The maker of automotive sensors could be valued at $200 million or more, a decade after its founding by two engineers with just 1 million yuan in registered capital

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Key Takeaways:

• Senasic Electronics has filed for a Hong Kong IPO, boasting a list of industry backers including Geely, SAIC, GAC and Sany
• The automotive sensor maker's revenue growth slowed last year, but steady improvement in its gross margin could lift it to profitability this year on an adjusted basis

China's new generation of microchip makers are often massive startups led by industry veterans armed with hundreds of millions of investment dollars from big state-run entities. But Senasic Electronics Technology Co. Ltd., which filed for a Hong Kong listing last week, looks far more like a mom-and-pop affair, despite its status as the world's third-largest maker of automotive wireless sensor chips that do things like monitor a car's tire pressure.

In this case, Senasic is really a "pop-and-pop" affair, since its founders and two key executives are both 48-year-old engineers surnamed Li, though they presumably aren't related. Li Mengxiong and Li Shuguang set up their company in 2015 with just 1 million yuan ($145,000) in registered capital, and were its only two initial stakeholders with 75% and 25% of its shares, respectively.

The pair continues to be two of Senasic's key executives. Li Mengxiong, with a background in chip design and experience at mid-tier global firms Sensata Technologies (ST.US) and Sequans Communications (SQNS.US), is Senasic's chairman and CEO; and Li Shuguang, with a similar technical background, leads the company's R&D team. That pair are joined by Zhu Shouteng, 42, with a background in semiconductor sales, as the company's president. Rounding out the core management group is a youthful Xu Yalei, who was only around 30 when she became CFO in 2024.

Despite its mom-and-pop feel, Senasic is no slouch when it comes to attracting big-name backers. Some of China's top car makers are among its investors, including Geely, SAIC and GAC, as well as heavy machinery giant Sany. The IPO also counts CICC as one of its underwriters, showing the company can attract big names despite its modest size and background. Many of those investors were part of a 500 million fundraising conducted by Senasic in 2023.

The company is the world's third-largest maker of automotive sensor chips with 8.5% of the global market, behind Europe's Infineon (IFX.DE ) with 30%, and Li Mingxiong's former employer Sensata with 21%. Senasic is the leader in China with 22% of the market, which positions it well as Chinese car makers look set to dominate the global market in the future.

In terms of financial metrics, Senasic looks most like Sensata. The Chinese company is still losing money, though it looks set to become profitable as early as this year. That's similar to Sensata, which is profitable now but lost money as recently as 2023. Senasic's gross margin of 28.0% last year is also similar Sensata's 29.3%. Both are significantly behind Infineon's latest figure of 39.4% – reflecting their smaller size.

Infineon's bigger size and better profitability have earned it a price-to-sales (P/S) ratio of 3.5, well ahead of Sensata's 1.36. A Sensata-level multiple would value Senasic at around a relatively modest $100 million. But given Senasic's strong positioning in China, including big potential for new demand from the country's new energy vehicle (NEV) sector, combined with strong investor appetite for new semiconductor IPOs, we wouldn't be surprised to see it get valued at up to $200 million or perhaps even more.

Uneven growth

Despite its more than a decade of history, we suspect a major issue that's keeping Senasic from realizing its true potential is its "mom and pop" nature. Past experience shows that engineers like the two Li's who founded and retain control of the company may be good at product development, but that doesn't always translate to being good chief executives. Similarly, Xu Yalei is probably an intelligent financier, but at just 32 years old she's unlikely to have the experience needed to take Senasic to the next level.

That said, the company's business has been growing at a commendable pace over the last two years, though the growth rate slowed down somewhat last year. Senasic's sensors are known in the industry as system-on-a-chip (SoC) products, and its two main categories are used for sensing tire and battery pressure. The company also began developing universal sensor interfaces in 2023, which could have big potential due to their wider application in sectors like energy storage, industrial electronics and robotics.

The company positions itself as an SoC designer, and uses a typical asset-light model that employs third-party fabs for actual products.

Its revenue grew 56% in 2024 to 348 million yuan, though the rate slowed to 37% last year when the figure reached 478 million yuan. Tire sensors are its top product, accounting for about 60% of its revenue in the last two years. Universal sensor interfaces are the second largest source at 24% last year, though we should point out that figure has been dropping steadily from its 38% contribution in 2023.

While its revenue performance has been a bit uneven, the company's gross margin tells a more positive story with steady improvement from just 16.6% in 2023 to last year's 28.0%. Part of that owes to its growing scale and experience, and part to its growing direct sales to customers, which carries higher margins than selling through distributors. As its margin improved, its adjusted loss, which excludes certain non-cash items, has been narrowing steadily from 187 million yuan in 2023 to just 32 million yuan last year. If that trend continues, the company could quite possibly post its first-ever adjusted profit this year.

Senasic could accelerate its growth through M&A, and it completed one such deal back in 2022 when it purchased a smaller peer called Gainsil for about 126 million yuan. But just a year later, it booked a 76 million yuan goodwill impairment loss on the purchase, showing it significantly overpaid for the company, reflecting its lack of experience at such M&A.

While the company has undoubtedly learned some lessons from such setbacks, it really could benefit from having some more seasoned managers at the helm to take it to the next level. Such management could quickly build up a company that has accomplished quite a lot from very modest beginnings, and position it as a key player in China's broader ambitions to build up its semiconductors sector.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.