IPO outlook | Can Hope Sea win market favor when a leading cross-border supply chain goes public in Hong Kong?

Recently, Hope Sea Inc. (Huafuyang), a leading cross-border supply chain segment sprint to the Hong Kong Stock Exchange listing, submitted a listing application to the main board of the Hong Kong Stock Exchange. Agricultural Bank International is the sole sponsor. According to the prospectus, according to Frost & Sullivan data, Hope Sea Inc. is China's largest integrated electronics import supply chain solution provider based on 2024 GMV.

Since this year, as the trend of recovery in the semiconductor industry chain has basically been established, the performance of semiconductor companies has also generally picked up. As a segment leader in the semiconductor cross-border supply chain, Hope Sea's performance was inevitably affected by the industry environment, which also added uncertainty to its path to market. Whether the current IPO in Hong Kong can be recognized by investors also depends largely on the fundamental quality of the company itself.

A steady development trend amidst fluctuations in performance

According to public information, Hope Sea Inc. is an integrated supply chain solution provider headquartered in China that specializes in providing cross-border supply chain solutions for electronic products (especially various complex types of integrated circuits). The company's customers span more than 40 vertical industries, including IoT communications, semiconductors, intelligent robot solutions, and new energy industries. During the record period, the company mainly focused on importing electronic products from the customer's international upstream suppliers to China. In 2024, GMV imports reached approximately RMB 34.8 billion.

During the reporting period, the company's performance declined slightly, but rebounded in 2024. In 2022, 2023, and 2024, the total revenue from the company's main business was 253 million yuan, 221 million yuan, and 235 million yuan (unit: RMB, same below); for the same period, annual profits were 86.989 million yuan, 83.06 million yuan, and 85.528 million yuan, respectively.

Specifically, Hope Sea Inc.'s comprehensive solution includes “four streams in one”: (i) cargo flow (that is, the flow of goods from the customer's international upstream supplier to its place of business in China); (ii) capital flow (that is, settling the purchase price of goods with international suppliers); (iii) information flow (that is, tracking the flow of goods and funds in real time and synchronizing information with customers); and (iv) commercial flow (that is, the seamless integration of goods flow, capital flow, and information flow to complete end-to-end transactions between the company's customers and their suppliers).

By business, from 2022 to 2024, Hope Sea's supply chain solution revenue was $136 million, $117 million and $123 million respectively, while net revenue from cross-border funding arrangements was $117.1 million, $104 million and $111.9 million, respectively.

The Zhitong Finance App learned that the company uses the large amount of cash flow generated by supply chain solutions to methodically implement cross-border funding arrangements to improve overall profitability while avoiding speculative risks. This strategic approach enables the company to provide competitive prices, thereby effectively reducing overall supply chain costs for customers.

However, due to the impact of the industry environment, the company's costs increased significantly during the reporting period. For example, transportation expenses as a percentage of total revenue from the main business increased from 9.9% in 2023 to 13.0% in 2024.

In addition, the Zhitong Finance App learned that the GMV growth for cross-border supply chain solution customers was mainly due to the company's price reduction measures. Although the GMV for each customer rose from about RMB 200,000 in FY2023 to about RMB 25.6 million in FY2024, the average rate dropped from about 0.25% in FY2023 to about 0.22% in FY2024, reflecting the “price for volume” business model.

Between 2022 and 2024, the average rate for the company's import solutions fell from 0.29% to 0.22%, while the average rate for export solutions fell from 0.26% to 0.18%. The continued downward trend in rates may cause the market to worry about the quality of its profits.

It is worth noting that performance growth brought about by price reduction strategies is often unsustainable, which also indicates that a company's bargaining power in the industrial chain may be relatively weak. In the current uncertain international trade environment, as industry competition intensifies and cost pressure rises, strategies that rely solely on price competition will face greater challenges.

High demand for imports and exports in the semiconductor industry

As an integrated circuit cross-border supply chain service provider, Hope Sea's performance is closely related to the domestic semiconductor import and export situation. According to the data, as global demand for consumer electronics products rebounded, semiconductor industry inventories returned to normal, and semiconductor prices rose due to the AI boom, China's integrated circuit import and export volume rebounded in 2024 after two consecutive years of decline, and the annual export value reached a record high.

According to statistics from the General Administration of Customs, in 2024, China's integrated circuit exports amounted to US$159.55 billion, an increase of 17.4% over the previous year. In RMB terms, the export value of 1135.16 billion yuan once again exceeded the level of trillion yuan after exporting 1025.44 billion yuan in 2022. After 2022, integrated circuits also surpassed mobile phones as the single commodity with the highest annual export value in China, accounting for a slight increase of 4.46% of China's goods exports; the annual export volume increased 11.7% year on year to 298.13 billion yuan.

In 2024, China's integrated circuit imports amounted to 385.79 billion US dollars, and the import volume was 549.26 billion yuan, up 10.5% and 14.6% year-on-year respectively, and maintained the position of the single commodity with the highest import value of goods in China with a share of 14.9%, up from 13.7% in 2023. The annual deficit in integrated circuit trade was US$226.24 billion, an increase of US$12.93 billion over the same period last year, but below the level of 2020-2022.

According to the prospectus, Hope Sea's electronic product business is highly concentrated in the field of integrated circuit chips. In 2022, 2023 and 2024, integrated circuits accounted for about 70.1%, 65.2%, and 68.5% of the company's total GMV, respectively. On December 31, 2024, based on the 2024 GMV calculation, the average length of business relationships between the company and the top 20 customers was over nine years. Eight of these customers commissioned the company's GMV in 2024 over RMB 1 billion.

The pressure on the semiconductor industry's macro environment is also reflected in changes in the company's customer structure. The Zhitong Finance App learned that from the downstream industry, the company's main customers are from the IoT communications, semiconductor and computer software and hardware industries. The GMV share of IoT communications customers increased from 30% to 37.3% during the reporting period, while the share of the semiconductor industry continued to decline from 29.3% to 25.6%.

However, in addition to the fact that there is still uncertainty in the semiconductor industry, since the company's cross-border funding arrangements mainly use US dollars to settle with the customer's international suppliers, the impact of currency exchange rate risk on the company's performance cannot be ignored.

According to the data, the overall appreciation of the RMB against the US dollar in the first half of 2025. By the beginning of June, the US dollar had declined somewhat against the RMB center, fluctuating between 7.17-7.21. According to CICC analysis, looking ahead to the second half of 2025, the overall trend of the US dollar against the renminbi will fluctuate. The US economy is expected to further converge with the rest of the world, thus weakening the US dollar. Furthermore, on the fiscal side, the test of liquidity in the increase in US bond issuance after the debt ceiling was raised may continue until the 3rd quarter, and the US dollar may continue to be under pressure.

Overall, the continued boom in the semiconductor industry is expected to provide a favorable environment for Hope Sea and drive the company's performance recovery, and the company has a leading market advantage in the segmented circuit, which is expected to usher in opportunities for continued growth in the future. At the same time, falling prices of the company's products and exchange rate risks will present certain challenges. Investors can look forward to whether Hope Sea can tell a new story as it begins its IPO in Hong Kong.