Author | Fang Qiao Editor | Wang Gefa

A supplier of consumer electronics components is seeking to reshape its future trajectory through an ambitious capital-raising initiative.

Sunway Communication has unveiled a private placement scheme, proposing to issue shares to select investors with a maximum fundraising target of 6 billion yuan. The proceeds will be channeled into three key domains: commercial satellite communications, RF devices, and chip thermal management. For a listed entity with a market capitalization hovering around 70 billion yuan, this move represents a significant strategic shift. Notably, just three months prior, the company’s market cap stood at less than 35 billion yuan.

From November of the previous year to January of the current year, Sunway Communication’s share price skyrocketed from 28 yuan to 94 yuan before experiencing a pullback, ultimately closing at approximately 65 yuan on March 16, with a corresponding market capitalization of roughly 71.7 billion yuan.

While the commercial satellite sector has partly fueled this meteoric rise in stock price, a closer examination of the company’s underlying fundamentals reveals a contrasting narrative. Revenue growth has stalled, profits are on a downward trajectory, and a previous attempt at a private placement failed to materialize after the approval lapsed. Market skepticism persists regarding whether this latest endeavor will yield a different outcome.

Sunway Communication’s ascent was initially propelled by the consumer electronics boom. Established in 2006, the company honed its expertise in RF and antenna technologies, securing coveted positions within the supply chains of industry giants Huawei and Samsung. In 2012, it further expanded its reach by entering Apple’s supply chain through strategic acquisitions, driving revenue from 140 million yuan in 2010 to a staggering 5.134 billion yuan by 2019, boasting a compound annual growth rate exceeding 33%.

However, in subsequent years, the consumer electronics market reached a saturation point, and competition intensified. Global smartphone shipments declined from 1.36 billion units in 2021 to 1.17 billion units in 2023.

Consequently, Sunway Communication’s gross margin for RF components plummeted from a peak of over 37% to around 21% in 2024. Net profit, excluding non-recurring items, stood at a mere 538 million yuan that year, marking a more than 40% decline from the 2019 peak. In the first three quarters of 2025, net profit attributable to shareholders was a paltry 487 million yuan, down over 8% year-on-year, signaling near-stagnant growth in its core business.

Internal incentives are also facing mounting pressure. The company’s third employee stock ownership plan mandates that net profit attributable to shareholders must grow by 50% by 2025 from 2023 levels, reaching approximately 782 million yuan. Given the progress made in the first three quarters, the company must achieve nearly 300 million yuan in net profit in the fourth quarter alone—a formidable challenge.

Historically, participants in the second employee stock ownership plan purchased shares at an average price of about 39.5 yuan and sold them at around 33.3 yuan, incurring a cumulative loss exceeding 100 million yuan. After years of employee stock ownership, staff have yet to reap substantial benefits from the company’s growth.

In response to these mounting pressures, management has pinpointed commercial satellite communications, smart vehicles, and chip thermal management as its “second growth curve.” The 6 billion yuan private placement is designed to fuel this strategic pivot. Chairman Peng Hao embarked on a similar path in 2020 with a 3 billion yuan private placement plan, which was terminated in March 2022 after expiration amid pandemic-induced disruptions and tightening regulatory policies. This time, the fundraising target has doubled.

Among the three fundraising areas, commercial satellites represent the largest investment, totaling 3.563 billion yuan, with 2.85 billion yuan earmarked from the placement.

In 2021, Sunway Communication began supplying the commercial satellite supply chain, exclusively delivering satellite ground terminal components to a major North American customer. By 2025, it had secured a second North American commercial satellite client, expanding its product offerings to include antennas and connectors.

While the company has refrained from naming these clients in official announcements, industry sources widely speculate that they are associated with SpaceX’s Starlink and Amazon’s Project Kuiper. The former boasts over 10,000 satellites in orbit, while the latter deployed its inaugural 32 satellites in February of the current year, with plans for a total of 3,236.

According to estimates from multiple securities firms, Sunway Communication’s revenue from commercial aerospace surged to approximately 1 billion yuan in 2024, up from around 600 million yuan in 2023.

The RF devices segment aims to raise 2.15 billion yuan for products such as automotive millimeter-wave radar antennas and V2X antennas for intelligent driving. Meanwhile, the chip thermal management segment plans to invest 1 billion yuan in a field currently dominated by overseas companies, offering ample opportunities for domestic substitution.

While each of these three areas holds promise, all three projects have a 36-month construction period, meaning it will take time for new capacity to translate into tangible profits. The placement itself will dilute earnings per share and return on equity, a fact the company acknowledges in its plan.

What adds to market caution is Sunway Communication’s consistent approach to information disclosure. Since 2021, its annual reports have vaguely described its commercial satellite business as “supplying a major North American customer” without revealing revenue scale or product mix. The 2020 private placement plan provided specific projections, such as a “31.03% post-tax internal rate of return,” whereas this time, it merely claims “favorable economic benefits.”

Meanwhile, controlling shareholder Peng Hao announced plans in January to reduce his stake by no more than 9.6375 million shares. At the announcement date’s closing price of 83.11 yuan, this could potentially raise approximately 800 million yuan.

A representative from Sunway Communication’s securities department stated, “From the perspective of strategic implementation, the company has navigated through its toughest phase” and anticipates rapid growth in 2026–2027. Whether its new ventures can sustain profitability amid ongoing consumer electronics pressures and whether the 6 billion yuan placement will succeed remain open questions.

Disclaimer: This content is for reference only. The information or opinions expressed herein do not constitute investment advice. Readers are advised to exercise caution when making investment decisions.