Aux Electric subscription plan, expensive or cheap, is it worth it?
For the conclusion, see the bottom
IPO Details:
Company: Aux Electric$AUX ELECTRIC(02580.HK) is one of the top five global air conditioning suppliers, integrating the design, R&D, production, sales, and service of household and central air conditioners.
In 2024, by sales volume, the company was the fifth-largest air conditioning provider globally, with a market share of 7.1%. It is the fourth-largest air conditioning company in China, with a market share of 7.3%.
The company's top five customers are mainly distributors and ODM clients. The total revenue from the top five customers accounted for 18.3%, 17.5%, 18.9%, and 18.1% of the total revenue during the same periods.
The company's suppliers mainly include raw material and component suppliers. The total procurement from the top five suppliers accounted for 31.8%, 28.8%, 33.3%, and 26.6% of the total operating costs during the same periods.
Products: Household air conditioners + Central air conditioners
Shareholders: Mr. Zheng Jianjiang controls approximately 96.36% of the voting rights through Ze Hui, China Prosper, and Aux Holdings.
The company distributed 3.8 billion in dividends in 2024, with Zheng alone receiving 3.65 billion, and now seeks 3.6 billion in its 2025 IPO?
Will investors still buy in after such massive payouts?
What can I say?
The company's fund allocation: 20% for global R&D, 50% for capacity and supply chain upgrades, 20% for sales, and 10% for operations.
Financials: Growth has been decent in recent years, but the rate is declining.
Operating cash flow is tight.
Industry: Just take a look
Valuation: Cheap
Top 5 air conditioning companies in China:
Aux's current P/E is 9.23, seemingly more expensive than Gree's 8.29, but not really. Although Gree is larger, it has a high 85% domestic business share, along with negative growth and near-stagnant revenue growth, but its profit margin surged to 17% in 2024, leading the industry (normally around 13%, also top-tier), making its position unique.
Compared to the other three companies with nearly 40% overseas revenue, except for Hisense, all recorded positive domestic growth, with Aux being the fastest-growing in overseas revenue. Benchmarking against Midea, Aux's disadvantages lie in scale and gross margin, but its profit margin is comparable. Compared to Haier Smart Home (half of which is air conditioning), Aux's P/E and PEG valuations are cheaper than all three, making it not expensive.
Margin Financing: 14x, total of 2.5 billion, indicating low popularity.
Placement: Mechanism A, normal clawback, 3.6 billion offering.
Cornerstone Investors: 4, accounting for 27%, nothing noteworthy.
Sponsor: CICC. Wholesaler CICC is the stabilizing agent, with decent recent performance.
Market Trends: Divergence
The two leading companies (Gree > Midea) have shown resilience, while the other two (Haier > Hisense) have performed averagely, largely aligning with their industry positions and financial performance.
Gree rising: $GREE(000651.SZ)
Midea oscillating at highs: $Midea Group(000333.SZ)
Haier oscillating: $HAIER SMARTHOME(06690.HK)
Hisense weakening: $Hisense H.A.(000921.SZ)
Subscription: Participate
Aux primarily operates in ODM mode, with relatively cheap but not significantly so. Industry sentiment favors the two leaders, while Aux is not in that league. Pre-IPO dividends exceeded fundraising, and Mechanism A crowds retail investors, lacking hype.Old Cat Rating: 2-4 stars. For detailed strategies, check the knowledge planet!
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