Taiwan-based Longyang Electronics plans to list on the GEM: performance increases, with Apple contributing more than 72% of revenue

As we all know, as the pace of consumer electronic product updates gets faster and faster, the resulting demand for electromagnetic shielding materials has not only increased significantly in quantity, but also become more diverse in types. Especially in the era of 5G and smart manufacturing, the demand for various new types of electromagnetic shielding materials will become the main driving force for future market growth.

Recently, according to the author's inquiry, Longyang Electronics (Kunshan) Co., Ltd. (hereinafter referred to as "Longyang Electronics"), which is engaged in consumer electronic electromagnetic shielding materials, submitted an IPO prospectus and plans to be listed on the Growth Enterprise Market! The company's main customers are Apple's direct suppliers, and it supplies Apple through Apple's direct suppliers!

In addition, according to the author's inquiry, the company is controlled by a Taiwanese enterprise. The controlling shareholder of Longyang Electronics is Dingxuan Investment Holding Co., Ltd., which currently has two business divisions: weighing instruments and electronic materials. The company started out as a traditional weighing instrument manufacturer. Its predecessor, "Taiwan Weighing Instrument Factory", was founded by Mr. Fu Guozhang in Taipei in 1967.

With the continuous development of the company, its main business areas include two divisions: weighing instruments and electronic materials. The company currently has four factories in Kunshan, Huai'an, Jiangsu, and Chongqing. The Longyang Electronics that is planning to be listed on the GEM is its electronic materials division!

Apple contributes more than 72% of the performance: Longyang Electronics' performance grows rapidly

It is understood that Longyang Electronics is a professional manufacturer of electromagnetic shielding materials, mainly engaged in the research and development, production and sales of electromagnetic shielding materials, and is committed to providing customers with high-quality electromagnetic shielding materials and complete electromagnetic interference solutions.

The company's electromagnetic shielding products mainly include conductive cloth, conductive cloth tape, shielding insulation composite tape, absorbing materials, conductive cloth foam, all-round conductive sponge, SMT conductive foam, etc. It focuses on the field of consumer electronics and plays an electromagnetic shielding function on electronic products such as laptops, tablets, smart phones, smart wearable devices, etc., to achieve electromagnetic compatibility.

At present, the company has established good business cooperation relationships with well-known electronic OEM service enterprise groups in the industry, such as Foxconn, Quanta, Compal, Pegatron, Inventec, Luxshare Precision, Dongshan Precision, and Changying Precision. Its products are widely used in Apple, HP, Asus,

Dell and other internationally renowned consumer electronics brands.

In terms of performance, the company's revenue increased rapidly from 2018 to 2020 (hereinafter referred to as the "reporting period"), with revenue of 214 million yuan, 268 million yuan, and 425 million yuan, respectively, and corresponding net profits of 83 million yuan, 105 million yuan, and 167 million yuan. The compound growth rate of revenue from 2018 to 2020 was 40.95%.

In terms of customers, Longyang Electronics’ top five customers are all Apple’s core suppliers, such as Foxconn, Quanta Computer, Jialianyi, Luxshare Precision, Pegatron Group, and Dongshan Precision.

In addition, according to the company, during the reporting period, the company's product and service revenues that were ultimately applied to Apple accounted for 67.02%, 66.37% and 72.53% of its main business revenues, respectively, which is a high proportion. The company's product revenues are somewhat dependent on Apple. Looking at the business of each major sector, the largest customer for conductive fabrics and conductive fabric tapes, conductive foams, and insulating materials is Apple!

According to Longyang Electronics, the company has obtained supplier qualification certification from terminal brand Apple since 2007. Apple and its electronic manufacturing service providers have strict supplier management systems. If the company cannot pass the supplier qualification review of Apple and its electronic manufacturing service providers, it will not be able to continue selling to Apple and its electronic manufacturing service providers, which will have an adverse impact on the company's operating conditions.

R&D investment ratio decreases: Longyang Electronics plans to raise 372 million yuan

According to the author's inquiry, Longyang Electronics' R&D investment accounted for 5.09%, 5.62% and 4.21% of its revenue in 2018-2020, respectively, showing an overall downward trend. This time, it plans to raise no more than 372 million yuan, mainly for electromagnetic shielding and other related materials production projects and expansion projects.

According to it, as the functions of electronic products increase, the frequency and speed of signal transmission increase, the electromagnetic interference between electronic components intensifies, and the shielding effectiveness requirements of electromagnetic shielding products continue to increase, bringing new development opportunities to the electromagnetic shielding industry.

According to BCC research, the global electromagnetic shielding material market will grow from US$7 billion in 2018 to US$9.3 billion in 2023, with a compound annual growth rate of 5.7%. In addition, due to their personalized designs, terminal brand owners have unique performance and size requirements for electromagnetic shielding materials. During the electronic product design stage, they often require supply chain companies to collaborate in development and provide them with personalized electromagnetic shielding solutions. Therefore, the strong demand for electromagnetic shielding products provides a broad market space for the implementation of electromagnetic shielding and other related material production projects.

After the completion of the project, it will form an annual production capacity of 6.86 million square meters of electromagnetic shielding, heat dissipation and other related materials and 946 million die-cut products.

Production capacity will increase the company's product production capacity, expand product categories and market scale, consolidate the company's competitive position in related product application fields, and provide guarantee for the company's continued growth in performance.

In addition, the company also stated that it has established a solid cooperative relationship with downstream high-quality customers over the years, including well-known domestic and foreign consumer electronics manufacturers such as Quanta Computer, Compal, Inventec, Pegatron, and Clevo Computer Group, and its products are ultimately used in well-known terminal brands such as HP, Asus, and Dell.

Consumer electronics products are updated and iterated at a fast pace, with endless product designs and functions. Customers require suppliers to not only pass strict quality control standards, but also have the ability to quickly develop products simultaneously. Therefore, on the one hand, they will not easily replace suppliers of existing products, and on the other hand, they will consider existing qualified suppliers more in the process of developing new products. At present, the company's subsidiary Chuanyang Electronics has entered the supplier system of well-known brands such as HP, Asus, Dell, Lenovo, and world-renowned notebook computer manufacturers such as Quanta, Pegatron, and Inventec.