Breton Eyes Big Haul From Investors With Hong Kong IPO Plan – Tesla (NASDAQ:TSLA), Nikola (NASDAQ:NKLA)
Breton Technology Co. Ltd. is gaining momentum in the electric industrial vehicle sector. The company has filed for a Hong Kong Initial Public Offering (IPO), aiming to leverage funds to expand its production capacity for electric-powered loaders and dump trucks. This strategic move aligns with China’s robust support for green technology manufacturers.
While electric cars from China, particularly those from major players like Tesla and BYD, often dominate headlines, Breton is carving out a niche for itself in the lesser-known segment of electric industrial vehicles. This market segment exhibits significant growth potential driven by increasing demand from property, infrastructure, and resource developers.
The company has appointed CICC and CMB International as its underwriters, indicating the potential size of the investment opportunity, predominantly targeting Chinese investors. Breton aims to raise approximately $200 million through the Hong Kong listing, which could value the company at $1 billion or more.
Unlike the more glamorous consumer electric vehicle market that Tesla and BYD occupy, Breton focuses on electric loaders and wide-body dump trucks. Last year, it was China’s third- and fourth-largest seller in these categories, respectively, based on units sold. Breton sold 484 loaders and 88 dump trucks, underscoring the modest size of this market. However, it is a fast-growing sector, with the market for industrial electric vehicles rapidly expanding.
One key advantage for Breton is the substantial support it receives from China as part of the country’s commitment to environmental goals, including achieving peak carbon emissions by 2030 and carbon neutrality by 2060. The Chinese government has introduced favorable policies, such as the initiative to build “greener mines,” which aligns with Breton’s business strategy. Many of Breton’s clients are large state-owned enterprises that are more likely to invest in electric-powered vehicles, supporting Beijing’s clean energy objectives.
From an economic perspective, investing in Breton’s electric vehicles makes sense for buyers, offering significant savings on operating costs. Over a five-year period, owners of Breton’s electric loaders can save around 1.2 million yuan ($167,000), with potential savings for dump truck owners reaching up to 2.2 million yuan per vehicle.
These savings are noteworthy considering Breton’s average loader costs approximately 622,000 yuan, while its dump trucks are priced at 1.39 million yuan. Breton, founded in 2016, launched its first products in 2019, and has raised about 1.4 billion yuan through four funding rounds. Initially intending to list on Shanghai’s STAR Market, the company pivoted to the more internationally focused Hong Kong market earlier this year.
Breton’s revenue trajectory shows a steady upward trend, although its profitability faced challenges due to a spike in lithium prices last year. Revenue grew from 201 million yuan in 2021 to 464 million yuan in 2024. The upward trend continued, with revenue rising to 267 million yuan in the first half of 2024 compared to 161 million yuan a year earlier.
Breton’s gross margins were impacted by last year’s lithium price spike, dropping from 3.7% in 2021 to just 2.0%. However, as lithium prices moderated, margins improved to 3.1% in the first half of this year. The product mix has also evolved, with dump trucks accounting for a larger share of the revenue following the introduction of a new model in 2022 capable of heavy-load uphill operations.
Despite still operating at a loss, Breton remains in growth mode, with its net loss increasing from 97.5 million yuan in 2021 to 154.3 million yuan in the first half of this year. Its potential valuation can be compared with companies like Nikola Corp., which experienced significant stock price declines as the broader EV market faced challenges.
Nevertheless, the robust state support for EV makers in China suggests that Breton’s Hong Kong listing will likely receive a favorable response from investors, especially state-owned entities expected to be among the largest buyers of its IPO shares.
Breton’s strategic push to expand in the fast-growing market of electric industrial vehicles positions it well to capitalize on the increasing demand and China’s green technology aspirations. As the company eyes a significant infusion of capital through its Hong Kong IPO, Breton’s future in the EV landscape appears promising.
