ZTE supplier Holleywo's IPO on the Science and Technology Innovation Board was successfully approved

On December 3, according to the results of the 113th review meeting of the Shanghai Stock Exchange Science and Technology Innovation Board Listing Committee in 2020, Shanghai Hollewo Electronic Systems Technology Co., Ltd. (hereinafter referred to as "Holewo") successfully passed the Science and Technology Innovation Board IPO.

Regarding Hollewo's IPO, the IPO Examination Committee did not issue a review opinion, but raised inquiries, requiring Hollewo to explain the market space, market competition situation, and competitive advantages and future development strategies of its main business phased array calibration and testing system and phased array-related products.

The prospectus shows that Hollewo is committed to the testing and simulation of various application technologies of electromagnetic field and microwave technology, and is mainly engaged in the testing, simulation and overall equipment system business in the fields of wireless communication and radar. At present, its main customers are subordinate units of the military industry group, and its products are mainly used in the phased array field in the national defense science and technology industry.

In recent years, with the in-depth development of phased array technology in fields such as 5G, its main products and technologies can also be applied to fields such as 5G communications, automotive millimeter-wave radar, and low-orbit satellite communications, and it has become one of the main suppliers of ZTE's 5G base station production line test systems.

Benefiting from the rapid development of the downstream radar and communications industries, its performance has shown good growth in recent years. From 2017 to 2019, it achieved revenue of 98 million yuan, 155 million yuan and 169 million yuan respectively, with corresponding net profits of 17 million yuan, 30 million yuan and 35 million yuan respectively.

In terms of product segments, the growth in its revenue is mainly due to the rapid growth of phased array calibration and test systems and related product businesses. However, it is obvious that the stability of its three main business revenues is not high.

Among them, the revenue share of phased array calibration test systems and related products business surged from 33.11% in 2017 to 74.67% in 2018, which shows that this business has become the main contributor to revenue in the past two years; while the revenue share of the other two main businesses has generally shown a downward trend in the past three years, especially the revenue share of general testing business, which dropped sharply from 27.04% in 2017 to 8.99% in 2018, and then rose to 11.93%.

Specifically, the business revenue of phased array calibration and test systems and related products achieved a significant increase in 2018, mainly due to the large increase in phased array calibration and test system products. According to it, the increase in domestic demand for phased array radar research and development has led to a continuous increase in demand for this product. As a result, the company has obtained large product orders from multiple customers and completed the delivery and acceptance, which has greatly increased the revenue in 2018 and 2019 compared with 2017.

In addition, the revenue from phased array related products has also increased year by year, and the revenue share has increased from 1.20% to 18.15% in three years. This is mainly due to the company's development, delivery and acceptance of phased array related products such as reflector antennas and unit testing equipment.

In addition, the revenue share of electromagnetic field simulation analysis and verification business continued to decline, mainly because it delivered and accepted the detection and positioning technology development and verification system in 2017, which led to higher revenue for this product in the same year. The decline in the revenue share of general testing business was due to the continuous increase in the scale of phased array calibration test system business.

However, in terms of major customers, the revenue of Hollewo’s top five customers accounted for 97.06%, 89.88%, and 83.14% of the main business revenue in the current period; among them, the revenue of the largest customer, China Electronics Technology Group Corporation, accounted for 76.61%, 62.16%, and 32.14% respectively. Hollewo said that the company’s industry is the military electronic information industry, and the market concentration in this field is relatively high, which makes the company’s customer concentration also high. If the company’s existing customer demand drops significantly in the future and it is unable to expand new customers or businesses in a timely manner, it will have an adverse impact on the company’s operating performance.

In this IPO, Hollewo plans to raise 363 million yuan to invest in the digital phased array test and verification system industrialization project, the 5G large-scale antenna intelligent test system industrialization project, the R&D center upgrade project, and to supplement working capital.