A year’s valuation increased 7 times to 6.26 billion yuan, why did Avita’s worth surge？

In April, when listed car companies handed in their performance reports, Avita Technology, a new car manufacturer that has not yet been listed, became a dark horse that stood out.

On April 29, Changan Automobile (000625.SZ) released its 2022 quarterly report. The net profit attributable to shareholders of listed companies in the first quarter was 4.536 billion, an increase of 431% year-on-year. Changan Automobile’s net profit in the first quarter came from the sharp increase in ROI for Avita Technology. The announcement said that Avita Technology contributed 2.13 billion yuan to Changan Automobile’s net profit in the first quarter, accounting for nearly 50% of the entire Changan Automobile’s net profit in the first quarter. For the whole year of 2021, Changan Automobile’s net profit was 3.552 billion yuan.

As a rookie car manufacturer whose first model has not been officially released, Avita’s growth rate can be described as surprising to the market. On April 28, Avita announced that its latest valuation has increased to 6.26 billion yuan, which is the second time that Avita has disclosed its valuation to the market after disclosing 788.20 million yuan (based on the income method, the evaluation benchmark date is December 31, 2020) when it was first publicly listed on November 5, 2021. That is to say, in just over a year, Avita’s valuation has achieved a high-speed growth of nearly 7 times net increase.

The industry made a brief correction, but Avita bucked the trend upwards

In fact, from the perspective of capital markets, the current is not the best time for new car manufacturers. After two years of skyrocketing market value from 2020 to 2021, the entire market is gradually returning to rationality. For new car manufacturers, although the trend is still there, the valuation may be much lower than expected, especially in the case of a group listing, investors will be more stringent in the screening of companies.

Taking IPOs as an example, despite the unabated enthusiasm of new car manufacturers for IPOs, the feedback from capital markets has tended to calm down. Flush data shows that in the past six months (October 26, 2021 to April 25, 2022), 219 new shares have been listed, and as of April 25, 124 new shares have broken to varying degrees after listing, accounting for about 57%, including a number of automobile industry chain companies.

However, the short-term IPO cold does not affect the long-term growth demand of the downstream of new energy vehicles, nor does it hinder the enthusiasm of vehicle manufacturers. There are still a steady stream of new players pouring into the track and actively conducting capital operations. For example, on March 17, GAC Aian announced that it has completed a total of 2.566 billion yuan in financing, will start Aian’s shareholding system transformation and A round of financing in due course, and actively seek to spin off and list in the future. In the same month, Zero Run Auto submitted a listing application to the Hong Kong Stock Exchange, and Nezha Automobile, Weimar Automobile, Gahe Automobile and other new car-making forces in the second echelon of sales have all reported the news of listing in Hong Kong. In this regard, industry insiders believe that this is the current demand for new energy vehicles has not been fully met, and the development prospects of new car manufacturers are not only determined by the "window period" of capital.

Avita also seized the opportunity to develop against the trend in the industry correction tide. The significant increase in the valuation of Avita Technology this round stems from the inclusion of 2.42 billion yuan capital base after the first round of financing was completed on March 11, 2022, and based on the income method evaluation, the future sales and revenue expectations of Avita have been raised to a certain extent.

On March 29 this year, Avita officially completed the first round of strategic financing delivery and the change of industrial and commercial information. CATL also became the second largest shareholder of Avita Technology with a shareholding ratio of 23.99%. After the completion of the delivery, Avita Technology also officially changed from a holding subsidiary of Changan Automobile to an associate company, which will further enhance Avita Technology’s operational independence and accelerate the process of highly market-oriented operation.

The high contribution of Avita in this Changan Automobile Performance Report is another strong reassuring needle for the capital markets: the first model has not been officially launched, Avita has the ability to feed back the performance of Changan Automobile through itself, with the product landing, Avita’s valuation in the capital markets is expected to continue to rise.

Weta’s "product year" and "capital year"

The CHN cooperation model is without a doubt the greatest trump card that distinguishes Avita from other new car makers on the market.

Since its inception, Avita has aggregated the advantages of Changan Automobile, Huawei, and Ningde Times in the fields of vehicle R & D, intelligent manufacturing, smart vehicle solutions, and smart energy ecology to create the world’s leading intelligent electric vehicle technology platform CHN platform, and is committed to building a global brand in the high-end SEV field. As industry leaders, Changan Automobile, Huawei, and Ningde Times have assembled at the head of the industrial chain, leveraging their own advantages to complement each other and deeply bind to achieve the effect of 1 + 1 + 1 > 3.

Tan Benhong, chairperson and CEO of Avita Technology, said, "By joining hands with Changan Automobile, Huawei, and Ningde Times, Avita Technology has truly mastered the core capabilities of the SEV industry in the hands of the Chinese for the first time." As the first high-end SEV brand to come standard with Huawei HI (Huawei Inside) full-stack smart car solutions, the first product, Avita 11, has a leading edge in both Sandian and cockpit and intelligent driving. Avita 11 will be equipped with CATL’s new generation CTP ternary lithium battery pack, with a maximum range of more than 700km. It will be the first in the industry to apply a 750V high-voltage charging system, equipped with industry-leading super-sensing system + supercomputing platform, including 3 lidars, 6 millimeter-wave radars, 12 ultrasonic radars, 13 cameras, and 400Tops of high computing power, enabling high-level intelligent driving for complex urban road conditions.

Since the global launch of the brand in November last year, less than half a year has passed, Avita 11 has completed a series of tests such as extreme cold, entered the third round of trial production, and rolled out more than 100 test vehicles. It is understood that Avita is currently working with Huawei to actively implement the preparations for entering Huawei city stores, and plans to open the first store in the second quarter. This year, the sales network will be expanded to 100 cities, and mass production and mass delivery will be achieved within the year. Steady progress towards the medium and long-term strategy of four cars in four years.

Echoing the speed of product advancement, Avita’s layout in the capital markets is also accelerating. Previously, Changan Automobile had bluntly stated in the investor interaction that Avita has an independent listing plan, and recently Avita directly announced that it will open a round of financing in 2022.

If the temporary cooling of the new energy automobile industry once caused the market to have uncertainty about the future financing direction of new forces in car manufacturing, then the significant increase in the valuation of Avita has fully demonstrated the confidence of the capital markets in the long-term development of Avita, and also reflects the recognition of the pioneering CHN cooperation model.

From Avita, it is not difficult to see that the short-term pullback fluctuations of new energy do not affect the long-term development trend of the field, but rather urge investors to carefully select high-quality targets. Among them, factors such as the product strength and technological strength of new car manufacturers are important bases for capital evaluation, and this is where Avita’s confidence lies.

This year is Avita’s first product year, and it is also the new year of SEV with "new platform, large computing power, and efficient energy supplementation" as the three core characteristics. In the short term, Avita will efficiently promote the high-quality production and delivery of the first product within the year, accelerate the opening and completion of the A round of financing; in the medium and long term, emerging industry trends such as new energy vehicles are still completing the penetration rate, and Chinese companies are also attracting a larger share in the global division of labor. For Avita, which has the advantages of the CHN platform, the rapid growth in valuation is just the beginning.

Editor: Lu Jiangtao