The enthusiasm for listing and financing of auto parts industry companies continues unabated.

Driven by the continuous and rapid growth of China's auto production, sales, and inventory, China's auto parts market continues to grow. From 2006 to 2014, the average annual growth rate was as high as 27%. In 2016, China's auto production and sales exceeded 28 million units, ranking the first in the world for eight consecutive years. In 2016, sales revenue of auto parts enterprises above designated size in China exceeded 3.67 trillion yuan, a year-on-year increase of 14.3%.

Chart: Sales Revenue of China's Auto Parts & Accessories Manufacturing Industry, 2012-2016 (trillions)

Source: China Association of Automobile Manufacturers

There are a large number of companies in China's auto parts market. The number of parts and components companies in China exceeds 100,000, and the number of companies with an annual output value of more than 20 million exceeds 10,000. Among them, small enterprises accounted for 62%, medium-sized companies 25%, large-scale parts and components companies accounted for only 9%, and large enterprises, especially Chinese-funded large-scale parts and components companies, had a small number. Affected by factors such as capital, technology, talent and development history, domestic-funded enterprises are generally smaller in scale than internationally renowned automobile parts and components companies, and their equipment level is relatively low. The overall competitiveness is not strong, and market competition is mostly concentrated in low-end products. market. China's automobile parts and components market companies are strong in China, Germany, Japan and the United States. They are dominant in China through sole proprietorships and joint ventures.

There are nearly a hundred listed companies in the domestic A-share auto parts segment, but large-scale non-listed auto parts companies still have strong desires for listing and financing to strengthen their own strength. In recent years, the performance of some non-automotive component private enterprises in China’s capital markets such as Hong Kong, the United States, and South Korea has spawned a growing number of auto parts companies’ plans to consider overseas listings. Overseas listings can not only meet the needs of companies. The funds can also be used to expand the visibility of companies and help open up the international market. Overseas listing has become a hot spot for domestic auto parts companies.

- Korea Securities Market Introduction

The Korean Stock Exchange (KRX)'s stock market system covers KOSPI in the securities market, KOSDAQ in the Growth Enterprise Market, and the lower KONEX market. At present, Kosdaq KOSDAQ is open to Chinese companies.

KRX has been developing rapidly together with the Korean economy since it was opened in 1956, and it has been until today. Companies listed on the KRX can not only finance growth, but also form partnerships with multinational companies in South Korea and have the opportunity to enter the most active Korean market in Asia. Not only that, after foreign companies occupy a favorable strategic position in South Korea, they are more likely to break into the adjacent Asia-Pacific markets, such as China and Japan, and explore more business opportunities.

The Korea Exchange (KRX) is Korea's only securities and futures exchange, and Korea Exchange ranks among the top in Asia in terms of market size, liquidity, openness, and stock turnover. KRX is one of the most dynamic and abundant liquidity markets in the world. South Korean domestic investors and foreign institutions are actively investing in the stock market, so that the stock exchange turnover rate has always been among the top of the world exchange. Since 2014, it has been ranked fifth in the Asia region with a transaction volume of US$1.4 trillion, and the number of listed companies is 1,864 in the world.

- Korea's listing advantage

1. The time to market in Korea is short, and the total is about 18 months without waiting in line.

2. The cost is low and the overall cost is about RMB 12 million.

3. Higher price-to-earnings ratio: Generally better than Hong Kong market, Chinese companies listed on average Korea's earnings-earnings ratio of 11 times, but Hong Kong's manufacturing companies are generally 8 times the average.

4. Financing is guaranteed: Korean investors have more hot money and prefer to invest in Chinese companies. Usually, they can introduce 100 million yuan of private equity in South Korea before the listing, and the public issuance ratio can basically reach 30% of the valuation. On average, each financing amount is about 3-5 billion yuan.

5. Liquidity is good and easy to realize: In the Korean market, about 70% of retail investors are involved, and small shareholders can sell or transfer their shares.

6. Sustainable refinancing: Generally, three months after listing, as long as it meets the needs of the expansion of the enterprise, it can be refinanced at any time. Four additional issuances of financing can be made each year, and the additional issuance of processes and procedures that do not require particularly complicated procedures.

——Performance of Chinese companies’ Korean stock market

In 2007, the Korean stock market opened to China, and the Korean Exchange referred to Chinese companies listed in Korea from 2007 to 2011 as the first generation of Chinese companies. During this period, 22 companies were listed, and were later interrupted for special reasons from 2011 to 2014. After President Xi visited South Korea at the end of 2014, the Korean stock market KOSDQ once again opened its doors to China. The Chinese companies listed in 2016 were called second-generation Chinese companies and listed six companies that year. In the 10 years since 2007, 28 Chinese companies have entered the Korean securities market, of which 7 have been delisted. As of October 2017, a total of 21 Chinese companies listed on the Korean stock market, including Kosdaq KOSDAQ, are traditional small and medium-sized enterprises with a total market value of more than RMB 14 billion. From an industry perspective, Chinese companies currently listed in Korea are mainly concentrated in the manufacturing industry, such as cosmetics/clothing, software, semiconductors, automobiles and parts, machinery, media/education, chemistry, consumer goods, and biomedicine.

In 2016, a total of six companies listed IPOs in Korea. The six IPO Chinese companies listed in KOSDAQ in South Korea were Jiangyin Youjia Zhuguang Mica Co., Ltd., Jiangsu Rothwell Electric Co., Ltd., Fujian Hengsheng Group, Yangzhou Golden Century Wheel Manufacturing Co., Ltd., and Jiangyintong. Li Optoelectronics Technology Co., Ltd. and Fujian Haichuan Pharmaceutical Technology Development Co., Ltd. These six companies are all small and medium-sized manufacturing enterprises. Their main business income in the pre-IPO period is 300-1000 million yuan. On average, each company obtains 120 million yuan in South Korean private equity investment before the IPO. On average, each enterprise is listed and publicly funded 380 million yuan. Yuan, the average total financing of each Chinese company listed in Korea reached 500 million yuan, with an average price-earnings ratio of 11 times. In 2016, the average IPO of Chinese A-shares and GEM stocks was RMB 480 million. According to the average calculation, the amount of financing was equivalent, but according to the actual scale of the company, the probability of Chinese companies listed in Korea listing in China is still high. Extremely low.

Table: Statistics on the IPO status of Chinese companies listed in Korea KOSDAQ in 2016

Source: Korea Exchange KRX, Beijing Liben Financial Services Group

Beijing Liben Financial Services Group is the chief financial advisor of listed companies in Korea of ​​Chinese companies. South Korea’s listed businesses cover the whole process of listing and counseling services such as enterprise listing diagnosis, planning, rectification, audit, legal, public relations, industry research, brokerage, and private equity. Liben Financial Services Group is advocating a one-stop Korean listing service throughout the entire country. It saves money, is effective, does not flicker, and has guaranteed financing.