IPO Observation | Uutai Technology Rides External Battery IPO: Main Operating Revenue Down, Listing Valuation Tripling

Recently, Hangzhou Uutai Technology Co., Ltd. (hereinafter referred to as "Uutai Technology") disclosed its prospectus and plans to list on the Shenzhen Stock Exchange's startup board.

According to our understanding, Uutai Technology is primarily a provider of electric vehicle battery charging and swapping services, with its subsidiary owning an APP called "This Lithium Swapping" for electric vehicles.

The prospectus shows that Uutai Technology plans to issue no more than 10 million shares, accounting for not less than 25% of the total issued shares after this round, raising RMB 109.4 billion for smart swapping product production and operation center projects, research and development center construction projects, and replenishing working capital.

Chasing "Swapping First Share" Estimated Valuation Tripling

Fueled by the hot external battery economy, fast-paced delivery has led many delivery personnel to experience "electrification anxiety," with electric vehicle swapping becoming a major issue. Street corners have seen more and more swapping stations emerging. Uutai Technology's "This Lithium Swapping" is one of them.

Uutai Technology currently focuses on main products and services, including swapping services and charging equipment. Swapping services refer to the provision of soft and hard ware through self-developed research and development, including lithium batteries, swapping cabinets, and swapping systems, for customers, who can operate via mobile APPs or user-end applications.

Established initially as a subcontractor for certain Internet-of-Things (IoT) software and hardware businesses from Uums Technology, Uutai Technology sold its first charging cabinet based on the small-scale charging system in 2017, officially launching its charging business. In 2019, Uutai Technology released its first self-developed lithium battery to the market, marking the beginning of its swapping business operations.

Today, Uutai Technology has completed its industrial chain layout from research and development to production, deployment, and operation. It has developed a swapping business system called "This Lithium Swapping" and self-produced lithium batteries and swapping cabinets, applying innovative technologies such as big data, AI, etc., to battery safety control, energy consumption management, business operations, and user management.

Worth noting is that, before its listing, Uutai Technology had introduced shareholders at a "high-speed" pace. Between May 2012 and March 2020, the company underwent several equity transfers and increase-in-capital transactions, increasing its registered capital from RMB 500,000 to RMB 1 million. The share price varied between RMB 1 per registered capital unit. However, from July 2021 to August 2022, Uutai Technology introduced new shareholders through four rounds of financing and transferred shares twice, with a share price ranging from RMB 50 to RMB 156.81 per registered capital unit, differing significantly from the previous period.

The Shenzhen Stock Exchange also raised concerns about whether the recommended person entered the stock at a suitable time.

Meanwhile, Uutai Technology's valuation has taken off like a "rocket," jumping from RMB 5 billion before its external financing in July 2021 to RMB 22.7 billion after three rounds of financing in December 2021, April 2022, and August 2022. The share price increased by 315.75%.

Main Operating Revenue Down

Although the electric two-wheeled vehicle market has seen more entrants, the entire industry is still in its "wild growth" stage.

According to a report by Frost & Sullivan, China's electric two-wheeled vehicle swapping service market size reached RMB 45.3 billion in 2022. It is predicted that between 2023 and 2026, the market size will increase from RMB 70.8 billion to RMB 201.1 billion, with a compound annual growth rate of 41.62%.

Currently, the swapping service market is mainly comprised of riders and instant delivery personnel. In recent years, China's instant delivery market has developed rapidly, with the number of riders increasing continuously. As swapping facilities become more complete, the penetration rate of swapping services will continue to rise, but the market remains relatively dispersed, with no large-scale enterprises dominating.

As of June 30, 2023, Uutai Technology had already deployed its swapping cabinets and batteries in 66 cities, with a total of 237,000 cabinets and 517,500 batteries. Compared to the same period last year, other companies such as Tiantu Energy have also expanded their operations.

The main terminal users of Uutai Technology's swapping services are riders and instant delivery personnel. Riders swap batteries frequently, and the quality of swapping services affects their logistics work efficiency. Therefore, user experience is crucial for retaining users. Meanwhile, electric two-wheeled vehicle swapping services are a heavy asset-intensive business that requires high operating efficiency for companies to achieve profitability.

As the industry becomes more competitive, Uutai Technology not only needs to improve its technology but also needs to optimize its charging cabinet operations.

Therefore, the focus of the industry's technology development should be on improving user experience and asset operating efficiency. Swapping operators need to continuously invest in research and development, upgrading swapping equipment and systems, and implementing digitalized and fine-grained management to ensure high operational efficiency and provide good user experiences for riders.

During the reporting period, Uutai Technology's R&D expenses were RMB 934.19 million, RMB 1.109 billion, RMB 1.867 billion, and RMB 1.290 billion in 2020-2022, with a compound growth rate of 41.40%.

However, as the market becomes more competitive, Uutai Technology's main operating revenue has also experienced a downward trend.

During the reporting period, Uutai Technology's comprehensive gross profit margin was RMB 44.58%, RMB 33.82%, RMB 28.54%, and RMB 26.58%. The downward trend is mainly due to the decline in swapping service gross profit margins and the decrease in sales revenue of charging equipment.

Uutai Technology has stated in its prospectus that the main reason for the decline in swapping service gross profit margins is the increase in raw material lithium battery prices and the cost increase caused by prior investments. During the reporting period, the company's swapping service business developed rapidly, with resources shifting towards swapping services, resulting in an increase in sales revenue of swapping services and a decrease in sales revenue of charging equipment.

Between 2020-2022 and January-June 2023, Uutai Technology's operating income was RMB 9.383 billion, RMB 2.29 billion, RMB 5.56 billion, and RMB 4.07 billion, with a compound growth rate of 144.02%. As the industry develops and regulates, Uutai Technology will face more challenges in maintaining its high growth rate.