Proposed issuance of US$750 million convertible bonds, ideal for a new round of financing

Ideal Auto is still 'running desperately' in the face of intensified terminal competition.

All signs show that, compared with the past, the three new forces in the top echelon have successfully passed the most difficult and darkest moments, but for more long-term development, they are facing a gradual stabilization at this moment. In the overall environment of China, 'stocking over the winter' has become the general trend.

And just recently, according to the official announcement of Ideal Motors, the company will, depending on market conditions and other factors, recommend the issuance of convertible senior notes not exceeding US$750 million due in 2028. The initial conversion rate, interest rate and other terms have not yet been finalized and will be determined when the bill is priced. The specific uses of this round of financing will focus on the development of new models, including BEV models; research and development of advanced technologies; supplementary working capital and other general purposes.

But shortly after the news was officially released, Ideal Auto's stock price ended on April 7th, the US announcement time, and finally closed at 22.230 US dollars, a 12.93% drop, and the total market value also shrank to 20.110 billion US dollars. . Judging from the reaction of the capital market, the attention paid to this round of financing is not as hot as expected.

Fortunately, judging from the results achieved in March, the performance of this car company is quite gratifying. According to official data, with only one mass-produced model on sale, 4,900 ideal ONEs were delivered, an increase of 238.6% from March 2020 and an increase of 113% from February 2021. New cars were delivered in the first quarter. 12,579 vehicles, a year-on-year increase of 334.4%.

Earlier, Ideal Auto also announced its full-year financial report. On the whole, in terms of sales revenue, its Q4 quarter auto sales revenue was 4.06 billion yuan (approximately US$621.9 million), an increase of 64.6% from 2.46 billion yuan in the previous quarter, and the 2020 full-year auto sales revenue was 9.28 billion yuan. (Approximately 1.42 billion U.S. dollars).

In terms of new car sales, the Ideal ONE delivered a total of 14,464 units in the Q4 quarter, an increase of 67% from the third quarter. From January to December last year, the brand delivered a total of 32,624 units. At the same time, the industry is concerned about the gross profit margin. The ideal car sales gross profit margin in Q4 reached 17.1%, which was a slight decrease from 19.8% in the previous quarter. The gross profit margin of car sales for the whole year of 2020 was 16.4%. According to the explanation in the financial report, the reason for the decline in gross profit margin is the decline in one-time rebates from suppliers.

In addition, from the perspective of the company's operating conditions, the net profit for the Q4 quarter was 107.5 million yuan (approximately US$16.5 million), which is the ideal first quarterly profit. In contrast, for the whole year, the net loss reached 151.7 million yuan (approximately 23.2 million U.S. dollars), which was a significant drop of 93.8% from 24.4 billion yuan (approximately 37.8 million U.S. dollars) in 2019.

Finally, in terms of the company's cash flow, as of December 31, 2020, the company's cash reserves reached 29.87 billion yuan (approximately US$4.58 billion). In contrast, at the end of the previous quarter, the ideal cash reserve was 18.916 billion yuan (approximately 2.93 billion US dollars).

And it is gratifying that the related research and development expenses in the Q4 quarter have increased from the previous US$335 million to US$374 million. For the layout of offline channels, which is very important for new cars, as of January 31, 2021, Ideal has 60 retail centers across the country, covering 47 cities, 121 after-sales repair centers and authorized sheet metal painting centers, covering 89 Cities.

In short, from the perspective of financial reports and delivery data, it is sufficient to prove that the overall development trend of this car company is moving in a seemingly benign and healthy direction. The latest round of proposed financing of nearly US$750 million also proves that Ideal Auto is still 'running desperately' in the face of intensified terminal competition.