Well-known telecommunications giant, where will the 6 billion yuan private placement go?

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【Introduction】Where is the 6 billion yuan private placement of Xinwei Communications headed?

Intern Reporter Liu Mo

“The 6 billion yuan private placement plan by Xinwei Communications has attracted significant market attention. For a listed company with a market value of around 60 billion yuan, launching such a massive financing plan requires great courage, especially considering that just over three months ago, its market value was only about 30 billion yuan,” said an investment institution researcher who has been following the capital market for years after seeing Xinwei Communications’ private placement announcement. “This is quite rare in the capital markets.”

The China Fund Reporter found that Xinwei Communications’ large-scale financing plan actually had early signs. On one hand, it was the result of the company’s long-held patience finally being released, and on the other, it was the buildup before a major business breakthrough. However, based on past and current information, there are still many doubts about the 6 billion yuan investment project, and Xinwei Communications needs to provide the market with deeper explanations or disclosures.

Failed Financing Plan

On March 2, 2020, Xinwei Communications announced a 3 billion yuan private placement plan, with three fundraising projects at the time: a radio frequency front-end device project, a 5G antenna and antenna component project, and a wireless charging module project, with fundraising amounts of 1 billion, 800 million, and 1.2 billion yuan respectively.

Affected by the pandemic, the plan was revised multiple times, and finally received registration approval from the China Securities Regulatory Commission on March 8, 2021. The final registration document reduced the third project’s fundraising amount by 5.85 million yuan, from 1.2 billion to 1.19415 billion yuan. This was because the 3 billion yuan fundraising plan attracted considerable attention during the pandemic, and regulatory tolerance for refinancing was decreasing.

Despite this, Xinwei Communications only reduced the fundraising amount by a few million yuan. Its confidence stemmed from rapid business growth after entering Apple’s supply chain in 2014, with operating income rising from 8.87 billion yuan in 2014 to 51.34 billion yuan in 2019, and net profit after non-recurring gains and losses soaring from 57.6 million yuan to 925 million yuan.

In 2018, to further expand capacity, Xinwei Communications significantly increased investments, with cash used for fixed assets, intangible assets, and other long-term assets rising from 570 million yuan in 2017 to 1.733 billion yuan. The company explained that this was due to land purchases, factory construction, and production scale expansion by its Jiangsu subsidiary, likely preemptive preparation for future refinancing.

However, this financing plan failed on March 1, 2022. Xinwei Communications announced that due to changes in the capital market environment and timing of financing, the company was unable to complete the private placement within the validity period of the approval, and the China Securities Regulatory Commission’s approval expired automatically.

Subsequently, the company’s business development faced growth bottlenecks. Although revenue continued to grow, increased competition and the impact of the pandemic on consumer electronics caused gross profit margins to fall from a peak of 36% to below 20%. By the first half of 2025, both revenue and net profit declined year-on-year by 1.15% and 24.58%, respectively.

The current 6 billion yuan fundraising project, especially the radio frequency devices and components, is a continuation of the 2020 RF front-end project. In the 2020 project analysis report, Xinwei Communications internally estimated a post-tax payback period of 4.68 years and a post-tax internal rate of return of 31.03%. However, this time, the company has not disclosed the internal rate of return, only stating that the project “has good economic benefits.”

Figure 1: Xinwei Communications’ Operating Performance Over the Years (unit: billion yuan)

Information Asymmetry in Satellite Projects

In 2021, Xinwei Communications’ annual report first mentioned its commercial satellite business, only noting that it had entered satellite communications and related industries. In 2022 and 2023, the annual reports began to separately detail the commercial satellite projects. The 2022 report stated the company had successfully supplied large foreign clients and planned to expand to more major manufacturers, expecting revenue to continue growing. The 2023 report indicated successful supply to North American clients and plans to further penetrate large manufacturers, with expected revenue in related fields to increase. However, beyond vague statements, there was no disclosure of related products, capacity, revenue, or profit growth.

In 2024, disclosures became even more vague, only mentioning that the company’s commercial satellite communications, smart vehicles, and other emerging industries had gained recognition from many domestic and foreign clients. It was expected that in the next 2-3 years, the proportion of new products, emerging applications, and domestic business would increase, while the share of the original single business area would decrease, and risks from single-region or single-business dependence would be manageable.

By mid-2025, Xinwei Communications explicitly stated that its commercial satellite sector was entering a new growth phase, with new North American customers and mass deliveries expected in the second half of 2025.

In December 2025, domestic commercial space became a “new favorite” in the capital market, and Xinwei Communications’ stock price doubled in two months, finally presenting a long-awaited financing opportunity.

At this point, market speculation about new North American customers, product quantities, and delivery volumes surged. A former senior executive familiar with disclosure practices told China Fund Reporter that institutional investors could inquire within the industry and cross-verify: Who are the new North American customers? What products are being supplied? How large are the sales? For retail investors, if the company does not disclose, they can only guess. The company could also increase disclosures appropriately, but generally, there is little motivation to do so, as private placement targets are mostly institutional investors who only need to communicate well with them.

In this 6 billion yuan private placement, Xinwei Communications again only stated that, after implementation, the project would bring stable cash flow and good economic benefits. It did not mention yield or payback period. A long-term investor commented, “I hope Xinwei Communications can disclose more useful information about its commercial satellite projects.”

Investors “Vote with Their Feet”

Despite the promising prospects of commercial satellites, the high valuation and 36-month construction period, along with severe information asymmetry, still make secondary market investors cautiously optimistic. Before the announcement, Xinwei Communications’ stock had already retreated 32% from its high.

The company also acknowledged that after the issuance, with funds raised, both total share capital and shareholders’ equity attributable to the parent would increase significantly. However, since the benefits of the funds’ use take time to materialize, profits in the short term would be difficult to fully realize, and shareholder returns would mainly rely on existing business. There is a risk of short-term declines in earnings per share and return on net assets.

Data shows that in the first three quarters of 2025, Xinwei Communications achieved revenue of 6.462 billion yuan, up 1.07% year-on-year, and net profit after non-recurring gains and losses of 429 million yuan, up 4.69% year-on-year.

The company provided estimates based on relevant assumptions, projecting the impact of this issuance on key financial indicators in 2026, but only for 2026. Currently, Xinwei Communications’ PE (price-to-earnings ratio) is nearly 100, and the construction cycle for this fundraising is 36 months. This means that even if the additional issuance is completed in 2026, the dilution effect will impact 2027, 2028, and 2029. During this process, Xinwei Communications may face further valuation compression.

Before this large private placement was announced, on January 12, Xinwei Communications disclosed that its actual controller, Chairman, and General Manager Peng Hao planned to reduce his holdings of no more than 9.6375 million shares through centralized bidding within three months after the disclosure date. At the closing price of 83.11 yuan per share that day, this stake would be worth about 8 billion yuan. Peng Hao’s last share reduction via bidding was from September 1 to 3, 2020.