Entering the Middle East, stock price surges, ZHIDA's valuation is not cheap

Shareholders include ZHIDA TECH, which focuses on charging stations. Recently, it plans to enter the Middle East, and its stock price has surged. Key Points: ZHIDA TECH is the largest charging station company in mainland China and plans to enter the Saudi market. The company continues to report losses, and its stock price is now 200% higher than its IPO price. Bai Xinrui As electric vehicles gradually replace fuel vehicles, the related electric vehicle parts business is also rapidly developing, with automotive charging stations being one of the components. Shanghai ZHIDA TECH Development Co., Ltd. (2650.HK), the number one automotive charging station manufacturer in China, just listed on the Hong Kong Stock Exchange in early October and recently announced its entry into the Saudi Arabia market. The day after the announcement, the stock price surged by 8.7%. The group was established in November 2010 by the current chairman Huang Zhiming. In 2015, it established a subsidiary, ZHIDA Zhongding, mainly engaged in the production of smart home electric vehicle charging stations and accessories. It began expanding overseas in 2021 and changed to a joint-stock company at the end of September 2022, bringing in A-share companies such as Anhui Zhongding, BYD (1211.HK, 002594.SZ, BYDDY.US), and Shanghai Zhongdian Investment. The electric vehicle industry is thriving not only in mainland China but also in oil-rich countries like Saudi Arabia, which is vigorously developing and closely cooperating with ZHIDA, which focuses on electric vehicle charging stations. Qingtai announced that it has signed sales orders worth over 100 million yuan with Saudi Arabian companies, and both parties will cooperate for the next five years, with ZHIDA supplying various AC and DC electric vehicle charging station products. Saudi Arabia Expands New Energy Vehicle Ecosystem As one of the strongest economies in the Middle East, Saudi Arabia is rapidly advancing energy transition and environmental protection policies, especially under the Vision 2030 framework. The local government is committed to reducing dependence on black energy sources like oil and has planned to invest at least $39 billion by 2030 to develop a new energy vehicle ecosystem, including large-scale construction of electric vehicle charging stations and other core infrastructure. In addition to Saudi Arabia, opportunities abound in the Middle East. The sales volume of home electric vehicle charging stations in the Middle East is expected to reach 106,400 units in 2024, significantly increasing to 872,000 units by 2029, representing a compound growth rate of 52.3%. This is not only far higher than the global average (20.3%) but also second only to Southeast Asia (64.9%), making it the second strongest region in the world for electric vehicle compound growth. On the other hand, the group claims to rank first in the Chinese home electric vehicle charging station market, with a market share of 13.6% in mainland China and a global share of 9%. Its customers mainly include automobile manufacturers, retail customers, and distributors, with the top five customers accounting for 53.5% of the group's total revenue, and revenue from the largest customer reaching 17%. According to domestic media reports, its largest customer is one of its shareholders, BYD. Average Price Overseas Much Higher Than Mainland Although the sales volume to automobile manufacturers is large, the average selling price is relatively low. In the first quarter of this year, the group sold a total of 85,000 sets to automobile manufacturers at an average price of 721.9 yuan, which is not only lower than the 125,000 sets sold directly in the same period last year but also 7.5% lower than the average direct sales price of 780.8 yuan On the other hand, the average selling price of products overseas is also higher than that in the mainland. The average price of overseas and mainland products in the first quarter of this year was 1,089.3 yuan and 723.7 yuan, respectively, indicating that the average price of overseas products is 50% higher than that of the mainland. In addition, ZHIDA TECH's sales are also affected by seasonal factors, especially since the Chinese automotive industry typically conducts promotions in the fourth quarter, leading to an increase in electric vehicle purchases, which also drives demand for charging stations and related services. Therefore, the revenue in the fourth quarter of each year tends to be higher. It is worth noting that the group's performance has not yet turned profitable, with a loss of 239 million yuan in 2024, an increase of 308% year-on-year. For the first quarter ending March this year, the loss was 17.05 million yuan, but this represents a narrowing of 45.8% year-on-year. Aggressively Targeting the Robotics Business To improve performance, ZHIDA TECH should accelerate overseas development just like electric vehicle companies, as the average selling price overseas is much higher than that in the mainland. The group's overseas revenue in the first quarter was only 32.13 million yuan, accounting for 14.8% of the total revenue of 217 million yuan during the same period, indicating significant room for development. Additionally, ZHIDA TECH is also aggressively targeting the robotics business, having delivered 10 electric vehicle charging robots in the first quarter. The group revealed that the gross profit margin for this business reaches 30%, which is 10 percentage points higher than the gross profit margin of about 20% for electric vehicle charging stations. ZHIDA TECH estimates that automatic electric vehicle charging robots will play an important role in vehicle-energy interaction, such as obtaining real-time data for efficient management of charging facilities and achieving charging scheduling. ZHIDA estimates that the company's compound annual growth rate from 2024 to 2029 will be 191.3%, expecting to reach 902,000 units by 2029