IPO Observation | Shangyang Tong Breaks Through Sci-tech Board: Revenue Relies on Large-Scale Products and Major Clients - First Five Suppliers Have "Double Identity"

Shenzhen Shangyang Tong Technology Co., Ltd. (hereinafter referred to as "Shangyang Tong") has submitted its prospectus to the Shanghai Stock Exchange Sci-tech Board, marking the beginning of its IPO journey.

According to reports, Shangyang Tong's main business focuses on the research, design, and sales of high-performance power semiconductor products. The relationship between Shangyang Tong and its suppliers has received attention from investors in the prospectus.

Relying on Large-Scale Products - Relying on Major Clients

Shangyang Tong focuses on the research, design, and sales of high-performance power semiconductor products. The company's high-pressure product line includes super junction MOSFETs, IGBTs, and power modules, as well as SiC power devices; medium-low pressure products mainly include SGT MOSFETs, covering automotive, industrial, and consumer levels.

From 2020 to 2022, Shangyang Tong's revenue grew from RMB 127 million to RMB736 million, with net profits growing from a loss of RMB131.13 million to a profit of RMB139 million. Whether in terms of revenue or net profits, Shangyang Tong has shown significant growth.

Looking at specific products, Shangyang Tong relies heavily on super junction MOSFETs. During the reporting period, the revenue share of super junction MOSFETs was 83.80%, 71.12%, and 78.29%, respectively, making it Shangyang Tong's core product.

Currently, super junction MOSFETs have a wide range of applications in new energy charging stations, automotive electronics, photovoltaic storage, data centers, servers, and communication power supplies, as well as industrial automation and consumer electronics.

However, Shangyang Tong's product structure is single, and if market demand for individual application fields weakens or product prices plummet, the company may not be able to smoothly launch new products and effectively expand its market, which would have an adverse impact on its operations.

Notably, in addition to relying on large-scale products, Shangyang Tong's revenue also depends on major clients. The prospectus shows that from 2020 to 2022, Shangyang Tong sold a significant proportion of its main business income to its top five clients, with concentrations of 62.64%, 51.93%, and 66.82% respectively.

Supplier Complexity

Shangyang Tong's top five suppliers have "double identities," which may affect the impact of related transactions.

The reporting period shows that Huawei Hongli has been Shangyang Tong's largest supplier since 2020. From 2020 to 2022, Shangyang Tong purchased products from Huawei Hongli for RMB9675.89 million, RMB215 billion, and RMB481 million respectively, accounting for 84.85%, 77.92%, and 81.58% of each period's total purchases.

It is worth noting that Huawei Hongli is also Shangyang Tong's indirect shareholder. The prospectus shows that Huawei Investment holds a 4.24% stake in Shangyang Tong prior to issuance, while Huawei Hongli holds a 20% stake in Huawei Investment. In addition, Shangyang Tong's board member and CTO Xiao Wei'an has experience working at Huawei Hongli.

Shangyang Tong's second-largest supplier is also its indirect shareholder. From 2020 to 2022, Shangyang Tong purchased products from Huada Micro and its wholly-owned subsidiary, Tongfu Micro, for RMB1292.39 million, RMB3517.96 million, and RMB6416.17 million respectively, accounting for 11.33%, 12.77%, and 10.88% of each period's total purchases. Huada Micro is the parent company of Shangyang Tong's second-largest shareholder, Nantong Hua Hong.

This year, Qingchu Semiconductor Co., Ltd. (Ningbo) has appeared for the first time in Shangyang Tong's top five suppliers' list, ranking fifth. According to Tianyan Cha, Qingchu Semiconductor was established on March 11, 2021, with registered capital of RMB683.66 million. This means that the company became a top supplier just after its establishment.

Bulletin: IPO and Estimation

Shangyang Tong was founded in 2014 by Jiong Zhong, Lin Shaoan, and others with an initial investment of RMB600 million. Before the stock's formal issuance, Shangyang Tong had 37 shareholders, including 27 shareholders who reported their investments during the reporting period.

In June 2020, Shangyang Tong conducted its first capital increase. At that time, the price was RMB12.10 per registered capital, equivalent to a post-investment valuation of RMB409 million.

Subsequently, Shangyang Tong conducted six capital increases and one stock transfer until April 2022. The stock transfer price was RMB2 per registered capital, while the other rounds' capital increase prices gradually rose to RMB14.77 per registered capital in October 2021, equivalent to a post-investment valuation of RMB649 million.

In October 2022, Shangyang Tong conducted a large-scale capital increase and stock transfer. This time, nearly 20 institutions participated, with the stock price rising to RMB99.48 per registered capital, equivalent to a post-investment valuation of RMB5081 million. This means that from October 2021 to October 2022, Shangyang Tong's valuation grew by 682.90% in just one year.