On September 17, CHERY AUTO Co., Ltd. (Stock Code: 9973.HK) officially launched its Hong Kong stock offering, planning to finalize the issue price on September 23 and list on the Hong Kong Stock Exchange main board on September 25. This move not only marks the formal entry of the last unlisted major domestic automaker into the capital markets, but also signifies the culmination of CHERY AUTO's 20-year listing journey. Since 2004, the company has explored multiple listing paths, including plans for backdoor listing through Anhui Chaodong Shares, cross-shareholding arrangements with JAC Motors, and direct listings in Hong Kong and A-shares, but none materialized due to market conditions and business adjustments. As CHERY AUTO Chairman Yin Tongyue previously stated, the company has long focused on technological innovation with limited capital market experience, making this IPO a "breakthrough journey" into capital markets.
In terms of offering scale, CHERY AUTO is globally offering 297 million H-shares with a structure of "10% Hong Kong public offering + 90% international placement," including a 15% over-allotment option (greenshoe mechanism). The price range is set at HK$27.75-30.75 per share, corresponding to a fundraising scale of HK$8.25-10.52 billion and a company valuation range of HK$160-178.7 billion. If ultimately priced at the high end with full exercise of the greenshoe mechanism, the fundraising scale would surpass China Innovation Aviation Technology in 2022, becoming the largest non-"A to H" Hong Kong IPO since 2022.
From a market position perspective, this IPO has already become the largest non-A to H IPO since 2023. If ultimately priced at the high end (the international placement was fully subscribed by noon on the offering day, likely triggering high-end pricing) with full exercise of the over-allotment option, it would exceed China Innovation Aviation Technology in 2022 to become the largest non-A to H IPO since 2022. However, it's worth noting that while the 2025 Hong Kong capital market has shown significant recovery - with IPO financing reaching HK$132.9 billion in the first eight months, a four-year high, and additional offerings raising HK$190.5 billion, including mega-financings like BYD's HK$43.5 billion, Xiaomi's HK$42.6 billion, and CATL's HK$41 billion - CHERY AUTO's IPO will still divert substantial market funds, posing significant challenges for subsequent Hong Kong IPO projects' funding.
**Chinese-Backed Investors Dominate While Foreign Absence Raises Geopolitical Risk Discussions**
The cornerstone investor lineup for this IPO is equally noteworthy, showing distinct "Chinese dominance" characteristics. Twelve cornerstone investors collectively invested HK$4.57 billion (calculated based on the base IPO scale and high-end price range), accounting for 50% of the base offering scale - the highest ratio among Hong Kong IPOs raising over HK$5 billion since 2023, reflecting Chinese institutions' recognition of CHERY AUTO.
Among them, the "national team" fund China Reform Fund became the largest cornerstone with a single investment of HK$1.48 billion, accounting for 16.2% of the base IPO scale. Well-known Chinese private equity firms Hillhouse and Greenwoods each invested HK$470 million, accounting for 5.1% respectively. Industry partners Nexchip and Horizon Robotics invested approximately HK$320 million and HK$310 million respectively. Additionally, local government funds Huangshan Construction Investment and Hefei Jianhui invested HK$320 million and HK$160 million respectively.
Notably, no foreign financial institutions participated in the cornerstone lineup, and the underwriting team (CICC, Huatai International, GF Securities) consisted entirely of Chinese institutions. This phenomenon is directly related to CHERY AUTO's overseas business structure: from 2022-2024 and Q1 2025, Russian passenger car sales revenue accounted for 14.6%, 26.8%, 18.6%, and 10.9% respectively. Although the company has clearly stated in its prospectus that it "plans to reduce Russian business to lower sanctions risks," current capital markets have high aversion to geopolitical risks, leading to insufficient participation willingness from foreign institutions due to compliance concerns, with foreign investment banks also tending to avoid such projects. Furthermore, against the backdrop of substantial foreign capital inflows boosting valuations in this year's Hong Kong stock market, CHERY AUTO's continued lack of foreign institutional participation post-listing may suppress subsequent stock price appreciation.
**High Growth Performance Supported by HK$2.4 Billion FX Gains Behind Net Profit**
From a financial fundamentals perspective, while CHERY AUTO has demonstrated high growth in recent years, concerns remain regarding profit quality and stability. On the revenue side, CHERY AUTO's revenue from 2022-2024 was RMB 92.6 billion, 163.2 billion, and 269.9 billion respectively, with an annual compound growth rate of 70.7%. However, Q1 2025 revenue was RMB 68.2 billion, up 24.2% year-over-year, showing significantly slower growth than before. For net profit, attributable net profit from 2022-2024 was RMB 6.27 billion, 11.95 billion, and 14.13 billion respectively, with an annual compound growth rate of 50.2%. Q1 2025 attributable net profit reached RMB 4.65 billion, up 71.5% year-over-year, but this high growth was primarily driven not by core business operations but by RMB 2.44 billion in foreign exchange gains recorded during the period - an amount far exceeding historical levels (FX gains/losses from 2022-2024 were RMB 50,000, -14,000, and 0 respectively).
Excluding FX gains, CHERY AUTO's Q1 2025 attributable net profit was only RMB 2.21 billion, with the net profit margin declining from 6.8% (including FX gains/losses) to 3.2%. Since approximately 40% of CHERY AUTO's revenue comes from overseas markets (Q1 2025 overseas revenue was RMB 24.67 billion, accounting for 39.9%), currency fluctuations significantly impact profitability. The sustainability of Q1's high FX gains remains uncertain, requiring continued observation of future profit stability.
**Weaker Gross Margin Stability Compared to Peers, Limited IPO Valuation Safety Margin**
Beyond questions about business growth sustainability, comparisons with industry peers across profitability indicators like gross margin and attributable net profit margin, as well as price-to-earnings (PE) ratios, reveal concerns about CHERY AUTO's financial performance and valuation matching.
Regarding gross margins, Great Wall Motor's gross margin has remained stable in the 18%-19% range (slightly declining to 17.8% in Q1 2025), while Geely Automobile has steadily improved its gross margin from 14.1% in 2022 to 15.8% in Q1 2025 through increased proportions of new energy and premium brand vehicles. In contrast, CHERY AUTO's gross margin shows significant volatility - rising to 16.0% in 2023 but falling to 13.5% in 2024 and further declining to 12.4% in Q1 2025, below the levels of Great Wall and Geely during the same period.
For net profit margins, CHERY AUTO's Q1 2025 attributable net profit margin was 6.8%, but this figure includes RMB 2.44 billion in high FX gains. Excluding these non-recurring gains, the actual net profit margin was only approximately 3.2%. During the same period, Geely Automobile's attributable net profit margin was 7.8% (6.2% for H1 2025), while Great Wall Motor's was 4.4% (recovering to 6.9% for H1 2025).
From a valuation perspective, CHERY AUTO's IPO at high-end pricing calculates to a total market value of approximately HK$177.3 billion, with PE ratios positioned in the middle among peers: approximately 11.4x for 2024 and about 10.1x on a trailing twelve-month (TTM) basis as of Q1 2025, both falling between Geely Automobile and Great Wall Motor. Even considering that all three companies have their respective strengths in performance and financials, CHERY AUTO's IPO valuation provides limited profit margin for the market.
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