding was 100 million, 64.53 million, 393 million, and 114 million yuan, respectively.
Furui Technology also expects that from 2025 to 2027, the amount of products and services provided to Geely Holding will reach 1.115 billion, 1.33 billion, and 1.548 billion yuan, respectively.
Not only for Geely, but Furui Technology is also very optimistic about the overall market trend.
It stated that the global market size for L0 to L2+ intelligent driving solutions increased from 108.3 billion yuan in 2019 to 277.1 billion yuan in 2023, with a compound annual growth rate (CAGR) of 26.5%; it is expected to reach 650.3 billion yuan by 2028, with a CAGR of 18.6% from 2023 to 2028. Among them, China's CAGR from 2023 to 2028 is 24.1%, with a market size of 210.3 billion yuan.
Revenue is generally bullish, but cash flow is not very optimistic
As customers continue to increase, Furui Technology's overall revenue also shows an upward trend.
The prospectus shows that from 2021 to the first half of 2024, Furui Technology's revenue was 333 million yuan, 328 million yuan, 908 million yuan, and 312 million yuan, respectively.
However, while revenue is increasing, the gross margin has declined. In 2021, Furui Technology's gross margin was 11.2%, and in the first half of 2024, it was 6%.
In response, Furui Technology explained that the company is currently strengthening R&D investment and investment to support larger-scale operations and will take measures to improve the gross margin level in the future.
At the same time, Furui Technology also specifically stated that the company began to generate a positive gross margin for the FT Max solution in 2022. In 2021, the solution had a negative gross margin of 17.2%, and as of the first six months of 2024, this ratio further reached 8.1%.
Like most autonomous driving startups, Furui Technology is still loss-making. Among them, from 2021 to the first half of 2024, the adjusted net loss was 276 million yuan, 691 million yuan, 627 million yuan, and 217 million yuan, respectively.
Furui Technology stated that the loss-making situation is mainly due to the combined impact of multiple factors. These include being in the early stage of operational expansion and scale expansion; the procurement cost of raw materials and consumables; investment in R&D; and investment in attracting and retaining talent.
Among them, in terms of R&D funding investment, from 2021 to the first half of 2024, Furui Technology invested 185 million yuan, 515 million yuan, 561 million yuan, and 187 million yuan, respectively.
In terms of cash flow, as of June 30, 2024, Furui Technology had cash and cash equivalents of 276.7 million yuan. At the same time, Furui Technology specifically pointed out that it has unused bank financing of 1.1 billion yuan. The company has completed two rounds of equity financing in 2024 and raised a total of about 353 million yuan.
"We actively seek to optimize working capital and capital management, including signing more favorable operating capital terms with customers and suppliers," said Furui Technology. After considering the available financial resources, we believe we have sufficient working capital to meet the current and future 12 months' needs from the date of this document.