Recently, Lishun Precision (SZ002475) announced that it intends to purchase 50.1% of global automotive wiring harness giant Leoni AG (Leoni Company) and 100% of its wholly-owned subsidiary Leoni K, with a total transaction consideration of 525 million euros (about 4.1 billion yuan).
Leoni AG/K has a long history, ranking fourth in the world in 2024, with customers including Mercedes-Benz, Robert Bosch and Continental Automobile brands.
After the completion of this acquisition, the consolidated financial statements show that the operating income will exceed 30 billion yuan, making Licun Precision's revenue in the automotive Internet products and precision components segment tripled, and the revenue proportion jumped from the original 4.59% to about 13%.
This is the reappearance of Wang Laichun's strategy, that is, on the eve of the outbreak of application demand, the prospective merger and acquisition of mature businesses. This acquisition is a major move implemented by Lichon Precision since it positioned communication applications as the new second growth curve in 2023.
The combined revenue is expected to be nearly 40 billion, far exceeding the average 6.2 billion revenue of A-share auto companies. However, the target company's high debt and low profits are still a test of the management of Lisun precision investment.
Acceleration of the automotive business segment: Help in the era of car road cloud
Automotive wiring harness is the main body of the network of automotive circuits, which refers to the contact terminals (connectors) made of copper and crimped wire and cable, and the external plastic pressure insulator or metal shell, etc., to bind the wiring harness to form the components of the connection circuit, which is used to transmit power, signals and data, and connect the various electrical systems of the vehicle.
The operating conditions and parameters of the car are directly reflected in the on-board computer through the wiring harness, which can be said to be the nervous system of a car, so it has always been called the "blood vessel" of the car. The electronic technology content of automobile wiring harness has gradually become an important indicator for evaluating automobile performance, gradually showing the development trend of material lightweight, production automation and new energy high pressure.
Leoni AG/K has a long history and is acquiring its automotive cable and wiring harness business.
Leoni K2023 revenue of 1.46405 billion euros, equivalent to 11.5 billion yuan, Leoni AG2023 revenue of 5.46241 billion euros, equivalent to 42.9 billion yuan.
After the consolidated statement, Lichun Precision will increase revenue by about 33 billion yuan, and the revenue of automotive connected products and precision parts will expand to about 43 billion yuan. Revenue from automotive connected products and precision components will increase to about 13% of the company's revenue.
The acquisition will accelerate the pace of expansion of Lisun Precision Automotive business into the global market and enhance the comprehensive competitiveness of its automotive wiring harness products on a global scale. The target company has a broad international customer base covering more than 20 countries, including many of the world's leading automotive brands such as Mercedes-Benz, Robert Bosch and Continental.
Since its listing in 2010, Lichin Precision has been involved in the automotive sector, which initially accounted for a relatively large portion of the company's revenue, and was established as a strategic unit in 2015 and listed separately in the financial statements.
Although the average annual compound growth rate (CAGR) of Licun precision automotive connected products and precision parts from 2015 to 2023 is 34.94%, slightly lower than the average annual growth rate of 47.88% of the company's overall revenue, it is worth noting that in the first half of 2024, the revenue of automotive connected products and precision parts has reached 4,755.59 billion yuan. It accounted for 4.59% of the company's total revenue, an increase of 40.37 percentage points compared with 3.27% in the previous year, showing a significant acceleration in the growth rate of the business in this sector.
The strong growth of the automotive business segment is related to the advent of the "car road cloud" era. "Car road cloud" is a professional term for intelligent connected vehicles, which refers to the organic connection of "human-car - road - cloud" transportation elements with the help of the latest communication technology on the basis of intelligent autonomous driving on bicycles, to achieve the development goals of optimization of autonomous bicycles and global optimization of traffic, that is, integration of car road and cloud.
It can be seen that AI technology has boosted consumer electronics innovation, upgraded global data center computing power, and accelerated the smart car market, bringing greater growth to Licun Precision's consumer electronics, communications, and automotive businesses. The company estimates that the net profit of the first three quarters will be 88.49-9.218 billion yuan, an increase of 20%-25%; In the third quarter, about 3.453 to 3.822 billion yuan, an increase of 14.39% to 26.61%.
Under the wave of AI, the consumer electronics and communications businesses go hand in hand
Lisun Precision was founded in 2004, and listed in 2010, after nearly 20 years of development, is a leading precision manufacturing enterprise. Consumer electronics, communications, automotive as the core business structure. In the first half of 2024, these three sectors have achieved double growth in revenue and gross margin, among which the growth of consumer electronics and communications business is mainly due to the rise of AI large models.
Since the second half of 2023, with the rapid iteration and efficient compression of AI models, as well as the evolution trend from "cloud" to "end", the global consumer electronics market has steadily entered the era of AI, and more and more mobile terminals such as mobile phones, PCS, and pads have been enabled by end-to-side AI applications, and under the resonance of the industrial recovery cycle, market demand has been further activated.
It is based on such a background of The Times, Lishun Precision with the industry's years of deep cultivation of rapid mass production and process innovation capabilities, and under the support of new processes and new processes, successfully provide global brand customers with one-stop product landing services from parts, modules to system solutions. Especially in the field of acoustic products, AR/VR and smart devices such as home/office have been highly recognized by many customers, becoming one of the strong driving forces for current and future growth.
In the first half of 2024, Lichun Precision's consumer electronics business segment achieved a revenue of 85.548 billion yuan (accounting for 82.58% of revenue), an increase of 3.25%. Gross margin improved to 10.49%, up 0.98% from the same period last year.
In the communication business sector, because the current AI large model parameters are rapidly spanning from hundreds of billions to trillions or even larger, the huge amount of computation makes the next generation of AI clusters have more demanding requirements on high-speed interconnection performance. In this context, Lisun Precision efficiently collaborates with the global head chip manufacturers to conduct forward-looking pre-research on photoelectric high-speed interconnection products for the global mainstream data center and cloud service manufacturers, and jointly develop high-speed connection standards serving the next generation of AI clusters.
In the first half of 2024, the revenue of the communications business segment reached 7.465 billion yuan, an increase of 21.65%. Its share of revenue rose to 7.21 percent from 6.27 percent last year.
Conclusion
This acquisition is a strategic transaction, one is the promotion of car road cloud to bring about the growth of demand for automotive data interconnection products; Second, the target company is the global automotive wiring harness business leading enterprises, brands and customers are very strong; Third, the revenue scale of the target company is three times that of the current automotive connected products and precision parts, and the transaction has a scale effect on volume.
However, the net profit and loss of the target itself is large, and it is not profitable, and how to integrate after Lisun precision investment, give play to the efficiency advantages of the global layout, and take into account the local employment needs, which is the place to consider the integration of resources and wisdom of Lisun precision.
This paper is from Ulink Media, Shenzhen, China, the organizer of IOTE EXPO (IoT Expo in China)
