Prinx Chengshan to launch Hong Kong IPO

Hong Kong – Chinese tire maker Prinx Chengshan (Cayman) Holding is expected to debut on the Hong Kong Stock Exchange on 9 Oct, offering 135 million shares subject to over-allotment option at a maximum price of $0.96 (HKD7.5) per share.

The company filed the prospectus in April and its application was approved earlier this month.

A majority of the raised capital is planned to fund its expansions, such as $43 million earmarked for new truck and bus tire capacity and $21 million for new passenger car tire capacity, says its HKEX filing. Another $32 million will be pumped into possible acquisitions.

Prinx Chengshan, on its website, states that it currently has a 2.6 million unit/year truck and bus tire project and a 10 million unit/year passenger car tire project in the pipeline in its headquarters city of Weihai, Shandong province.

The tire-maker has already invested $10 million in new truck and bus tire facilities since March and expects it to start production in nearly 2019.

The company claims to be the fifth largest Chinese truck and bus tire maker and the third largest in the country’s replacement market with labels such as Prinx, Chengshan, Austone and Fortune.

The filing quotes US consulting firm Frost and Sullivan on its 18% compound annual growth rate for the truck and bus segment’s sales from 2015 to 2017, materially higher than the industry average of 2.5%.

With a portfolio of 2,400 products selling to 130 countries, last year Prinx Chengshan recorded $704 million annual revenue, up 27% from 2016. Net profit during the period dropped 40% to $25 million, “primarily due to a sudden fluctuation of the prices of natural and synthetic rubber,” says the filing.

One of China’s top five truck and bus exporters to the US, Prinx Chengshan notes that the 10% additional tariff effective since 24 Sept  covers all tires it exports to the U.S. and “could materially adversely affect our financial position and results of operations,” says the filing.

Prinx Chengshan’s planned Malaysia plant for both truck and bus tires and passenger car tires was divested from the listed arm as a separate unit fully owned by the arm’s parent Chengshan Group, due to the project’s uncertainty. The unit expects to complete land acquisition at the Malaysia-China Kuantan Industrial Park in Kuantan in 2019.