New Stock Preview | The popularity of smart cars continues to rise, can Magna shares' Hong Kong IPO win market favor?

Recently, Mejia Co., Ltd. (referred to as Mejia Co.) submitted an application for listing on the main board of the Hong Kong Stock Exchange, with CICC, Citibank, and Deutsche Bank as its joint sponsors. Since its establishment, Mejia Co. has received investments from many well-known institutions, including M31 Capital, Zhilu Capital, Nanshan Capital, Redpoint Ventures, Muhua Technology Innovation, Shanxing Capital, Greater Bay Area Common Home Development Fund, China Mobile Beijing Fund, Beijing Centergate Technologies Group, and Yuanhe, among others. As of the D+ round of financing, Mejia Co.'s estimated post-investment valuation reached $931 million (about 6.7 billion RMB). According to the prospectus, Mejia Co. is one of the first enterprises in the Chinese smart car industry to develop fully standardized, modular, software-driven integrated domain control solutions. They are the industry's first third-party supplier to achieve mass production of an intelligent cockpit + parking integrated solution driven by a single vehicle-grade master control chip. They are also one of the only two suppliers that can provide a full-scenario intelligent voice system integrated into intelligent cockpit solutions, with an industry-leading speech recognition accuracy rate of 99%. Currently, the automotive industry is accelerating its transformation towards intelligence, electrification, and connectivity, and the intelligent automotive industry chain is entering a golden development period. In this context, Mejia Co.'s IPO will attract close market attention. AI intelligent cockpit + modular software, with a compound annual revenue growth rate of over 90% Public information shows that Mejia Co. is an innovative-driven leading automotive technology company focused on reshaping the future of mobility. The company focuses on developing and delivering integrated domain control solutions centered around artificial intelligence (AI) to assist OEMs in creating the next generation of software-defined vehicles. It is understood that due to increased customer adoption rates, economies of scale, and improved research and development efficiency, Mejia Co.'s operating income is expected to increase from 388 million RMB in 2022 to 1.42 billion RMB in 2024, with a compound annual growth rate (CAGR) of 91.3%. The gross profit margin is expected to increase from 19.0% in 2022 to 21.8% in 2024. Net losses are projected to decrease from 423 million RMB in 2022 to 291 million RMB in 2024. The contracted pipeline volume is a key indicator of future revenue growth. From 2022 to 2024, the company's accumulated contracts increased from 15 to 48, with 23 new contracts in 2024 alone; the delivery volume increased from 120,100 units to 634,300 units. Due to the company's decision to stop cooperation with certain early OEM end customers that do not align with long-term development goals, the delivery volume in 2024 slightly decreased compared to 2023. As the company strategically reallocates resources to more advanced technologies, the gross margin improved significantly from 12.1% in 2023 to 21.8% in 2024. In recent years, the penetration rate of the company's solutions has continued to rise. In 2024, the combined wallet share of the company's top five customers increased from 1.2% in 2022 to 12.7% in 2024, reflecting the widespread adoption of the company's solutions on existing and new vehicle platforms. In 2022, 2023, and 2024, the company's research and development expenditures were 262 million RMB, 290 million RMB, and 358 million RMB, respectively, accounting for 67.5%, 19.2%, and 25.2% of the company's revenue. The proportion of research and development expenses to total revenue decreased in 2023 mainly due to significant revenue growth. In 2024, with the increase in project numbers and a significant increase in investment in artificial intelligence-related capabilities, both the absolute amount of research and development expenses and the proportion to revenue increased. The company expects the absolute amount of future research and development expenses to continue to rise, but at a more moderate pace and slower than revenue growth. Mejia Co. focuses on AI-driven integrated domain control solutions, combining advanced features, high system performance, and cost efficiency to help OEMs achieve intelligent transformation in a cost-effective manner. Public information shows that the integrated domain control solution is a vehicle control architecture with intelligent cockpit domain controllers at its core, designed to coordinate and manage multiple in-vehicle systems such as ADAS, vehicle networking, and body control through a unified intelligent platform. Mejia Co. adheres to the core product concept of "Intelligent Cockpit + X," with the intelligent cockpit as the core, seamlessly integrating a series of smart feature modules tailored for intelligent connected vehicles, including AI-driven voice assistants, driver and passenger monitoring systems (DMS/OMS), advanced driver assistance systems (ADAS) parking, ADAS drive vehicle networking, remote online (OTA) upgrades, etc., to achieve seamless plug-and-play integration, supporting scalable deployment across multiple OEMs and vehicle models. It is reported that the company's products use a modular, reusable software architecture, allowing OEMs to significantly shorten product development cycles, reduce research and development costs, and have more opportunities to differentiate their vehicle models. Thanks to the modular software library, the research and development expenses for each "ongoing engagement" (defined as an engagement within a year that has not been canceled or terminated) from 2022 to 2023 and from 2023 to 2024 decreased significantly by 24.4% and 20.2%, showcasing outstanding cost control capabilities. Since the mass production of the first model equipped with the company's solution in 2022, Mejia Co.'s business has experienced rapid expansion. The prospectus shows that Mejia's solutions have been applied to a variety of models from top OEMs such as Chery, Changan, Dongfeng, Changan Mazda, Nissan, and Ford, with approximately one out of every ten new vehicles in China in 2024 equipped with an intelligent cockpit domain control system using Mejia's solution. By the end of this year, the products using their technology are expected to expand to over 40 countries and regions, advancing the internationalization process steadily. The penetration rate of new energy vehicles is continuously increasing, and intelligent cockpits may become a new battleground In the first half of 2025, China's auto market performed well, driven by policies such as the "trade-in for new cars" incentive, with production and sales reaching 15.623 million and 15.653 million units respectively, representing year-on-year growth rates of 12.5% and 11.4%, both hitting historical highs. The new energy vehicle market has seen continued strong growth, with production and sales of new energy vehicles reaching 6.968 million and 6.937 million units in the first half of the year, both growing by over 40%. By the end of June 2025, the total number of new energy vehicles in China reached 36.89 million units, accounting for 10.27% of the total vehicle ownership. The market penetration rate reached 44%, meaning that four out of every ten new cars sold in the first half of this year were new energy vehicles. As the scale of the new energy vehicle market continues to grow, new energy companies are approaching a turning point towards profitability, with new players such as Xiaomi Auto and Xiaopeng Auto setting clear profit "timetables". For example, Li Auto is aiming to achieve a net profit of 647 million RMB in the first quarter of 2025, marking ten consecutive quarters of profitability; Xiaopeng Auto has expressed confidence in doubling its sales volume year-on-year in 2025, expecting profitability in the fourth quarter, and achieving positive scale free cash flow for the full year; Xiaomi Auto is gradually narrowing its business losses and is expected to achieve profitability in the third to fourth quarters of this year. As downstream vehicle manufacturers' profitability improves, the intelligent cockpit, as the core interface for user-vehicle interaction, has become a key battleground for OEMs' differentiation. At the 2025 Shanghai Auto Show, BMW's new-generation Ultra-Sense intelligent cockpit, equipped with the company's self-developed "Horizontal Panoramic Interaction System," featured an ultra-wide field of vision display projection extending from the A-pillar to the A-pillar; Zhiji L6 integrated the IMOS 4.0 AI Ecological Cockpit, incorporating Alibaba's ecological services in the form of an AI agent into the cockpit system for the first time. Leading brands such as Xiaopeng and Hongmeng also showcased their latest intelligent cockpit technology achievements. Frost & Sullivan data shows that in 2024, the total incremental installed capacity of integrated domain control solutions for passenger cars in China reached 6.8 million units. The top five integrated domain control solution suppliers in China collectively hold a 49% market share, with vehicles equipped with Mejia Co.'s integrated domain control solutions reaching 634,000 units, ranking second in the country with a market share of about 9.3%. In 2023 and 2024, based on the new installation volume, Mejia Co. ranked among the top two integrated domain control solution suppliers in China, with the second-highest installed volume of domain control solutions equipped with high computational power SoCs; as per the same source, the company was the fastest to reach one million cumulative deliveries in the integrated domain control solution industry in China since mass production. According to the prospectus disclosure, Mejia Co. is the only supplier in the industry with full-stack independent research and development capabilities, able to independently develop domain control-related software, design hardware independently, and seamlessly integrate software and hardware to provide end-to-end complete solutions, showcasing strong research and development capabilities. Looking ahead to the second half of 2025, with the continued efforts of new energy subsidy policies and the "trade-in for new cars" policy, combined with the intensive launch of new models by major automakers, it is expected to further stimulate the potential of automotive consumption. As a leading company in the field of intelligent automotive domain control solutions, Mejia Co. is expected to significantly benefit from the high prosperity of the industry. It is reported that the company is accelerating the iteration and upgrade of its products, focusing on higher integration and richer features such as cockpit and driving integration solutions. The progress of their technological research and development and industrialization will be key variables affecting future performance. With the continuous increase in the penetration rate of automotive intelligence, Mejia Co., leveraging its advantage of early entry and technological accumulation, is expected to further consolidate its leading position in the industry.