Zhaowei Electromechanical: Growth and Pressure Behind Over 40% Discount in A-H Share Spread Following 1,000-Fold Subscription Oversubscription

ZC Asia has learnt that Zowell (02692.HK) concluded its subscription period on 4 March 2026, with trading scheduled to commence on 9 March. The public offering witnessed overwhelming demand, attracting HK$233.82 billion in margin financing subscriptions – equivalent to 1,186 times oversubscription. According to the company announcement, the final issue price for ZW Motor's H-share offering was set at the upper limit of HK$73.68 per share. At this price, the H-shares trade at a discount of over 40% relative to their A-share counterpart. While this discount level holds some appeal among concurrent A+H listings, it also reflects the prevailing AH premium in the current market environment.

The company secured 21 cornerstone investors, collectively committing approximately HK$650 million, representing 33.1% of the base issue size. The roster includes prominent Chinese private equity firms such as Hillhouse Capital and Gaoyi Asset Management, alongside foreign long-term funds including Temasek-affiliated VVC Technology and South Korea's Mirae Asset. Notably, industrial partner Topstar contributed RMB 30 million to the subscription, signalling recognition of the company's value by industrial capital.

However, the significant presence of individual investors on the cornerstone list has drawn considerable market attention. Beyond direct subscriptions under personal names, multiple institutions wholly owned or effectively controlled by individual investors also participated, with total investments from individual investors exceeding HK$190 million.

Steady Performance Growth and Sustained Margin Expansion

Fundamentally, Zhaowei Electromechanical has indeed delivered a robust performance. According to Frost & Sullivan's report, the company holds an industry-leading position with a 3.9% domestic market share and a 1.4% global market share based on 2024 revenue.

Financial data reveals that from 2022 to 2024, the company's operating revenue reached RMB 1.152 billion, RMB 1.206 billion, and RMB 1.525 billion respectively, achieving a compound annual growth rate (CAGR) of 15.0% over three years. Revenue for the first three quarters of 2025 reached RMB 1.255 billion, representing an 18.7% year-on-year increase. This growth was primarily driven by sustained breakthroughs in automotive product sales.

Profitability also demonstrated robust performance. Net profit attributable to shareholders reached RMB 150 million, RMB 180 million, and RMB 230 million in 2022, 2023, and 2024 respectively, with the first three quarters of 2025 recording RMB 182 million. The company anticipates full-year 2025 net profit attributable to shareholders will not fall below RMB 250 million. More notably, gross profit margin has risen from 29.1% in 2022 to 32.7% in the first three quarters of 2025, while net profit margin has consistently maintained a robust level above 13%, demonstrating stable core profitability metrics.

Regarding the allocation of raised funds, the company plans to allocate approximately 35% towards global technological R&D and product portfolio expansion; approximately 30% towards global capacity expansion and production efficiency enhancement; and approximately 15% towards selective global strategic collaborations, investments, and mergers and acquisitions.

Rising Accounts Receivable Exert Pressure on Cash Flow

However, behind the impressive growth figures, pressure from capital occupation continues to mount.

Financial data reveals that from 2022 to 2024 and the first three quarters of 2025, the company's total accounts receivable amounted to RMB 407 million, RMB 466 million, RMB 618 million, and RMB 623 million respectively, demonstrating a year-on-year upward trend that significantly outpaced revenue growth during the same periods. By the end of Q3 2025, accounts receivable constituted over 20% of current assets.

This issue stems directly from the company's high customer concentration. During the same period, the top five customers accounted for 38.2%, 50.7%, 46.6% and 44.2% of total revenue respectively; the largest single customer represented 13.0%, 16.3%, 17.6% and 16.6% of revenue respectively. Negotiating power with major clients is relatively constrained, necessitating concessions on payment terms and directly prolonging the collection cycle.

Data indicates that the company's accounts receivable turnover days increased from 111 days in 2022 to 123 days in the first three quarters of 2025. The efficiency of capital recovery remains persistently low, consequently exerting pressure on cash flow. Net cash flow from operating activities for the first three quarters of 2025 amounted to merely RMB 100 million, representing a 35% decline from the RMB 160 million recorded in the same period last year, with liquidity pressures gradually emerging.

Declining overseas revenue share signals challenges in global expansion

For an enterprise opting for a Hong Kong listing, overseas business performance is particularly critical. However, Zhaowei Electromechanical's overseas revenue figures starkly contrast with its global expansion strategy.

Overseas revenue share declines as global expansion faces challenges

For a company opting for a Hong Kong listing, the performance of its overseas operations is particularly crucial. However, Zhaowei Electromechanical's overseas revenue figures starkly contrast with its global expansion strategy.

Despite the company's claims of successfully penetrating the supply chains of multiple industry leaders in Europe and America, both the scale and proportion of its overseas revenue have shown a weakening trend. From 2022 to 2024, the company's overseas revenue stood at RMB 150 million, RMB 160 million, and RMB 210 million respectively. In the first three quarters of 2025, this figure retreated to RMB 150 million, representing a decline of nearly 15% compared to the same period. More concerning is the drop in revenue share from 16.1% in the first three quarters of 2024 to 11.6% in the first three quarters of 2025, indicating persistently weak performance contributions from overseas markets.

This indicates that during the latter half of the reporting period in the prospectus, the company's overseas operations not only failed to grow but experienced substantive contraction. With its listing on the Hong Kong stock market, the company will face increased scrutiny from international investors. The current lacklustre growth of its overseas business stands in stark contrast to foreign capital's core expectations regarding the company's global expansion and overseas performance growth, potentially becoming a significant obstacle to gaining international investor approval.

Compliance Flaws Emerge: Social Insurance and Housing Fund Arrears Pose Risks

On the compliance front, the company also faces issues concerning underpayment of social insurance and housing fund contributions. The prospectus reveals that in recent years, the company has failed to make full social insurance and housing fund contributions for certain employees.

Data indicates that from 2022 to 2024 and the first three quarters of 2025, the company's total arrears for social insurance and housing provident fund amounted to RMB 26.9 million, RMB 34.7 million, RMB 30.1 million, and RMB 24.8 million respectively. During the same periods, the maximum potential late payment penalties the company may face for underpaying social insurance reached RMB 3.1 million, RMB 7.7 million, RMB 5.1 million, and RMB 1.2 million respectively. Should the company fail to complete the back payments within the stipulated timeframe required by the relevant social insurance authorities, it may face fines ranging from one to three times the total amount owed.

While this compliance issue has limited immediate impact on the company's operations, from a corporate governance perspective, it reflects certain gaps in its internal control management. For H-share listed companies soon to undergo stricter regulatory scrutiny, such issues warrant attention.

Against the backdrop of prevailing caution in the Hong Kong stock market recently, it remains to be seen whether Zhaowei Electromechanical can deliver satisfactory results on its first day of listing.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.