IPO Preview | Yudo: Global Hot Runner Leader's Automotive Base Remains Solid, New Application Growth Momentum Yet to Be Tested

Another global niche leader is knocking on the door of the capital markets. On September 29, Liudao Industrial Holdings Co., Ltd. (referred to as "Liudao Industrial"), a global precision temperature control technology company, officially submitted its listing application to the Main Board of the Hong Kong Stock Exchange, with CICC and CITIC SEC serving as joint sponsors. By revenue, the company is the world's largest hot runner system supplier, ranking first in 2025 with approximately 12.5% global share and approximately 21.5% Asian share, and ranking first in the Chinese and Korean markets. Deep moat as a leader; solid fundamentals but slowing growth According to the prospectus, Liudao Industrial is a global leader in hot runner systems centered on precision temperature control technology. It also ranks first globally in the two major end-application markets of automotive and electronics/home appliances. Its business essentially revolves around material heating, cooling, and flow in plastic injection molding, providing differentiated thermal control products and solutions. The company is the only market participant capable of offering a full range of hot runner systems with all key components produced internally in-house, with vertical integration and full product-line capabilities forming its core moat. Downstream coverage includes automotive, electronics and home appliances, packaging, and other industries. More importantly, the company is transforming from a product supplier to a technology-driven solutions provider, and plans to extend its precision thermal control technology into new scenarios such as ultra-precision runnerless molding for contact lenses, in-mold polyurethane coating, supercritical fluid foaming for shoe midsoles, and multi-material co-injection molding, opening a second curve for medium- to long-term growth. On the revenue side, from 2023 to 2025, the company's revenue was US$367 million, US$373 million, and US$381 million, respectively, showing moderate growth, but with a compound growth rate of less than 2%, indicating that the global hot runner market has entered a mature phase with limited overall room for industry expansion. In the first half of 2026, revenue was US$182 million, a slight decline of 3.4% from US$188 million in the same period of 2025, and it is necessary to be alert to growth pressure brought by cyclical fluctuations in demand from downstream automotive, home appliance, and packaging industries. However, the company's earnings quality is excellent. From 2023 to 2025, the company's gross margin remained stable at around 54% (further climbing to 55.3% in the first half of 2026). In the equipment manufacturing and materials sector, a gross margin above 50% is extremely rare, which confirms the vertical integration advantage of "all key components produced internally in-house" as well as the strong pricing power brought by its full range of product offerings. The high-gross-margin moat ensures that even when revenue scale peaks, the company still has strong risk resistance. Specifically, the company's core main business performed very strongly. From 2023 to 2025, operating profit steadily grew from US$97 million to US$109 million. However, the company's net profit and operating profit diverged severely: profit for the period in 2023, 2024, and 2025 was US$82 million, US$45 million, and -US$58 million, respectively, turning from profit to loss in 2025. But this was not due to deterioration in the main business; rather, it was caused by two major non-operating factors: First, changes in the fair value of convertible preferred shares: contributing a gain of US$27 million in 2023, a loss of US$9 million in 2024, and an expanded loss of US$44 million in 2025. This is usually an accounting treatment brought about by pre-IPO financing and is a non-cash book loss. Second, a surge in net financing costs: in 2025, net financing costs soared from US$23 million in 2024 to US$100 million; in the first half of 2026, they reached US$8 million (a sharp increase from US$3 million in the same period of 2025). This reflects that the company may have undergone debt restructuring or introduced higher-cost borrowing before listing, putting substantial pressure on actual cash flow. In short, Liudao Industrial's filing shows the underlying profile of a mature-stage niche leader: although growth has slowed, earnings quality is extremely high, and the "loss" in net profit may be more the result of pre-listing financial structure adjustments. Highly concentrated business; accelerated expansion of new applications becomes a new highlight In our view, Liudao Industrial's position as the global leader in hot runner systems is relatively clear, but its revenue is highly dependent on complete hot runner system equipment, revenue growth is close to stagnation, and its growth prospects are not without hidden concerns. From 2023 to 2025, revenue from complete hot runner system equipment accounted for 83.9%, 84.0%, and 84.5%, respectively, and 84.4% in the first half of 2026; hot runner system parts remained stable at around 14%, while other businesses accounted for only about 1%. This structure shows that the company is focused on its main business, but it also means that its revenue sources are relatively single and highly sensitive to complete machine sales and downstream capital expenditure. In terms of downstream applications, automotive is the company's largest end market, with revenue share continuously rising from 53.3% in 2023 to 57.5% in the first half of 2026; the share of electronics and home appliances fell from 25.5% to 18.9%; packaging accounted for about 10%, while other industries rose from 11.4% to 13.1%. The increase in the automotive share is consistent with the largest application area of global hot runner systems, but it also means the company's dependence on the automotive industry cycle has deepened. Fluctuations in automotive industry capital expenditure, cost-reduction pressure from OEMs, and price competition in the new energy vehicle supply chain may all be transmitted to hot runner suppliers. From a macro perspective, the global hot runner system market was worth approximately US$3.014 billion in 2025 and is expected to reach US$4.04 billion by 2030, with a compound growth rate of about 6.0% from 2025 to 2030, up from 1.5% from 2020 to 2025. The precision temperature control solutions market is expected to reach US$405.1 billion by 2030, with a compound growth rate of 5.2% from 2025 to 2030. In the long run, the direction of manufacturing shifting from extensive thermal management to precision temperature control is clear, and there is still room for increased hot runner penetration. However, it should be noted that industry growth is a slow variable, and declining average selling prices in recent years have partly offset sales volume growth. As the global leader, the company has already reached a market share of 12.5% globally and 21.5% in Asia, leaving relatively limited room to further increase share, with future growth relying more on overall industry expansion. What is worth looking forward to is that the company plans to extend its precision thermal control technology to new applications such as ultra-precision runnerless molding for contact lenses, supercritical fluid foaming for footwear midsoles, in-mold polyurethane coating, and multi-material co-injection molding. These directions have potential demand, but most are still in early stages with limited revenue contribution, and there is uncertainty around commercialization pace, customer validation, and returns on capital expenditure. The company's R&D expenses remain stable at around US$11 million per year, accounting for about 3% of revenue, which is not large in absolute terms, and whether new businesses can reach scale still needs time to be tested. In summary, Liudao Industrial is a leader in a niche sector, with stable operating margins, and customer repurchases and vertical integration constitute a certain competitive moat. However, the company's revenue growth has almost stagnated, its dependence on automotive has increased, and the electronics and home appliance segment has weakened. Future performance still depends on overall industry expansion and the development of new applications.