Dongshan Precision Seeks Hong Kong IPO To Support Acquisition Strategy

Benzinga_recent_news11-25

After moving from its original sheet metal processing business into PCBs through acquisitions, the company has filed for a Hong Kong IPO to complement its existing Shenzhen listing If you don't have ...

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If you don't have it, just buy it.That's the mantra atSuzhou Dongshan Precision Manufacturing Co. Ltd., which is now hoping investors buy into its own acquisitive story withits applicationlast week for a Hong Kong IPO. Starting out as a traditional sheet metal processer, the company has transformed itself into a major player in the printed circuit board  industry through a series of acquisitions over the last decade.Dongshan Precision has kicked its acquisition playbook into high gear once again this year, announcing two major deals that will expand its footprint into optical communications and automotive components. As it continues its buying spree, it's also hoping the Hong Kong IPO can raise funds to help pay for its many purchases.Since then, PCBs have become Dongshan Precision's main business, effectiv","collect":0,"end_time":0,"defaultTopTitle":"benzinga.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"300476":"胜宏科技","LU1934453819.USD":"AB CHINA A SHARES EQUITY PORTFOLIO \"A\" (USD) ACC","PCB":"PCB Bancorp","LU1979443071.USD":"AB CHINA A SHARES EQUITY PORTFOLIO \"AD\" (USDHDG) INC","BK0196":"行业龙头","LU1064131003.USD":"FULLERTON LUX FUNDS - CHINA A EQUITIES \"A\" (USD) ACC","BK0109":"智能穿戴","SGXZ81163826.USD":"UNITED CHINA A-SHARES INNOVATION \"A\" (USD) ACC","SGXZ49509284.SGD":"United China A Shares Innovation A Acc SGD","002384":"东山精密","LU2213484517.USD":"FRANKLIN TEMPLETON CHINA A-SHARES \"A\" (USD) ACC","BK0214":"IT设备","LU2148510915.USD":"FULLERTON LUX FUNDS - CHINA A EQUITIES \"R\" (USD) ACC","BK0102":"重组","LU1655091616.SGD":"JPMorgan Funds - China A-Share Opportunities A (acc) SGD","BK0171":"无线充电","LU1328615791.USD":"FULLERTON LUX FUNDS - ALL CHINA EQUITIES \"I\" (USD) ACC","BK0197":"中小创蓝筹","BK0028":"国家队","LU1064130708.USD":"FULLERTON LUX FUNDS - CHINA A EQUITIES \"I\" (USD) ACC","BK4211":"区域性银行","LU1808992512.USD":"AB ALL CHINA EQUITY PORTFOLIO \"A\" (USD) ACC","BK0076":"特斯拉","002916":"深南电路","BK0152":"OLED","LU0231483743.USD":"abrdn SICAV I - ALL CHINA SUSTAINABLE EQUITY \"A\" (USD) ACC","002463":"沪电股份","LU1255011170.USD":"JPM CHINA A-SHARE OPPORTUNITIES \"A\" (USD) ACC","LU0052750758.USD":"富兰克林中国基金A Acc","LU0320764599.SGD":"FTIF - Templeton China A Acc SGD","BK0141":"绿色节能照明","LU0708995583.HKD":"TEMPLETON CHINA \"A\" (HKD) ACC","LU0469268626.HKD":"AB FCP I-ASIA EX JAPAN EQUITY PTF(AD"},"translate_title":"东山精密寻求香港IPO支持收购策略","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"300476":1,"002384":1,"PCB":1,"002916":1,"002463":1},"content_text":"After moving from its original sheet metal processing business into PCBs through acquisitions, the company has filed for a Hong Kong IPO to complement its existing Shenzhen listing\nIf you don't have it, just buy it.\nThat's the mantra at Suzhou Dongshan Precision Manufacturing Co. Ltd. (002384.SZ), which is now hoping investors buy into its own acquisitive story with its application last week for a Hong Kong IPO. Starting out as a traditional sheet metal processer, the company has transformed itself into a major player in the printed circuit board (PCB) industry through a series of acquisitions over the last decade.\nDongshan Precision has kicked its acquisition playbook into high gear once again this year, announcing two major deals that will expand its footprint into optical communications and automotive components. As it continues its buying spree, it's also hoping the Hong Kong IPO can raise funds to help pay for its many purchases.\nThe company has enlisted five advisors for the potential offering, led by UBS and leading domestic brokerage Citic Securities. While Dongshan Precision hasn't disclosed the intended fundraising size, the heavyweight advisory lineup suggests a substantial IPO, likely to raise $100 million or more.\nThe company's acquisition strategy has served it well to date. Its PCB asset purchases have made it into the world's third-largest supplier of the component that's a staple in most electronic devices. The company clearly views this as a winning formula, listing strategic M&A as one of its core competitive advantages and touting it as a proven playbook for growth into new areas.\nHowever, this aggressive expansion strategy has also saddled Dongshan Precision with high debt, a significant risk that we'll examine in more detail shortly. Moreover, expanding into new sectors like optical communications offers no guarantee of success, as these businesses operate under different dynamics and present fresh management challenges that could stretch the company's capabilities.\nDongshan Precision traces its roots to Dongshan Sheet Metal, founded in 1980. While the company had long sought to break into the consumer electronics business, it only achieved this goal in 2016 when it paid $600 million for U.S.-based Mflex, which specialized in flexible printed circuits (FPC), a type of bendable circuit board used in smartphones, tablets, and other portable devices.\nTwo years later, it acquired Multek, a subsidiary of contract manufacturer Flextronics that specialized in rigid printed circuit boards (RPCB), for $293 million, giving it the capability to produce all major types of PCBs.\nSince then, PCBs have become Dongshan Precision's main business, effectively replacing its traditional precision metal components and castings operations. In the first half of this year, the PCB segment generated 11 billion yuan ($1.5 billion) in revenue, representing 65% of its total. By contrast, the legacy precision components business now accounts for just 13.9% of revenue.\nThe company's overall revenue is growing, though not especially fast, rising 2.4% to 17 billion yuan in the first half of this year from 16.6 billion yuan a year earlier. Its profit grew by a faster 39% to 758 million yuan from 560 million yuan over that time. Still, its relatively low margins reflect the highly competitive nature of the industry.\nWithin the PCB business, Dongshan Precision focuses primarily on flexible printed circuits used in mobile devices like smartphones and laptops, which accounted for 84% of total PCB sales during the period. According to third-party research cited in its prospectus, the company was the world's second-largest FPC supplier and third largest in overall PCB shipments last year.\nIts second-place FPC ranking translates to a sizable 23.8% market share, though it's worth noting its third-place position in overall PCB sales represents just 4.8% of that massive market. This highlights the highly fragmented nature of the PCB industry, which has led to fierce competition in the relatively mature sector.\nWhile Chinese companies now produce the majority of the world's PCBs, competition remains intense. According to a recent research report by Shenzhen Enterprise Investment, 43 PCB companies were listed on China's A-share markets as of this April, many in more tech-focused Shenzhen. Those include the likes of Victory Giant Technology (300476.SZ), Shennan Circuits (002916.SZ), and WUS Printed Circuit (002463.SZ).\nGiven such a competitive landscape, it should come as little surprise that Dongshan Precision is currently seeking to further diversify its business. And once again, the company is turning to its proven playbook of strategic acquisitions.\nIn June, it announced it would acquire Taiwan-based Source Photonics in a deal worth 5.9 billion yuan. Source Photonics specializes in optical transceivers, components that enable high-speed data transmission in data centers and telecommunications networks. This acquisition marks Dongshan Precision's entry into the optical communications sector.\nThe Source Photonics deal followed another major acquisition announced in May, when the company agreed to pay 100 million euros ($115 million) for Groupe Mécanique Découpage, a French automotive components manufacturer.\nWith the Source Photonics acquisition, Dongshan Precision is positioning itself to capitalize on the AI boom that has driven surging demand for AI servers and other infrastructure needed for the huge amount of data processing required by AI. AI servers require not only the optical transceivers that Source Photonics provides, but also sophisticated PCBs – creating potential synergies that could help Dongshan Precision build relationships to sell higher-end circuit boards into this fast-growing market segment.\nThis opportunity prompted the company to announce in July that it would invest up to $1 billion to build high-end PCB facilities in the South China city of Zhuhai next to Macao, and also in Thailand.\nEntering the high-end server market appears strategically sound, as this segment is currently driving much of the PCB industry's growth. But the massive $1 billion investment, like the company's acquisition-driven approach, carries inherent risks by further increasing its big debt.\nDongshan Precision's debt-to-asset ratio has remained persistently high, generating substantial financial expenses. According to filings with the Shenzhen Stock Exchange, the company's short-term debt reached a hefty 98.36 billion yuan – or more than $13 billion – by the end of the third quarter of 2025, up 35% from the end of last year.\nChinese investors seem quite enamored with Dongshan and its acquisitive story, with the Shenzhen-listed stock up 133% so far this year. But its shares still trade at a relatively muted forward price-to-earnings (P/E) ratio of 17, the same as Victory Giant and WUS Printed Circuit, reflecting the industry's competitive and relatively mature state.\nAt the end of the day, strategic acquisitions have served Dongshan Precision well to date, transforming it from a traditional sheet metal processor into a global PCB powerhouse. However, as the company embarks on its most ambitious expansion yet while wrestling with mounting debt, the question becomes whether this proven playbook can continue delivering results without overextending the company's balance sheet.\nThe upcoming Hong Kong listing may provide needed capital for its acquisitions. But investors will also be watching closely to see if Dongshan Precision can execute without stumbling as it moves into so many new business areas so quickly.\nBenzinga Disclaimer: This article is from an unpaid external contributor. 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