New Stock Research Report | JiXin GuoKong (08629) starts IPO today, mainly engaged in construction engineering testing and inspection services.

Jiexin Guokong (08629) is mainly engaged in construction engineering testing and inspection services, serving clients in Maoming, Guangdong Province, China. Offering date: August 26th to September 3rd Listing date: September 6th Joint sponsors: Huajin Financial International, Yuexiu Finance Receiving bank: Bank of China Asia Offering 10.179 million H shares, approximately 90% for placement, approximately 10% for public offering, with an additional 15% of the offering size adjustment right If the public offering is subscribed at least 15 times but less than 50 times, the public offering ratio will increase from 10% to 30%; if subscribed at least 50 times but less than 100 times, the ratio will increase to 40%; if subscribed 100 times or more, it will be increased to 50%. However, if the placement is not filled but the public offering is, or if both are filled but the public offering subscription is less than 15 times, the public offering ratio can be increased up to a maximum of 20%, with a minimum pricing requirement The offering price per share is between HK$8.6 and HK$10.4, raising a maximum of approximately HK$105 million, representing about 30% of the total market value, with IPO expenses of approximately HK$42.3 million At 500 shares per board lot, the entry fee is HK$5,252.44 Based on the maximum price of HK$10.4, the market value is approximately HK$352.9 million (calculated based on the adjusted net profit of approximately RMB 15.03 million in 2023, with a P/E ratio of approximately 21 times) As of the end of June 2024, the average net asset value is approximately RMB 109 million The public offering is divided into Class A (applicants of 5 million or less) and Class B (applicants of more than 5 million) Business: Revenue in 2021 to 2023 was RMB 39.78 million, RMB 19.96 million, and RMB 41.5 million, with revenue in the first half of 2024 amounting to RMB 22.83 million Gross profit in 2021 to 2023 was RMB 30.17 million, RMB 11.49 million, and RMB 29.78 million, with gross profit in the first half of 2024 amounting to RMB 16.17 million Net profit in 2021 to 2023 was RMB 17.73 million, RMB 2.91 million, and RMB 13.25 million, with net profit in the first half of 2024 amounting to RMB 7.34 million Adjusted net profit in 2021 to 2023 was RMB 17.73 million, RMB 2.91 million, and RMB 15.03 million, with adjusted net profit in the first half of 2024 amounting to RMB 8.23 million (excluding IPO expenses) The company was established in 2000 with its headquarters in Xinyi City, Maoming. Over the years, revenue from construction engineering testing and inspection services has continued to grow. The company provides a range of construction engineering testing and inspection services, covering various types of testing and inspection processes in the industry. The company mainly provides construction engineering testing services including foundation testing, infrastructure and public road testing, building material testing, and building structure testing. Additionally, the company also offers slope monitoring and foundation pit monitoring services in construction engineering inspection. Since May 2024, as part of its expansion plan, the company continues to focus on construction engineering testing and inspection services as its main business priority, while also diversifying its services to provide food testing services, which contributed 12.3% of total revenue in the first half of 2024. The company's clients mainly consist of participants in China State Construction Engineering Corporation, including private and public sector entities such as real estate developers, construction companies, state-owned investment companies, relevant Chinese government agencies, and government administrative departments. These clients rely on the company's expertise to ensure the quality, safety, and compliance of their construction or infrastructure projects at various stages. The company's testing and inspection services mainly focus on private commercial and residential construction projects, as well as public building and infrastructure projects. In the first half of 2024, the company had 196 clients. Currently, the company has a team of 106 employees, collectively holding 179 testing qualifications issued and approved by the Guangdong Provincial Construction Engineering Quality Safety Testing and Appraisal Association, capable of executing reliable testing and inspection procedures. Among them, 55 are qualified engineers specialized in construction engineering in China, while three are specialized engineers in food and Shenzhen Agricultural Power Group. The company has also obtained a total of 39 qualifications approved by the Guangdong Provincial Market Supervision Administration related to testing and inspection services for construction engineering, products and materials, environmental testing, food testing, and agricultural related testing, offering testing services for over 2,700 parameters under 39 categories. The company has been granted accreditation by the Guangdong Provincial Market Supervision Administration as a testing and inspection institution. This accreditation allows the company to use the CMA (certified testing and inspection institution accreditation) logo when conducting business. Approximately 27.5% of the funds raised will be used to expand construction engineering testing services to obtain comprehensive qualifications under the "Construction Engineering Quality Inspection Agency Qualification Standards" and strengthen existing construction engineering testing and inspection services. Approximately 27.7% will be used to consolidate the company's existing market position in Maoming and expand service coverage to third- to fifth-tier cities in western Guangdong. Approximately 37.4% will be used to diversify testing and inspection services beyond construction engineering to include food, agriculture, transportation, and fire safety. Approximately 5.5% will be used to upgrade the ERP system, and approximately 1.9% will be used for general operating funds. Pre-IPO financing: In July 2023 and November 2023, shares were sold to Xinyi Finance under Xinyi City's Finance Bureau at a discount of approximately 48.3% off the mid-point price, with a 12-month lock-up period. Major shareholder structure after listing: Xinyi City Housing and Urban-Rural Construction Bureau holds 56% Xinyi Finance holds 14% Public shareholders hold 30% Analysis: Jiexin Guokong (08629) is mainly engaged in construction engineering testing and inspection services, serving clients in Maoming, Guangdong Province, China. Based on the maximum price of HK$10.4, the market value is approximately HK$352.9 million, with a P/E ratio of approximately 21 times based on an adjusted net profit of approximately RMB 15.03 million in 2023. The company is listed on the Growth Enterprise Market (GEM), with an expected relatively large price volatility. Investors should pay attention to the risks. This article was provided by "Xincheng Securities" and authored by Xincheng Securities analyst.Chen Bohao; GMTEight editor: Ye Zhiyuan.I am hungry, so I am going to make some food.