IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

ATRenew (RERE US): Pre-Owned Satisfaction

ATRenew: A Turnaround Story With Material Increase in Profit Margins + Remaining Share Buyback

AiHuiShou IPO Initiation: Turning the Vicious Cycle into a Virtuous One

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> operates the largest pre-owned consumer electronics transactions and services platform in China under the brand “ATRenew”, which stands for “all things renew.” The platform consists of <em>AHS Recycle</em> (an omnichannel business for the collection of pre-owned consumer electronics), <em>PJT Marketplace</em> (B2B channel) and <em>Paipai Marketplace</em> (B2C channel). </p></div><div>
<p>At the mid-point of the proposed IPO price range of $13.00-15.00 per ADS, AiHuiShou will have a market cap of $3.1 billion. At the mid-point of the IPO price range, the net proceeds are $205.7 million. The raise is materially below the rumoured target raise of $500 million to $1 billion, according to press reports.</p>
<p>Existing shareholders have indicated a total of $100 million of the IPO (44.0% of the ADSs at the mid-point of the IPO price range). The indications of interest from <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> and Tiger Global.</p>
<p>In <a href="https://www.smartkarma.com/insights/aihuishou-ipo-initiation-turning-the-vicious-cycle-into-a-virtuous-one" target="_blank" data-smartkarma-citation="insights:52617" rel="noopener">AiHuiShou IPO Initiation: Turning the Vicious Cycle into a Virtuous One</a>, we stated that AiHuiShou as the largest player as measured by GMV and transacted devices, is well-positioned to capture its fair share of China's pre-owned consumer electronic devices market opportunity. AiHuiShou is delivering on this market opportunity through strong revenue growth, declining loss margin and improving cash burn. AiHuiShou’s business model will also appeal to investors with an ESG mandate. We concluded that AiHuiShou's story warrants a closer look.</p>
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<p>On a relative valuation basis and at the IPO price range, AiHuiShou is attractively valued on both an EV/Sales and growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Notably, the last funding round in May 2021 valued AiHuiShou at $19.43 per ordinary share, implying $12.96 per ADS which is broadly in line with the low-end of the IPO price range.</p>
<p>While the lower than expected raise suggest that AiHuiShou received lukewarm investor interest, yesterday's blistering first-day pop of <a href="https://www.smartkarma.com/entities/kanzhun-ltd" target="_blank" data-smartkarma-citation="entities:33368:1" rel="noopener">Kanzhun (BZ US)</a> suggests that the market may be warming up again to high-growth Chinese ADRs. Overall, we are inclined to participate. </p>
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Aihuishou (RERE US) operates the largest pre-owned consumer electronics transactions and services platform in China under the brand “ATRenew”, which stands for “all things renew.” The platform consists of AHS Recycle (an omnichannel business for the collection of pre-owned consumer electronics), PJT Marketplace (B2B channel) and Paipai Marketplace (B2C channel). 
At the mid-point of the proposed IPO price range of $13.00-15.00 per ADS, AiHuiShou will have a market cap of $3.1 billion. At the mid-point of the IPO price range, the net proceeds are $205.7 million. The raise is materially below the rumoured target raise of $500 million to $1 billion, according to press reports.
Existing shareholders have indicated a total of $100 million of the IPO (44.0% of the ADSs at the mid-point of the IPO price range). The indications of interest from JD.com Inc. (9618 HK) and Tiger Global.
In AiHuiShou IPO Initiation: Turning the Vicious Cycle into a Virtuous One, we stated that AiHuiShou as the largest player as measured by GMV and transacted devices, is well-positioned to capture its fair share of China's pre-owned consumer electronic devices market opportunity. AiHuiShou is delivering on this market opportunity through strong revenue growth, declining loss margin and improving cash burn. AiHuiShou’s business model will also appeal to investors with an ESG mandate. We concluded that AiHuiShou's story warrants a closer look.

On a relative valuation basis and at the IPO price range, AiHuiShou is attractively valued on both an EV/Sales and growth adjusted EV/Sales multiples (an EV/Sales/Growth basis). Notably, the last funding round in May 2021 valued AiHuiShou at $19.43 per ordinary share, implying $12.96 per ADS which is broadly in line with the low-end of the IPO price range.
While the lower than expected raise suggest that AiHuiShou received lukewarm investor interest, yesterday's blistering first-day pop of Kanzhun (BZ US) suggests that the market may be warming up again to high-growth Chinese ADRs. Overall, we are inclined to participate. 


ATRenew

AiHuiShou IPO: Valuation Insights