After eight years of ups and downs in the capital market, Longcheer Technology has finally successfully gone public. Longcheer Technology, which has shown some struggle, is a sought-after darling in the eyes of capital, with an extremely luxurious investor lineup, including a host of star institutions such as IDG Capital, Yunfeng Fund, Xiaomi, Shenzhen Venture Capital, Shunwei Capital, and Everlight Capital. Among them, Xiaomi is not only a shareholder but also an important customer of Longcheer Technology.

The first "dragon" new stock of the Dragon Year, Longcheer Technology, has successfully completed its IPO.

On March 1st, Shanghai Longcheer Technology Co., Ltd. (hereinafter referred to as "Longcheer Technology") officially landed on the main board of the Shanghai Stock Exchange, with Huatai United Securities as the sponsor and Guotai Junan as the joint lead underwriter. The company's issue price was 26 yuan per share, with a market value of 12 billion yuan and a total fundraising amount of 1.56 billion yuan.

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On the first day of listing, Longcheer Technology's stock price once surged by more than 130%. As of the close, it rose by 99.69%, reporting 51.92 yuan per share, with the latest market value reaching 24.15 billion yuan.

It is understood that Longcheer Technology is a technology company engaged in the research and development, production, and integrated services of smart products, belonging to the smart product ODM industry. The company's main customers include well-known consumer electronics brands such as Xiaomi, Samsung Electronics, Lenovo, Honor, and OPPO.

In terms of performance, from 2020 to 2022 and the first half of 2023, Longcheer Technology achieved a total revenue of over 80 billion yuan. According to Counterpoint data, Longcheer Technology's smartphone shipment volume in 2022 reached 138 million units, accounting for 28% of the global smartphone ODM/IDH shipment volume, ranking first in the world.

In this context, Longcheer Technology has attracted the favor of several star capital institutions such as Xiaomi, China Internet Investment, Yunfeng Fund, and Beyond Moore. It is worth noting that the connection between Xiaomi and Longcheer Technology is quite profound. For Longcheer Technology, Xiaomi has provided both funding and effort.

Over the years, Xiaomi has been the company's largest customer, with orders from Xiaomi accounting for half of Longcheer Technology's total revenue. At the same time, Xiaomi is the second-largest shareholder of the company, with a shareholding ratio second only to the actual controller.

A gathering of "big names" among shareholders

Longcheer Technology, along with Huaqin Technology and Wantai Technology, is known as the "three giants of domestic mobile phone ODM." With the company's successful listing, these three giants have gathered in the A-share market. Similar to Wantai Technology and Huaqin Technology, Longcheer Technology is also highly favored by capital.It is understood that in August 2021, Longcheer Technology completed a Series C financing round with an amount exceeding 1 billion yuan, led by China Internet Investment Fund (referred to as "CIIF"), Yunfeng Fund, Jinpu Investment, and Beyond Moore, with Guangyuan Capital and Sany Group following suit. The company's previous B and A rounds of financing also attracted star institutions such as IDG Capital, China Merchants Capital, Xiaomi Technology Jin Tai Fu Capital, Shenzhen Venture Capital, Shunwei Capital, and Guangyuan Capital to participate in the investment.

Longcheer Technology's prospectus shows that among them, CIIF and Beyond Moore are currently among the top ten shareholders of the company. After this issuance, CIIF holds 13.3957 million shares of the company, accounting for 2.88% of the total share capital, ranking as the 8th largest shareholder. Beyond Moore holds 11.482 million shares of the company, accounting for 2.47% of the total share capital, ranking as the 9th largest shareholder.

Specifically, looking at the top ten shareholders of Longcheer Technology, in addition to CIIF and Beyond Moore, the remaining 8 are, in order of shareholding from most to least, Kunshan Longcheer, Kunshan Longfei, Tianjin Jinmi, Suzhou Shunwei, Ge Zhen Gang, Kunshan Yunrui, Kunshan Qiyun, and Wang Boliang.

Among them, after this issuance, Kunshan Longcheer's shareholding ratio is 20.60%, making it the controlling shareholder of the company. Du Junhong controls 38.5% of the voting rights of Longcheer Technology through Kunshan Longcheer, Kunshan Longfei, and the acting persons Ge Zhen Gang and Kunshan Qiyun, making him the actual controller of the company.

Among the top ten shareholders, the most "eye-catching" are still Tianjin Jinmi and Suzhou Shunwei, which are actually controlled by Lei Jun, the founder of Xiaomi Group. After the IPO, the two companies hold 7.76% and 6.95% of Longcheer Technology's shares, respectively, with a combined shareholding of 14.71%, which is second only to the actual controller Du Junhong. According to the current market value of about 24.2 billion yuan, the value of these shares is about 3.56 billion yuan.

Kunshan Yunrui can also be related to Xiaomi, whose executive partner Deng Hua is the legal person and chairman of Xiaomi's ecosystem company, Shanghai Chuangmi Digital Union Intelligent Technology Development Co., Ltd.

In addition, Yunfeng Fund holds 5.741004 million shares, with a shareholding ratio of 1.23%.

Xiaomi, which has been contributing both money and effort to Longcheer Technology, has shown its commitment. The prospectus shows that in March 2015, Tianjin Jinmi and Suzhou Shunwei increased their capital in Longcheer Technology by 900 million yuan, accounting for 20% of the total share capital after the increase, corresponding to a valuation of 450 million yuan after the increase. With the capital increase from Tianjin Jinmi and Suzhou Shunwei, Xiaomi also became an associated party of Longcheer Technology.Excluding the profits from subsequent equity transfers, based solely on the current shareholding value mentioned above minus the capital increase amount in 2015, Xiaomi's investment in this deal has made a "net profit" of 3.47 billion yuan, with a return of 38.6 times.

In terms of cooperation, Xiaomi is also very generous.

As early as 2013, Longcheer Technology began its cooperation with Xiaomi.

The prospectus shows that since 2020, due to the gradual shift from IDH to ODM in the cooperation model between Longcheer Technology and Xiaomi, Xiaomi and its related parties have firmly held the position of the largest customer of Longcheer Technology.

During the reporting period (2020-2022 and the first half of 2023), Longcheer Technology's sales amount to the top five customers including Xiaomi were 15.379 billion, 21.988 billion, 25.697 billion yuan, and 7.907 billion yuan, accounting for 93.65%, 89.40%, 87.57%, and 73.21% of the total revenue, respectively.

Among them, the related sales amount with Xiaomi was 6.891 billion, 14.183 billion, 13.357 billion yuan, and 4.086 billion yuan, accounting for 41.96%, 57.66%, 45.52%, and 37.83% of the total revenue, respectively. The amount and proportion are relatively high, but there was a decline in the first half of 2023.

It is worth noting that the related transactions with Xiaomi have brought impressive sales data to Longcheer Technology, but there are also risks behind it. In the prospectus, Longcheer Technology also stated that on the one hand, the high proportion of related transactions between the company and Xiaomi may pose a risk that if Xiaomi's future business situation or procurement strategy changes, it may lead to a significant decrease in the amount of purchases from the company, which will have a significant adverse impact on the company's business and operating performance.

On the other hand, during the reporting period, the gross profit margin of the company's sales to Xiaomi was 8.24%, 7.10%, 7.24%, and 8.67%, respectively. If the gross profit margin of future sales to Xiaomi decreases significantly, the overall gross profit margin level of the company will be adversely affected to a certain extent.

It should be noted that as of the end of each reporting period, the book value of Longcheer's accounts receivable was 6.667 billion, 6.744 billion, 5.524 billion yuan, and 6.282 billion yuan, accounting for 59.64%, 53.52%, 48.87%, and 55.39% of the total current assets at the end of each period, respectively, and accounting for 40.95%, 27.71%, 19.05%, and 59.01% of the main business revenue of each period, respectively.

Among them, Xiaomi and its related parties have always been the first in the accounts receivable objects, with a book value of 3.964 billion, 4.152 billion, 2.690 billion yuan, and 2.972 billion yuan, accounting for 59.38%, 61.47%, 48.70%, and 47.24% of the accounts receivable balance, respectively.Concerns for Longcheer Technology

Shifting our focus back to Longcheer Technology, in fact, the company's journey to go public has been quite tumultuous.

In May 2005, led by Du Junhong, Longcheer was listed on the mainboard of the Singapore Stock Exchange, but ultimately chose to delist in December 2020.

In December 2015 and December 2017, Longcheer Technology also submitted prospectuses twice aiming for the ChiNext board, but both attempts were rejected by the China Securities Regulatory Commission's review committee, ending in failure.

By February 2023, Longcheer Technology turned to the Shanghai Stock Exchange's mainboard to restart its listing, and this time the company passed the review in less than seven months, ultimately successfully ringing the bell.

However, despite the support of Xiaomi, compared to the ODM giants Huaqin Technology and Wingtech Technology, Longcheer Technology's performance is good but not outstanding.

From 2020 to 2022 and the first half of 2023, the company achieved revenues of 16.42 billion yuan, 24.595 billion yuan, 29.343 billion yuan, and 10.8 billion yuan, respectively. Over three and a half years, the company cumulatively achieved revenues exceeding 80 billion yuan. During the same period, the company's net profits were 299 million yuan, 548 million yuan, 561 million yuan, and 334 million yuan, respectively.

In the first half of 2023, the company achieved revenues of 17.35 billion yuan, a year-on-year decrease of 24.41%, with a net profit of 506 million yuan. Longcheer Technology estimates that the net profit for the full year of 2023 will be between 602 million yuan and 627 million yuan, a year-on-year increase of 7.40% to 11.86%.

Compared to Huaqin Technology and Wingtech Technology, Longcheer Technology's profitability is weaker. For the year 2022, the revenues of these two companies were 92.646 billion yuan and 58.049 billion yuan, respectively, approximately 3 times and 2 times that of Longcheer Technology; their net profits were 2.493 billion yuan and 1.36 billion yuan, respectively, 4.5 times and 2.5 times that of Longcheer Technology's net profit.

As a "latecomer" to the A-share ODM market, in addition to the "Xiaomi factor" mentioned earlier that may pose risks to Longcheer Technology, a relatively singular product structure is also a significant weakness for the company. During the reporting period, the proportion of Longcheer Technology's smartphone business in its main business exceeded 61%, 72%, 74%, and 84%, respectively, showing a continuous upward trend.Looking at the specifics, in this IPO, Longcheer Technology plans to raise 1.8 billion yuan, with 400 million yuan allocated to supplement working capital. However, Longcheer Technology seems not to be short of funds. As of the first half of 2023, the company still had 4.047 billion yuan in monetary funds on its books. At the same time, in 2021 and 2022, the company carried out two cash dividends, with dividend amounts of 100 million yuan and 455 million yuan, respectively, totaling 555 million yuan in dividends.

Under these circumstances, the necessity of Longcheer Technology raising 400 million yuan to supplement working capital is naturally questioned.

In addition, during the reporting period, Longcheer Technology's asset-liability ratio has always been at a high level, at 87.17%, 88.45%, 80.2%, and 81.2%, respectively.