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China's Aux Electric Files For Hong Kong IPO

The air conditioner maker's low-price strategy has helped it win customers in China, while its OEM model has won over customers abroad

Key Takeaways:

Aux Electric achieved 20% revenue growth in 2024, outpacing rivals using a low-price strategy at home and OEM model overseas

The air conditioner maker's low-price strategy has won it market share, but has also resulted in quality concerns and significantly lower profit margins than its peers

The founder of air conditioner maker Aux Electric Co. is an Ox on the Chinese zodiac. That explains why Zheng Jianjiang chose to name his company Aux when he founded it more than three decades ago, choosing a rough homophone for Ox. The name signaled Zheng's ambition to imbue his company with traits of the Ox, including perseverance, audacity, and patience, according to Chinese tradition.

Such efforts may finally be bearing fruit as Zheng attempts to take his company public, offering investors a different type of air conditioner maker from several better-known larger rivals that are already listed. Last week, the company filed an updated IPO listing document with the Hong Kong Stock Exchange, as its plan was also approved by China's securities regulator, marking two major milestones for the listing.

The Hong Kong IPO plan is the latest twist in the company's tortuous journey to the capital markets. Aux first listed on China's thinly traded "New Third Board" in Beijing nearly a decade ago in 2016. But it delisted just a year later, partly due to thin liquidity and limited financing potential for companies listed in that market.

It then shifted its focus to China's more mainstream A-share market, planning to list on the Shanghai Stock Exchange. It kicked off that process in 2018, and in June 2023 finally completed an IPO counseling stage necessary for all listing candidates. But after completing that process, Aux shifted gears and set its sights on Hong Kong, filing its first application with the Hong Kong Stock Exchange in January this year. That application expired after six months, prompting the company to make its latest updated resubmission.

Aux has hired leading domestic investment bank ...