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BYD-backed Haiwei Electronic Files For Hong Kong IPO

The capacitor film manufacturer attracted China's leading electric vehicle maker with its technological edge, but its falling gross margin is a cause for concern

Key Takeaways:

Haiwei has filed for a Hong Kong IPO, after taking on electric vehicle leader BYD as both a backer and its largest client in 2023

The capacitor film maker's gross margin fell from 44.9% in 2022 to 32.4% in the first three quarters of 2024

Hengshui, a city in North China's Hebei province, is famous as home to Hengshui High School, a sort of local West Point known for its military-style discipline. Such discipline may have also rubbed off on one of the city's lesser-known corporate residents, Hebei Haiwei Electronic New Material Technology Co. Ltd., which is China's top maker of capacitor film, a key component in film capacitors used to regulate power in electric vehicles (EVs) and other products.

Now, this niche EV supplier is seeking a higher profile with its application late last month to list in Hong Kong, showing it generates more than 300 million yuan ($41 million) in annual revenue and has become a supplier to leading EV maker BYD (1211.HK; 002594.SZ).

The company's main product is capacitor base film, a dielectric material made of polymers that facilitate electric insulation and energy storage. Such products account for nearly 40% of the production cost of film capacitors that are widely used in NEVs, as well as new energy systems, industrial equipment and home appliances.

China's capacitor film market isn't huge, but the competition is quite fierce nonetheless. According to Haiwei's application document, the five top companies, which includes Haiwei, account for nearly 60% of the market, with further consolidation expected. According to third-party market data in the listing document, Haiwei was China's largest producer in terms of sales in 2023 with 13.6% of the market.

30-year history

Haiwei's history dates back to the founding of Heibei Haiwei Transportation Facilities Group in 1992 by Song Junqing, a ...