Xiangyang Changyuan Donggu Industry Co Ltd, a Chinese diesel engine parts manufacturer and distributor, plans to raise 915 million yuan ($129 million) in an initial public offering (IPO) on the Main Board of the Shanghai Stock Exchange (SEE).
Backed by Chinese government-led venture capital firm Shenzhen Capital Group, the company is poised to issue an aggregate of 57.88 million shares at a price of 15.81 yuan ($2.23) apiece.
It kicked off the online roadshow for the IPO offering on Wednesday with a plan to offer almost 23.15 million shares for subscription among individual investors online, while the remaining 34.73 million shares will be available offline for institutional investors, according to updates on the board.
Established in December 2001, Changyuan Donggu focuses on the research and development, production and sale of diesel engine parts, such as diesel engine cylinder blocks, cylinder heads, flywheel shells, exhaust pipes, and gearboxes. The company is based in central China’s Xiangyang City, Hubei Province and has more than 1360 employees.
Its major clients include Chinese truck brand Dongfeng Trucks, China-based diesel engines maker SFH, and Beijing Foton Cummins Engine, a joint venture between New York-listed diesel engines maker Cummins Inc and Chinese vehicle manufacturer Foton Motor.
According to its prospectus, the company generated almost 1.16 billion yuan ($163 million) in revenues in 2019, up 8.9 per cent from about 1.07 billion yuan ($151 million) in 2018. Its net profit stood at 272 million yuan ($38 million) last year, compared to nearly 185 million yuan ($26 million) one year earlier.
After the IPO, the company founder and chairman Li Zuoyuan will remain as the largest shareholder with a 39.5 per cent stake. Chinese state-backed fund Xiangyang Innovation Investment will hold a 3.33 per cent stake, while Shenzhen Capital Group, which backed the firm’s Series A and B rounds between 2010 and 2011, will retain a 2 per cent stake.
Chuangyuan Donggu will use the proceeds to consolidate its manufacturing base while facilitating the construction of a research centre.
Apart from Shenzhen Capital Group, the company’s backers also include state-owned Hubei Provincial High Technology Industry Investment, RiseSun Enterprises Holdings Limited, Future Value Capital and Xiangshui Dongting Capital.
China-based First Capital Securities serves as the principal underwriter of the deal. The company will float shares under the symbol “603950.”