2023-11-13 13:34:56 ET
Summary
- ZEEKR Intelligent Technology Holding Limited plans to raise $50 million in an IPO to fund the development of advanced electric vehicle technologies and expand its product portfolio.
- The company specializes in the design and production of new energy vehicles in China and has a network of sales centers and online collaborations to attract customers.
- The Chinese market for electric vehicles is expected to reach $330 billion by 2024, driven by environmental concerns and the affordability of electric vehicles.
- ZEEKR Intelligent Technology has returned to revenue growth, and operating losses, while still heavy, have dropped.
A Quick Take On ZEEKR Intelligent Technology
ZEEKR Intelligent Technology Holding Limited ( ZK ) has filed proposed terms to raise $50 million in gross proceeds from the sale of American Depositary Shares representing underlying common stock in an IPO, according to an SEC F-1 registration statement .
The company is a manufacturer of battery electric vehicles in China.
Top line revenue has resumed growth, and operating losses, while heavy, have been reduced. I’ll provide an update on ZEEKR Intelligent Technology Holding Limited when we learn more IPO details.
ZEEKR Overview
Ningbo, China-based ZEEKR specializes in the design and production of new energy vehicles in China.
Mr. Conghui An is the Co-founder and Chief Executive Officer. He has extensive experience in the automotive industry and has been president of Geely Auto since 2011.
The firm operates in the new energy vehicles market, a sector that is growing due to a shift in consumer demand for sustainable and environmentally friendly transportation solutions.
ZK’s vehicle offerings include:
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ZEEKR 001
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ZEEKR 001 FR
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ZEEKR 009
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ZEEKR X.
Management has plans to launch additional vehicles, including a premium sedan.
Customer Acquisition
ZEEKR markets its products through a combination of online and offline strategies.
The firm leverages its sales network to attract traffic and convert prospective leads.
Its network includes ZEEKR Centers, ZEEKR Spaces, ZEEKR Delivery Centers, and ZEEKR Houses, which are located in urban commercial centers where the company can directly engage and interact with a larger number of customers.
ZK also collaborates with online opinion leaders to promote its brands through various social media channels.
Selling, G&A expenses as a percentage of total revenue have remained flat as revenues have increased, as the figures below indicate:
Selling, G&A | Expenses vs. Revenue |
Period | Percentage |
Six Mos. Ended June 30, 2023 | 13.6% |
2022 | 13.3% |
2021 | 13.3% |
(Source - SEC.)
The Selling, G&A efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling, G&A expense, rose to 4.2x in the most recent reporting period, as shown in the table below:
Selling, G&A | Efficiency Rate |
Period | Multiple |
Six Mos. Ended June 30, 2023 | 4.2 |
2022 | -0.1 |
(Source - SEC.)
ZEEKR’s Market And Competition
According to a 2019 market research report by TechSci Research, the Chinese market for electric vehicles of all types was valued at approximately $74 billion in 2018 and is expected to reach $330 billion by 2024.
This represents a forecast CAGR of more than 28% from 2019 to 2024.
The main drivers for this expected growth are growing concern over environmental pollution and the increasing affordability of electric vehicles on offer.
Also, the chart below shows the historical and future forecast growth trajectory for regions in China:
Major competitive or other industry participants include:
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Yadea Group
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AIMA Technology Group
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Zhejiang Luyuan Electric Vehicle
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Geely Automobile
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Dongguan Tailing Electric Vehicle
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Jiangsu Xinri E-Vehicle Co.
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Shandong Incalcu Electric Vehicle
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BAIC International.
Recent Financial Results
The firm’s recent financial results are shown in the table below:
Total Revenue | ||
Period | Total Revenue | % Variance vs. Prior |
Six Mos. Ended June 30, 2023 | $ 2,933,278,000 | 132.5% |
2022 | $ 4,399,135,000 | -1.5% |
2021 | $ 4,465,922,720 | |
Gross Profit (Loss) | ||
Period | Gross Profit (Loss) | % Variance vs. Prior |
Six Mos. Ended June 30, 2023 | $ 307,915,000 | 150.8% |
2022 | $ 340,911,000 | -1.5% |
2021 | $ 346,087,000 | |
Gross Margin | ||
Period | Gross Margin | % Variance vs. Prior |
Six Mos. Ended June 30, 2023 | 10.50% | 0.8% |
2022 | 7.75% | 0.0% |
2021 | 7.75% | |
Operating Profit (Loss) | ||
Period | Operating Profit (Loss) | Operating Margin |
Six Mos. Ended June 30, 2023 | $ (513,040,000) | -17.5% |
2022 | $ (1,327,193,000) | -30.2% |
2021 | $ (1,347,342,220) | -30.2% |
Comprehensive Income (Loss) | ||
Period | Comprehensive Income (Loss) | Net Margin |
Six Mos. Ended June 30, 2023 | $ (527,391,000) | -18.0% |
2022 | $ (1,053,686,000) | -24.0% |
2021 | $ (1,069,682,600) | -24.0% |
Cash Flow From Operations | ||
Period | Cash Flow From Operations | |
Six Mos. Ended June 30, 2023 | $ 48,250,000 | |
2022 | $ (485,924,000) | |
2021 | $ (493,303,580) | |
(Source - SEC.)
ZEEKR IPO Details
ZK intends to sell American Depositary Shares representing underlying common stock for gross proceeds of approximately $50.0 million, not including the sale of customary underwriter options, although the final figure may differ.
Concurrent with the IPO, Geely Auto (GELYF) will have the right to purchase shares in a concurrent private placement at the IPO price.
The firm operates through subsidiaries, which means that U.S. shareholders would not have a direct interest in the operating subsidiaries.
The company is also a "foreign private issuer," which will enable management to disclose substantially less information to public shareholders.
Such company stocks have typically performed poorly post-IPO.
Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:
approximately [45]%, [...] for [the development of more advanced BEV technologies, as well as expansion of product portfolio];
approximately [45]%, for [selling and marketing, and expansion of our service and charging network]; and
approximately [10]%, [...] for [general corporate purposes, including working capital needs, to support our business operations and growth].
(Source - SEC.)
Management’s presentation of the company roadshow is not available.
Leadership said that the firm is not the subject of any material legal proceedings that would have a "serious interference with [its] commercial operation."
Listed underwriters of the IPO are Goldman Sachs, Morgan Stanley, BofA Securities, CICC and other investment banks.
Commentary About ZEEKR’s IPO
ZK is seeking U.S. public investment to continue developing its product line and build out its commercial operations capabilities.
The firm’s financials show uneven revenue growth, improving gross margin, lower operating losses and positive cash flow from operations.
Free cash flow for the twelve months ended June 30, 2023 was negative ($433 million).
Selling, G&A expenses as a percentage of total revenue have been stable as revenue has grown, and its Selling, G&A efficiency multiple rose to 4.2x in the most recent six-month reporting period.
The firm currently plans to pay no dividends on its capital stock and anticipates that it will retain any future earnings to reinvest back into its growth and working capital needs.
ZK’s recent capital spending history indicates it has continued to spend materially on capital expenditures despite operating cash use.
The market opportunity for battery electric vehicles is large and growing but may slow down due to the high prices of many BEVs compared to hybrid or ICE-powered vehicles.
Business risks to the company’s outlook as a public company include its exposure to unpredictable Chinese government regulatory actions and policies as well as the current higher cost of capital environment.
When we learn more IPO details from management, I’ll provide a final opinion.
Expected IPO Pricing Date: To be announced
For further details see:
ZEEKR Intelligent Technology Begins U.S. IPO Effort