Huawei's first exit from chip investment yields 35 times return in two years

Latest update time：2021-09-27

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Source: The content comes from the public account " Touzhong.com ", author: Tao Huidong , thank you.

The return from this exit is enough to outperform most VCs.

On the evening of September 22, 2021, SiRuiPu, a popular chip stock that has risen five times in a year, announced that four shareholders plan to reduce their holdings by more than 2 million shares, and the four shareholders can cash out a total of more than 1 billion yuan.

SiRuiPu was listed on the Science and Technology Innovation Board on September 21, 2020, and the one-year lock-up period has just expired. The four shareholders who reduced their holdings are all initial shareholders, and the most special one is Huawei's wholly-owned subsidiary Habo Investment. Habo Investment was one of SiRuiPu's major investors before its listing and currently holds 6% of its shares.

In 2019, Huawei broke the principle of "not investing in suppliers" and registered and established Habour Investment, making large-scale investments in the semiconductor industry chain, which shocked the industry and VC circles. SiRuiPu is a listed company invested by Habour Investment after its establishment. Correspondingly, this reduction is also the first exit of Habour Investment since its establishment.

The return from this exit is enough to beat most VCs in seconds - based on the latest stock price, Huawei's current shareholding value exceeds 2.6 billion yuan, and the investment has returned 35 times in two years.

Behind the ultra-high returns, Huawei supports the domestic supply chain

In July 2019, the newly established Habour Investment invested 72 million yuan in SiRuiPu. SiRuiPu is a core supplier of signal chain chips for Huawei's 5G base stations. This investment is an important move by Huawei to support the domestic supply chain.

In fact, before joining Huawei, SiRuiPu was just a small analog chip manufacturer and had difficulty surviving. In 2018, SiRuiPu, which had been established for six years, had a revenue of 114 million yuan and a loss of 8.82 million yuan.

After Hubble acquired a stake in SiRuiPu in 2019, orders from Huawei brought SiRuiPu to a new level, with revenue increasing by 167% to 304 million yuan and net profit soaring to 70.98 million yuan.

The prospectus shows that in 2018, Huawei's contribution to SiRuiPu was only 1.7 million yuan, accounting for 1.5% of its total revenue. In 2019, Huawei's sales contribution reached 170 million yuan, accounting for 57.13% of the total revenue. It can be said that it was Huawei that pushed SiRuiPu onto the Science and Technology Innovation Board.

The financial report shows that Huawei's procurement scale is still growing rapidly after SiRuiPu went public. The financial report shows that Huawei is still SiRuiPu's largest customer in 2020, with sales of 310 million yuan, accounting for 55% of total revenue.

In addition to its strategic significance, Huawei's investment also brought great financial returns. When Habour invested in 2019, SiRuiPu's post-investment valuation was only 900 million yuan. If based on the actual net profit in 2019, the PE multiple is only 12 times, which is "cheap" in the current primary market. Four months after Habour Investments acquired the shares, SiRuiPu introduced investors such as Yuanhe Puhua and Huiyou Capital, and the valuation had risen to 2.5 billion yuan.

After SiRuiPu was listed on the Science and Technology Innovation Board in September 2020, it was highly sought after as one of the leading 5G stocks. Its current market value has reached 45 billion yuan, and the market value of Habo Investment's holdings exceeds 2.6 billion yuan, with a return of 35 times in two years. Habo Investment plans to reduce its holdings by no more than 160,000 shares this time, and the estimated cash-out scale is about 90 million yuan, which is equivalent to getting back the investment principal.

After the announcement of the share reduction, SiRuiPu's stock price plummeted 7.6% at the opening on September 23, 2021, but the decline narrowed to 1.36% by the close of the market, which shows that market sentiment was not overly affected by the share reduction.

Hubble Investments, which has made money quietly

Taking advantage of the registration system, Habour Investment has been quietly making money. Currently, Habour Investment's projects are undergoing IPOs intensively. SiRuiPu has been listed, and projects such as Canqin Technology, Shandong Tianyue, Dongxin Semiconductor, and Changguang Huaxin have passed the review. Projects such as Nanochip and Haoda Electronics have all applied for the Science and Technology Innovation Board. As an investment institution established only two years ago, Habour Investment's record is legendary.

The following is a summary of the projects of Habour Investment that have been listed, approved, or applied for IPO. It can be seen that the returns of Habour Investment are quite generous:

In the above figure, except for SiRuiPu, the other companies all calculated the forecasted issue price based on the amount of funds raised and the shares to be issued disclosed in the prospectus, and used this to calculate the book value and return multiple of Hubble Investment's holdings. Since the current pricing of the Science and Technology Innovation Board is still significantly low, the stock prices of these companies after listing will almost certainly far exceed the issue price, which means that the actual return multiple of Hubble Investment will be much higher than the calculation in the above table.

Taking Nanochip as an example, its market value is only 3 billion yuan according to the predicted issue price, but analysts generally believe that Nanochip's market value can reach 20 billion to 30 billion yuan after listing, which means that the market value of Haobo Investment's holdings can reach 500 million yuan, with a return multiple of more than 10 times.

Faced with such a powerful company like Habour Investment, ordinary VC/PEs can only admire it. It is no exaggeration to say that Habour Investment's performance in the semiconductor field is no less than that of Tencent Investment in the TMT field. Huawei has also begun to taste the sweetness of equity investment.

In fact, in the semiconductor industry, VCs can already clearly feel the pressure from Hubble Investment. More than one investor has talked to ChinaVenture about the strength of Hubble Investment. One investor told ChinaVenture that a project had been finalized, but at the last minute, Hubble Investment suddenly jumped in and took the lead investment position.

The rapid expansion of Hubble's investments in both quantity and scale has also caused some controversy. One investor said: "I don't understand whether (Huabo) is for industry or financial returns."

In some cases, Habour Investment suddenly acquired shares at a low valuation on the eve of listing, which is indeed suspected of "picking peaches". For example, two months before Canqin Technology applied for the Science and Technology Innovation Board, Habour Investment completed the investment at a price equivalent to only one-seventh of the expected issue price, which is a treatment that ordinary VC/PE cannot imagine.

To some extent, Habour's investment layout is getting closer to Xiaomi's ecological chain investment, that is, using financial investment methods to make strategic investments, making money and adding industries, a dual-wheel drive. From the cooperation between Habour Investment and professional investment institutions such as Shenzhen Capital Group to set up funds, it can also be seen that it is trying to downplay the color of direct investment in Huawei.

Since the establishment of Habour Investment, Huawei has increased its capital to Habour several times. The registered capital of Habour has increased from the initial 500 million yuan to the current 3 billion yuan. Industrial and commercial information shows that Habour Investment has directly invested in 44 companies. Unlike ordinary VCs, Habour does not need to worry about ammunition. Huawei will continue to replenish the funds once they are invested.

In addition, in 2020, Hubble also cooperated with Shenzhen Capital Group to establish Shenzhen Hongtu Shanli Private Equity Investment Fund Partnership (Limited Partnership), with Hubble serving as one of the two GPs. The fund has currently invested in 8 companies. In 2021, Hubble established another investment platform, Shenzhen Hubble Technology Investment Partnership (Limited Partnership), which has currently invested in 13 companies. The total capital scale of the above three investment platforms has reached 5.6 billion.

When Habour Investment was first established two years ago, the outside world was still full of doubts about what Huawei was going to do. Now Habour Investment has become more systematic, with a complete layout and sufficient ammunition. Huawei is determined to continue this investment business for a long time.

*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.

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