IPO Observation | Sightkun Technology Responds to First-Round Inquiry Before Listing

Recently, Sightkun Technology responded to the first-round inquiry from the Shanghai Stock Exchange, focusing on the rationality of its high gross profit margin, the necessity of capital expansion, and the basis for exempting information disclosure. As understood, Sightkun Technology was approved by the Shanghai Stock Exchange on June 16, 2023, and the company plans to list on the sci-tech board, with China Securities as the sponsor (600030).

Sightkun Technology is a provider of three-dimensional (3D) vision digitalized comprehensive solutions. The main products include handheld and tracking 3D vision digitalized products and industrial-grade automatic detection systems, widely applied in the fields of aviation, automotive manufacturing, and engineering machinery.

Pre-IPO Agreement

The founders of Sightkun Technology are four Ph.D. students from Zhejiang University, namely Wang Jiangfeng, Chen Shangyan, Zheng Jun, and Guo Zhonghua. In 2015, the four co-founders invested RMB 8 million to establish Sightkun Limited, which is the predecessor of Sightkun Technology.

Sightkun Technology has deepened its research and development in three-dimensional vision digitalized hardware and software fields, with products mainly covering industrial-grade high-precision and professional-grade high-value-added two major channels. The products include handheld 3D vision digitalized products, tracking 3D vision digitalized products, professional-grade color 3D vision digitalized products, and industrial-grade automatic detection systems.

According to the prospectus, from 2020 to 2022, Sightkun Technology's revenue was RMB 0.92 billion, RMB 1.61 billion, and RMB 2.06 billion, respectively, with a compound growth rate of 50.05%. The net profit before tax was RMB 0.27 billion, RMB 0.64 billion, and RMB 0.71 billion, respectively.

Notably, during the reporting period, the company's main business gross profit margin was 79.19%, 77.01%, and 76.40%, respectively, which is higher than the industry average of 54.83%. The Shanghai Stock Exchange also asked Sightkun Technology to explain the rationality of its high gross profit margin and whether it conforms to industry characteristics.

Sightkun Technology replied that because its main competitors have not been listed independently, the relevant comparable companies are not selected; because its competitors have been listed on the new third board, only First-Line Three-Dimensional (3D) Vision Digitalized Products and Sightkun Technology exist with similar products, while other comparable companies and Sightkun Technology's products all have certain differences.

The high gross profit margin has also attracted many investment opportunities. In October 2022, Sightkun Technology introduced multiple investors, including Zhongtai Investment and Hunan Electric Media (000917), with a financing price of RMB 166.67 per share, raising RMB 1.7 billion, and post-investment valuation of RMB 26.7 billion.

However, the introduction of these investors also led to the signing of an agreement requiring Sightkun Technology to repurchase all or part of its shares if it fails to complete its initial public offering on December 31, 2024.

Currently, Wang Jiangfeng, Chen Shangyan, and Zheng Jun collectively hold 85.21% of the company's shares, which is the actual controlling shareholder. Guo Zhonghua was a professor at Zhejiang University's Computer Science Department before he left academia to start a business in 2015.

In 2022, Sightkun Technology had over 70% of its revenue come from the top three downstream application fields, namely automotive manufacturing (40.4%), engineering machinery (22.38%), and aviation (10.23%). Within the automotive manufacturing field, Sightkun Technology's products have entered well-known companies such as BMW, BYD, and Tesla, widely applied in product design, manufacturing, and quality control.

Regarding clients, Germany's Zeiss High-End Company has been a consistent top customer for three consecutive years, with the backing of the Zeiss Group, a global leader in optics. In 2020-2022, Zeiss High-End contributed RMB 0.06 billion, RMB 0.13 billion, and RMB 0.16 billion to Sightkun Technology's revenue, accounting for 6.49%, 8.15%, and 7.54% of the company's total revenue, respectively.

R&D Expenses Insufficient

In 2022, the global three-dimensional digitalized market sales revenue was approximately RMB 500.6 billion, while the market scale is expected to grow to RMB 1203.2 billion by 2027, with a compound growth rate of 19.2%. From 2022 to 2027, China's three-dimensional digitalized product market size is expected to grow at an annual compound growth rate exceeding 20%, reaching RMB 200.8 billion in 2027.

As the downstream market demand continues to rise, the three-dimensional vision digitalized product market is developing rapidly, attracting numerous domestic and foreign companies to set up related fields. On the one hand, international industrial measurement giants such as Zeiss and Hexagon have expanded their presence in the Chinese market through internal development, mergers and acquisitions, and other means; on the other hand, domestic companies such as Wuhan Zhongguan and Tianyuan Three-Dimensional have also established a strong presence.

Currently, the concentration of the three-dimensional vision digitalized scanning industry in China is relatively high, with main manufacturers including Sightkun Technology, Shape Creation Company, Heksakon (including Wuhan Zhongguan), and First-Line Three-Dimensional. According to data for 2022, the top five companies in the global market share of handheld and tracking common three-dimensional digitalized scanning products are American Technology (including Shape Creation Company), Sightkun Technology, Carl Zeiss (including Zeiss High-End), Heksakon (including Wuhan Zhongguan), and First-Line Three-Dimensional, with a combined market share of approximately 30%. Among them, Sightkun Technology and First-Line Three-Dimensional are Chinese companies that rank high in the global market, accounting for 3.3% and 1.7%, respectively.

Sightkun Technology claims to be China's top player, but lacks detailed data, which has also raised questions from the Shanghai Stock Exchange. In response to this inquiry, Sightkun Technology only published relevant documents, stating that according to a certificate issued by the Chinese Instrument and Meter Industry Association, in the industrial-grade field, the company's handheld 3D scanning instruments occupied the top spot domestically.

However, it is worth noting that Sightkun Technology's R&D expenses are lower than those of its peers. The prospectus shows that from 2020 to 2022, the company's R&D expenses were RMB 1.379 billion, RMB 2.331 billion, and RMB 3.672 billion, respectively, with an R&D expense ratio of 15.07%, 14.48%, and 17.82%. During the same period, the industry average R&D expense ratio was 15.91%, 18.31%, and 19.68%.