Huarui International Proceeds Toward IPO, Targeting $14.4 Million
The Chinese small-cap company makes copper parts for various applications.
CapitalWatch Staff
CapitalWatch Staff
Nov. 29, 2021 16:44
Huarui International Proceeds Toward IPO, Targeting $14.4 Million

(CapitalWatch, Nov. 29, New York) Huarui International New Material Ltd., a small-cap Chinese manufacturer of copper conductors, has picked up efforts toward a U.S. initial public offering, targeting to raise up to $14.4 million for capacity expansion.

The company, operating through a VIE structure in China, makes fine finish copper fittings and customized copper busbars for high-conductivities electrical power applications. According to the prospectus, filed before Thanksgiving, Huarui sells more than 15,000 components in the categories of copper bars, hard connections, soft connections, and aluminum connections.

Huarui operates on a built-to-order (BOT) business model. It delivers product quality inspection for the client's approval, then purchases the raw materials like electrolytic copper, copper tape, copper bar, and aluminum profile, and manufactures the products. In the half-year through June 2021, about 90% of its raw supplies came from one supplier in China.

The filing cited China's initiative on infrastructure upgrade and the company expects to benefit from the improvements in construction and municipal projects, water supply and plumbing, air conditioning and refrigeration, as well as power distribution systems. Huarui also noted the surge in energy consumption amid the increasing urbanization and industrialization. China's push to a cleaner air, meaning more usage of electric power, will also drive the demand for copper products, it said.

In the six months through June 2021, Huarui generated $19.3 million in revenue, up 63% year-over-year. Net income has more than doubled to $774,300, according to the prospectus. In the year 2020, the company saw a 13% revenue decline to $29 million on income of $1.2 million.

Huarui boasts of being recognized as "best supplier" in China's low-voltage electronic systems industry, as well as scoring related awards in Jiangsu province. In addition to China, Huarui generates a small portion of its sales from exporting to Finland and Czech Republic.

In New York, Huarui expects to sell 2.4 million ordinary shares at the price range of $4 to $6 per share. It plans to use the proceeds from the offering to acquire land for a new factory, purchase new production equipment, increase output capacity, boost R&D, and recruit and train new talents.

The company had initially applied for a U.S. IPO in March and has now picked up its efforts after a shake-up of China's listing laws.

Over the past half-year, Beijing has cracked down on overseas listings, which has turned the flow of Chinese IPOs in New York into a trickle. Among other things, China has mandated a cybersecurity review for companies dealing with significant amounts of user data, or data that may be considered sensitive. The country has also been reviewing its variable interest entity (VIE) structure laws.

Huarui has applied to trade on the Nasdaq Capital Market under the symbol "HRDG." The sole underwriter on the deal is Univest Securities.

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