New Stock Preview | Marji Electronics' AB Side: The glory of entering the supply chain of Nvidia, Qualcomm, and AMD, and the reality of continuous losses.

Since the outbreak of generative AI in 2023, the AI computing power hardware side has been experiencing a structural bull market in the capital market for three years. Represented by optical modules, liquid cooling, PCB, and other key components, a group of leading companies have seen a phenomenal increase in their stock prices, emerging as benchmark stocks with remarkable gains. Currently, this industry trend remains strong, with market funds continuously digging deeper into the industrial chain, actively seeking new hardware branches emerging from technological iterations to capture potential excess profit opportunities in the next round. In this market environment, power inductors have gradually entered investors' view. As a core passive component that ensures stable power supply for chips, power inductors have the potential to become another high-growth segment of focus in the market, given the significant increase in AI server single-machine value, coupled with the resonance of car regulations and high-end consumer electronics demands. As a leading company in the field of advanced process chip power inductors in China, Kunshan Maji Electronics Co., Ltd. (referred to as "Maji Electronics") has attracted continuous attention in its capitalization process. It has been observed that Maji Electronics has officially initiated its journey to Hong Kong for listing, submitting its listing application to the Hong Kong Stock Exchange on March 31st, with Ping An Securities (Hong Kong) as the sole sponsor. According to Zhuoshi Consulting data, based on the income from advanced process chip power inductor solutions in 2024, Maji Electronics ranks first among suppliers headquartered in mainland China and sixth globally. Additionally, Maji Electronics' car sales deputy general manager, Wang Bin, previously stated that the company is the primary supplier of inductors for NVIDIA, Qualcomm, and AMD. However, Maji Electronics is currently still facing continuous losses. According to the prospectus, the company's revenue from 2023 to 2025 is approximately RMB 362 million, RMB 436 million, and RMB 471 million respectively, while the adjusted net profit during this period is approximately -RMB 23.265 million, -RMB 7.178 million, and -RMB 2.585 million respectively. A question arises: how should a reasonable valuation be given to a company that leads in the niche market and has entered the supply chains of NVIDIA, Qualcomm, and AMD but has yet to achieve profitability? This is a matter that investors should thoroughly consider. While the gross profit margin continues to improve, the average selling price of the core business is declining The development history of Maji Electronics is a focused growth story closely following the evolution of high-end chips step by step. Founded in Kunshan in 2012, Maji Electronics initially focused on consumer electronics and IT equipment markets, subsequently anchoring its research and design in high-end electronic components and magnetic materials, laying the foundation for the high-end evolution of its technical capabilities. By 2016, Maji Electronics successfully expanded into the automotive electronics sector, and in 2018, the company made a critical strategic decision to launch high-performance power inductors for GPUs, which allowed it to enter the high-speed growth track of computing power, paving the way for becoming a supplier to industry giants like NVIDIA and AMD in the future. Subsequently, Maji Electronics continued to evolve towards miniaturization and specialization, launching miniaturized inductors in 2020 and specializing in AI power inductors in 2024, always catering to the demands of the most advanced chip processes. With this, the three major application scenarios of Maji Electronics' power inductors have officially taken shape, marking the further opening up of the company's growth space. In 2025, Maji Electronics' revenue from consumer electronics, automotive electronics, and high-performance computing accounted for 67.5%, 22.5%, and 9.8% respectively. Clearly, consumer electronics remains the core area for Maji Electronics, with revenue from the high-performance computing scenario still not high. In terms of performance, the steady revenue growth from 2023 to 2025 for Maji Electronics is mainly due to the concerted efforts of the three major businesses, with revenue from different scenarios showing continuous growth, particularly consumer electronics acting as the "ballast" for the company's performance, consistently providing stable support and driving growth. It is worth noting that there are significant differences in the revenue growth logic of the three major business scenarios of Maji Electronics. The consumer electronics and automotive electronics sectors exhibit the characteristic of "volume increase, price decrease", where revenue growth mainly relies on sales volume, while the average selling price continues to decline amidst intensified market competition. In contrast, the high-performance computing scenario achieves "volume and price increase", with the average selling price increasing from 0.76 RMB in 2023 to 0.88 RMB in 2025, and sales volume also increasing from 35.4826 million pieces to 52.5942 million pieces during the same period. However, what is more analytically valuable is the changing trend in the gross profit margin of each business, which forms an interesting contrast with the revenue growth logic. Despite facing the pressure of "volume increase, price decrease" in consumer electronics and automotive electronics, the gross profit margins of both sectors continue to rise - the gross profit margin for consumer electronics increased from 16.1% in 2023 to 22.8% in 2025, and for automotive electronics from 15.1% to 17%. This is mainly due to the company outsourcing some standardized, labor-intensive processes, effectively improving cost efficiency. In contrast, the gross profit margin trend of the "volume and price increase" high-performance computing business scenario is completely opposite, significantly decreasing from 37.6% in 2023 to 21.7% in 2025. This indicates that the rise in product prices in this scenario is mainly driven by the increase in raw material costs, and the company has not been able to fully transfer the cost pressure downstream, leading to a squeeze on gross profit margin space and a weakening of profitability. Between this "rise and fall", Maji Electronics has achieved a steady increase in the overall gross profit margin through structural adjustments in the profitability of different businesses, rising from 17.6% in 2023 to 21.5% in 2025. This has also been a key reason for the continuous narrowing of its adjusted net loss. Multiple potential risks indicate challenging business operations for the company From the analysis of Maji Electronics' performance, it can be seen that the company is facing price pressure in the consumer electronics and automotive electronics sectors due to intensified market competition, while the high-performance computing sector is challenging due to cost transmission issues. However, these are not the only challenges on its growth path. Besides these, the following potential risks are also worth investors' attention. Firstly, the significant increase in storage prices has cast a shadow over the consumer electronics industry, with the market having a generally pessimistic outlook on future shipment volumes. As consumer electronics is a significant source of revenue for Maji Electronics, it may be affected by this. Taking smartphones as an example, IDC predicts a global shipment volume of approximately 1.1 billion units in 2026, a year-on-year decline of 12.9%, reaching the lowest level since 2013. Meanwhile, the organization believes that despite a stabilization in the smartphone market in 2027, shipment volumes will only slightly increase by 1.9%, with a significant recovery not expected until 2028. Other segments such as personal computers, tablets, and game consoles are facing similar challenges of weak growth or continuous decline in shipments. In a fiercely competitive market with significantly reduced demand, prices of power inductors used in consumer electronics may face significant pressure. Secondly, Maji Electronics has a high concentration of customers, which may lead to significant fluctuations in the company's performance. According to the prospectus, from 2023 to 2025, revenue from the top five customers accounted for 78.7%, 78.4%, and 70.2% respectively; with the revenue share from the single largest customer accounting for 34.1%, 34.7%, and 32.5% respectively. In a competitive market, high customer concentration weakens the company's bargaining power to a certain extent. More critically, if demand from top customers weakens, it will have a noticeable impact on Maji Electronics' performance. At the same time, the intensity of competition in the global power inductor market may exceed the expectations of most investors. Though Maji Electronics ranks first among suppliers headquartered in mainland China and sixth globally based on the income from advanced process chip power inductor solutions in 2024, its market share globally is not particularly high. According to the prospectus, the global market for power inductors for advanced process chips is highly concentrated, with the top six companies accounting for over 80% of the market share, and Maji Electronics, ranked sixth, holding only 4.5% of the global market share. The company faces strong competition from leading companies in Japan and Taiwan. Additionally, the relatively low level of research and development investment may hinder the long-term construction of the company's core competitiveness. Despite being in a rapidly evolving and fiercely competitive power inductor industry, Maji Electronics has maintained relatively low levels of R&D expenditure. According to the prospectus, its R&D investment from 2023 to 2025 was RMB 25.721 million, RMB 28.828 million, and RMB 28.337 million respectively, accounting for only 7.1%, 6.6%, and 6.0% of its revenue, showing a downward trend year by year. In such a technology-driven market, continuous R&D is crucial to maintaining product leadership and responding to rapid iteration. If the company falls behind competitors in terms of technological reserves due to insufficient R&D investment, its long-term competitiveness and value growth space may be significantly constrained. In conclusion, the strengths and weaknesses of Maji Electronics are quite prominent. As a leading player among domestic manufacturers, its continuous revenue growth and position as the primary inductor supplier to major chip manufacturers such as NVIDIA, Qualcomm, and AMD are significant competitive highlights for the company. However, expectations of weakening demand in the consumer electronics market, high customer concentration, intense industry competition, and relatively limited R&D investment all pose constraints on its valuation. Therefore, investors should maintain a rational view when evaluating Maji Electronics.