By Xu Huijing, Harbour Business Observation

A frontrunner in the automotive intelligent chassis sector is seeking to unlock new capital opportunities through a secondary listing in Hong Kong.

Recently, Wuhu Bethel Automotive Safety Systems Co., Ltd. (hereinafter referred to as "Bethel") has applied to the Hong Kong Stock Exchange (HKEX) with plans to issue H shares for a dual "A+H" listing, sponsored by CICC. The company's A shares have been listed on the Shanghai Stock Exchange since 2018, bearing the stock code 603596.

According to Tianyancha and the prospectus, Bethel, established in 2004, is dedicated to full-stack, self-developed core technologies across automotive braking, steering, suspension, and intelligent driving systems, boasting end-to-end capabilities from independent R&D and matching verification to mass production.

Based on Frost & Sullivan data, Bethel is projected to lead Chinese brand suppliers in terms of market share for China's Electronic Parking Brake (EPB) and Brake-by-Wire (BbW) systems by 2025, with revenue-based market shares of 14.2% and 8.6%, respectively.

1. Revenue Growth Outpaces Profit Growth, Gross Margin Under Pressure

Financial data reveals that Bethel achieved revenues of RMB 7.196 billion, RMB 9.636 billion, and RMB 11.712 billion in 2023, 2024, and 2025, respectively, with a compound annual growth rate (CAGR) of 27.6%, signaling robust growth momentum.

However, despite the revenue surge, the company's profit growth has significantly slowed. The prospectus indicates that net profit rose from RMB 911 million in 2023 to RMB 1.222 billion in 2024, but only marginally increased to RMB 1.321 billion in 2025. Over the same period, the net profit margin stood at 12.7%, 12.7%, and 11.3%, respectively, with a notable decline in 2025.

Bethel attributes the 2025 profit growth slowdown mainly to increased R&D spending. During the reporting period, R&D expenses were RMB 450 million, RMB 576 million, and RMB 605 million, accounting for 6.3%, 6.0%, and 5.2% of revenue, respectively. As of December 31, 2025, the company employed approximately 1,535 R&D personnel, making up 24.1% of its total workforce.

More significantly, gross margins have faced sustained pressure. During the reporting period, the overall gross margin was 19.1%, 18.4%, and 17.6%, respectively, declining for three consecutive years and cumulatively dropping by 1.5 percentage points.

By business segment, the gross margin of core mechanical braking products decreased from 20.3% in 2023 to 15.4% in 2025, a 4.9 percentage point drop. The gross margin of intelligent electronic control products fluctuated upward from 18.7% to 19.9%, while the gross margin of mechanical steering products declined from 11.5% to 9.2%. The overall trend was downward.

Geographically, the gross margin in the Chinese market first dipped and then rose, standing at 16.8% in 2023, dipping to 16.5% in 2024, and rebounding to 17.0% in 2025. In overseas markets, the gross margin fell from 35.8% to 21.7%. Despite the significant decline, it remained notably higher than the domestic level.

The company explained that the gross margin decline was primarily due to several factors: first, key customers requested annual price reductions, a common industry practice according to Frost & Sullivan; second, rising market prices of key raw materials, with material costs accounting for 81.1%, 84.2%, and 82.4% of total sales costs during the reporting period, primarily including aluminum ingots and cast iron; third, changes in product mix and incomplete efficiency gains during the capacity ramp-up phase.

Additionally, the prospectus disclosed that the core components of the robot motion control systems within the company's intelligent electronic control products (such as motors, ball screws, and robot joint modules) are still in the active expansion stage. The ability of these emerging businesses to effectively contribute profits remains uncertain.

In the first quarter of 2026, the company's performance weakness became more pronounced. Revenue reached RMB 2.674 billion, up only 1.38% year-on-year. Net profit attributable to shareholders of the listed company was RMB 269 million, down 0.64% year-on-year. Net profit after deducting non-recurring items was RMB 254 million, down 4.48% year-on-year. The gross margin was 19.43%, up 1.46 percentage points year-on-year, while the net profit margin was 10.07%, down 0.10 percentage points year-on-year.

The period expense ratio was 10.04%, up 2.65 percentage points year-on-year. Selling expenses were RMB 14.86 million, up 37.40% year-on-year. R&D expenses were RMB 141 million, up 9.35% year-on-year.

Famous economist Song Qinghui commented: "Bethel exhibited high revenue growth but sluggish profit growth in 2025. Revenue increased by 20.9% year-on-year, but net profit only grew by 8.3%, with the net profit margin declining from 12.7% to 11.3%. Meanwhile, the gross margin fell for three consecutive years to 17.6%, indicating that the company's profitability is under pressure.

The company attributed the profit growth slowdown to increased R&D investment. However, data shows that the R&D expense ratio actually decreased from 6.0% to 5.2% in 2025, with R&D investment growth significantly lagging behind revenue growth. Therefore, using only R&D investment to explain the profit slowdown is insufficient.

More notably, the automotive parts industry generally faces pricing pressure from automakers. As competition in the new energy vehicle market intensifies, upstream suppliers' bargaining power is weakened, and declining gross margins may reflect increased industry competition and product pricing pressures.

However, it is premature to conclude that the company's profit model is ineffective. Bethel maintains a high proportion of R&D personnel and continues to invest in high-value-added products such as brake-by-wire and intelligent chassis systems. If new products can achieve significant volume growth in the future, profitability can still recover. However, if gross margins continue to decline and high-end product contributions fail to improve, future profit growth may further lag behind revenue growth, posing challenges to profit quality."

2. High Customer Concentration, Chery-Related Transactions Contribute 40%

One of the core challenges Bethel faces is the excessive concentration of its customer base.

During the reporting period, revenue from the top five customers accounted for 72.9%, 76.0%, and 74.4% of total revenue, respectively. Revenue from Chery Group, the largest customer, accounted for 38.7%, 45.1%, and 39.0%, respectively, amounting to RMB 2.783 billion, RMB 4.349 billion, and RMB 4.572 billion. This means that approximately RMB 4 out of every RMB 10 in revenue comes from Chery Group. A deeper governance concern is that Chery Technology is also Bethel's second-largest shareholder, holding a 14.56% stake.

The risk of accounts receivable cannot be overlooked. During the reporting period, the company recorded total trade receivables and bills receivable of RMB 2.646 billion, RMB 4.136 billion, and RMB 3.909 billion, respectively, with a sharp year-on-year increase of 56.3% in 2024, far exceeding the same period's revenue growth of 33.9%. During each period, trade receivables turnover days were 122.4, 123.6, and 123.5 days, respectively, while bills receivable turnover days were 7.9, 17.6, and 13.4 days, respectively.

As of the end of March 2026, the company had RMB 3.637 billion in accounts receivable, RMB 2.316 billion in receivables financing, and RMB 44.62 million in bills receivable, totaling approximately RMB 6 billion.

In terms of cash flow, the company exhibited characteristics of "stable operations and investment expansion." During the reporting period, net cash flow from operating activities was RMB 678 million, RMB 1.058 billion, and RMB 867 million, respectively, with a year-on-year decline of 18.05% in 2025.

In the first quarter of 2026, net cash flow from operating activities was RMB 118 million, up 179.34% year-on-year, primarily due to increased receipts from sales. Net cash used in investing activities was RMB 841 million, RMB 706 million, and RMB 3.756 billion, respectively, with a significant surge in capital expenditures in 2025 due to the acquisition of Yubei Steering.

During the same period, net cash flow from investing activities was -RMB 124 million, continuing to show a net outflow. Net cash flow from financing activities was RMB 162 million, RMB 516 million, and RMB 2.596 billion, respectively, with a significant net inflow in 2025 due to increased bank borrowings. In the first quarter of 2026, net cash flow from financing activities was -RMB 3.58 million, turning negative.

As of the end of 2025, the company had cash and cash equivalents of RMB 1.707 billion, down from RMB 2.170 billion at the end of 2023. As of March 31, 2026, cash and cash equivalents were RMB 1.689 billion, slightly down from the end of 2025.

Song Qinghui pointed out: "One of Bethel's biggest risks is the long-term high customer concentration. During the reporting period, the top five customers contributed over 70% of revenue, while Chery Group alone contributed nearly 40%. This means the company's performance growth is highly tied to Chery's sales performance. Any fluctuation in Chery's market share could significantly impact Bethel's operating results.

More notably, Chery Technology is also the company's second-largest shareholder, creating a dual relationship of being both a major customer and a major shareholder. While this structure benefits order stability and business synergy, it also raises market concerns about related-party transaction pricing, fair competition, and the company's independence. Especially given that revenue grew by 20.9% and net profit only grew by 8.3% in 2025, the company's profit growth lags significantly behind revenue growth, indicating that some growth has not effectively translated into shareholder returns.

Meanwhile, the ratio of operating cash flow to net profit declined to 0.66, reflecting a weakened ability to convert profits into cash. This may be related to increased accounts receivable, extended payment terms, or enhanced customer bargaining power. From a governance perspective, investors need to focus on the proportion of related-party transactions, changes in accounts receivable, and optimization of the customer base in the future. Overall, there is currently no evidence suggesting issues with profit authenticity, but excessive customer concentration and deep binding with shareholder-customers do pose long-term risks to profit sustainability, cash flow quality, and governance independence, requiring continuous observation after the HKEX listing."

3. Acquisition of Yubei Steering for Integration, Some Securities Firms Lower Profit Forecasts

Strategically, Bethel is bolstering its full-stack chassis system capabilities through external mergers and acquisitions.

On February 25, 2026, the company entered into a share transfer agreement with the existing shareholders of Yubei Steering Systems (Xinxiang) Co., Ltd., planning to acquire 30.44%, 15.08%, 3.64%, and 1.82% of the equity, respectively. According to a supplementary agreement signed on April 28, 2026, the consideration for these acquisitions is RMB 670 million, RMB 332 million, RMB 80 million, and RMB 40 million, respectively, to be settled in cash. Upon completion, Yubei Steering will be 50.97% owned by the company and become a non-wholly-owned subsidiary of the group.

Yubei Steering is a Tier 1 automotive parts supplier specializing in the R&D, production, and sales of automotive steering systems and key components, with main products including EPS, hydraulic power steering systems, and steering system components. The acquisition is expected to integrate Yubei Steering's complementary technological strengths and resources with Bethel's, further enhancing and expanding the company's product portfolio in the automotive safety systems sector while strengthening customer service capabilities and overall competitiveness.

However, this acquisition also brings multiple risks. First, the acquisition has not yet been completed and faces regulatory approval uncertainties. Second, Yubei Steering's gross margin during the reporting period was only 7.9%, 9.5%, and 11.9%, significantly lower than Bethel's overall level, which may drag down the company's comprehensive profitability after integration. Third, as of the last practical date, the company had not completed registration or filing for eight domestic leases, posing compliance issues.

In terms of shareholding structure, as of March 31, 2026, Yuan Yongbin directly held a 18.24% stake, Wuhu Chery Technology Co., Ltd. held a 14.56% stake as the second-largest shareholder, and Wuhu Bethel Investment Management Center (Limited Partnership) held a 4.83% stake. Yuan Yongbin and Wuhu Bethel Investment Management Center are parties acting in concert, collectively controlling approximately 23.07% of the voting rights and serving as the company's single largest shareholder group.

Regarding dividend policy, the company declared and paid dividends of RMB 140 million, RMB 147 million, and RMB 212 million during the reporting period, respectively, with a dividend payout ratio of approximately 15% to 16%. Retained profits were primarily used for reinvestment.

From an A-share performance perspective, Bethel has generally trended upward since its listing in 2018, but recent market divergence has increased. As of the end of the first quarter of 2026, the number of shareholders was 65,200, up 48.98% from the end of 2025, indicating a more dispersed shareholding structure.

On April 30, 2026, Guosen Securities lowered its net profit forecasts for the company for 2026 and 2027 to RMB 1.474 billion and RMB 1.878 billion, respectively, down 19.0% and 19.1% from previous forecasts of RMB 1.82 billion and RMB 2.32 billion, and added a forecast of RMB 2.314 billion for 2028, maintaining an "Outperform Market" rating. Guosen Securities highlighted risks of weaker-than-expected terminal demand and R&D outcomes, as well as potential tariff pressures and customer price wars on profitability.

On May 2, 2026, Huatai Securities reaffirmed its net profit projections for the years 2026 through 2028, estimating them to be RMB 1.649 billion, RMB 2.089 billion, and RMB 2.599 billion, respectively. The firm set a price-to-earnings (P/E) ratio of 20.3 times for 2026, along with a target price of RMB 55.22, marking an increase of RMB 1.91 from the prior target of RMB 53.31. Huatai Securities also drew attention to potential risks, including the possibility of production and sales volumes falling short of expectations among its downstream automaker clients, as well as concerns regarding the short-term profitability of newly launched products.

The disparity in net profit forecasts for 2026 between the two securities firms amounts to RMB 175 million, representing an 11.9% difference.