## Breton Technology Targets $1 Billion Valuation with Hong Kong IPO, Riding the Wave of China’s Green Tech Boom
While the world focuses on electric cars, a quieter revolution is unfolding in the realm of electric industrial vehicles. Breton Technology Co. Ltd., a leading manufacturer of electric-powered loaders and dump trucks, is poised to capitalize on this burgeoning market with a planned Hong Kong IPO.
Breton’s listing application, filed with the Hong Kong Stock Exchange last Friday, reveals the company’s ambitious plans to raise approximately $200 million. This move signifies a significant step towards achieving a potential valuation of $1 billion or more, placing Breton firmly on the map of Chinese green tech success stories.
The company, with its two flagship products, electric loaders and wide-body dump trucks, has secured a commanding position in the Chinese market. Breton emerged as the third-largest seller of loaders and the fourth-largest seller of wide-body dump trucks in China in 2023, according to third-party research cited in the listing document. Though the market size might seem modest—Breton sold 484 loaders and 88 wide-body dump trucks last year— its rapid growth rate is undeniable.
The market for electric industrial vehicles is expanding at a remarkable pace, exceeding the growth of the electric car market. Breton highlights that while electric passenger vehicles took eight years to achieve a 5.5% market penetration rate, electric loaders and dump trucks reached the same milestone in under six years. This robust growth is fueled by a confluence of factors, including China’s ambitious green energy goals and supportive government policies.
China has set an ambitious target of reaching peak carbon emissions by 2030 and achieving carbon neutrality by 2060. This commitment has spurred the adoption of favorable policies like the Ministry of Natural Resources’ directive to build “greener mines,” which is anticipated to further accelerate Breton’s sales growth.
Moreover, a significant portion of Breton’s customer base comprises large state-owned enterprises, which are actively embracing electric vehicles to align with Beijing’s clean energy agenda. Breton also strategically positions its products as cost-effective solutions. The company estimates that over a five-year lifespan, an owner of a Breton electric loader can save around 1.2 million yuan ($167,000) in operating costs. For dump truck owners, the savings are even more substantial, reaching 2.2 million yuan per unit over the same period. These cost advantages are particularly compelling considering the average price of a Breton loader is 622,000 yuan, and a dump truck costs 1.39 million yuan.
Breton’s journey began in 2016, and the company launched its first products in 2019. Since then, it has secured approximately 1.4 billion yuan through four funding rounds, with the most recent raising nearly 1 billion yuan last year. Breton initially planned to list on Shanghai’s STAR Market but shifted its focus to the international-focused Hong Kong market in April 2023.
The company’s revenue trajectory has been consistently upward, with revenue more than doubling from 201 million yuan in 2021 to 464 million yuan last year. The strong growth momentum continued this year, with revenue reaching 267 million yuan in the first half of 2024, up from 161 million yuan in the same period last year.
While the company’s gross margins were impacted by the lithium price surge in 2023, they have rebounded with the decline in lithium prices. The company’s revenue mix has also evolved, with dump trucks becoming a more significant portion of overall sales following the introduction of a heavy-duty model in August 2022. This development has contributed to a sharp increase in the average selling price for dump trucks, reaching 1.39 million yuan in the first half of 2024, up from 914,000 yuan in 2021. As a result, dump truck sales now account for 54% of the company’s revenue in the first half of 2024, compared to 27.3% in 2023.
Despite the growth, Breton remains in a net loss position due to its ongoing investments. The company’s net loss expanded from 97.5 million yuan in 2021 to 154.3 million yuan in the first half of 2024. However, with its strong market position, government support, and the potential for substantial cost savings for its customers, Breton is poised for significant future growth.
When assessing Breton’s potential valuation, Nikola Corp., a US-based EV maker, offers a relevant comparison. Though Nikola’s stock has experienced a significant decline in recent months, its prior price-to-sales (P/S) ratio of around 20 provides a benchmark for Breton. Applying a similar P/S ratio to Breton, assuming revenue of 500 million yuan this year, suggests a valuation of approximately $1.4 billion.
The success of Breton’s IPO will depend on investor sentiment. While investors have shown recent reluctance towards EV stocks, the strong government support and the potential for high demand from state-owned enterprises in China could drive a positive reception for Breton’s IPO in Hong Kong. This IPO could potentially be a game-changer for Breton, solidifying its position as a leading player in the rapidly expanding electric industrial vehicle market in China.
