【HK IPO】Cirrus Aircraft: Global Leader in Private Aviation

I. Basic Information

1.1 Company Profile

$CIRRUS(02507.HK), a company focused on designing, developing, manufacturing, and selling high-quality aircraft recognized by the industry, is a pioneer and leader in the global private aviation sector.

The company's two aircraft product lines (the SR2X series and the Vision Jet) have successfully set industry standards for self-piloted aircraft and are currently certified and validated in over 60 countries.

According to the General Aviation Manufacturers Association, the SR2X series has been the best-selling single-engine piston aircraft for the past 22 years. Since its first delivery in 2016, the Vision Jet has been the best-selling business jet for six consecutive years.

1.2 IPO Information

II. Fundamental Analysis

2.1 Financial Data

Revenue: From 2021 to 2023, the company achieved revenues of $738 million, $894 million, and $1.068 billion, respectively, with a compound annual growth rate (CAGR) of 20.3%. The global private aircraft market's average annual growth rate is 8.5%, with an expected growth rate of 10.7% over the next four years, indicating the company's performance far exceeds industry trends.

Profit: From 2021 to 2023, the company's gross profits were $242 million, $298 million, and $365 million, with gross margins of 32.8%, 33.3%, and 34.2%, respectively, showing a clear upward trend. Net profits for these three years were $72.403 million, $88.076 million, and $91.143 million.

2.2 Industry Development

The private aviation market is benefiting from factors such as post-pandemic global economic recovery, restored business confidence, and an increase in the number of high-net-worth individuals worldwide, leading to accelerated growth in private aircraft deliveries.
 

According to the company's prospectus, global private aircraft deliveries maintained a CAGR of 8.5% from 2019 to 2023, with an expected growth rate of 10.7% from 2024 to 2028.

Notably, the average selling price of private aircraft has also shown an upward trend in recent years, primarily due to rising raw material and labor costs, as well as manufacturers' achievements in developing and selling higher-performance, premium aircraft.

2.3 Company Position

According to the General Aviation Manufacturers Association, the global delivery volume of general aviation aircraft in 2023 was 3,050 units. Cirrus is the world's largest general aviation aircraft manufacturer, delivering 708 units in 2023, accounting for a 23.2% market share. By revenue, its market share was 4.0%.

The global delivery volume of private aircraft in 2023 was 2,215 units. Cirrus is the largest private aircraft manufacturer in the global private aviation market, with a 32.0% market share by delivery volume and a 24.9% share by revenue in 2023.

III. Cornerstone Investors and Sponsors Analysis

The company has secured five cornerstone investors for this IPO, with a total subscription amount of HKD 851 million. At the offer price, their subscriptions account for 56.1% of the total shares issued, which is a reasonable proportion. According to the agreement, the lock-up period for cornerstone investors is six months...

IV. Lottery Rate Analysis

The Hong Kong public offering comprises 5.4876 million shares, with each lot consisting of 100 shares, totaling 54,976 lots. Currently, the margin financing has just reached 1x. The recent enthusiasm for Hong Kong IPO subscriptions has been high, with decent returns. However, with eight companies simultaneously launching IPOs this round, capital will be significantly dispersed. Given the current situation, the oversubscription rate is unlikely to exceed 15x, meaning Groups A and B will each receive 27,488 lots. Assuming 8,000 applicants, the estimated lottery rate for one lot is 100%...

V. Comprehensive Analysis and Rating of the IPO

1. Fundamentals: The company is performing well, with revenue growth maintaining 20% and improving gross margins, indicating strengthening profitability...

2. Brand Recognition: The private aircraft sector is niche, but the company has achieved global leadership.

3. Cornerstone Investors: Five cornerstone investors subscribed HKD 850 million, accounting for over 50% of the total offering, which is decent.

4. Market Environment: The private aircraft industry is booming, especially with the current push for low-altitude economy development. A-share listed Wanfeng Aowei is a prime example. Coupled with the recent strong performance of Hong Kong IPO subscriptions, the market is heating up.

5. Valuation: The company's current valuation is HKD 10 billion, with a P/E ratio of 11x based on 2023 earnings. In comparison, A-share listed Wanfeng Aowei trades at 39x P/E, though its business is more diversified.
 

6. Liquidity: The company is issuing 54.87 million shares, aiming to raise HKD 1.4 billion. Cornerstone investors subscribed HKD 850 million, leaving approximately HKD 550 million in the public float. While selling pressure may be significant, given the company's HKD 10 billion market cap, this is manageable. Besides, Hong Kong IPO subscriptions are really hot right now.

7. Summary: Cirrus has solid fundamentals. Even if the IPO doesn't yield immediate gains, holding long-term shouldn't be a bad bet. By the way, earlier this year, Brother Er Gou made some pocket money following the hype on Wanfeng Aowei!

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Disclaimer:

1. This article represents personal opinions only and should not be taken as investment advice. The stock market is volatile and unpredictable—proceed with caution.

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