The landscape of the Chinese technology sector is witnessing dynamic transformations, particularly in the fields of electric vehicles and automationRecent developments underscore this trend, and one notable episode has emerged from Huichuan Technology's strategic move to spin off its subsidiary, United Power, for public listingSuch actions are gaining traction in China's business environment, as other major players like China Railway Construction, Shanghai Electric, and Hikvision have also pursued similar strategies to bolster their operational efficacy and financial performance.

The backdrop to this corporate maneuvering is the rapid expansion of the new energy vehicle (NEV) sectorHuichuan Technology has leveraged its commitment to research and development, concentrating on electric drive and power systems tailored for both commercial and passenger electric vehicles

Since its inception in 2016, United Power has independently operated within the NEV components market, fostering continual innovation in critical components such as powertrains, motors, and electronic controlsThe culmination of these efforts was the rollout of their fourth-generation product platform, which has now entered mass production, effectively soaring to the forefront of market competition.

The first half of 2024 illustrates Huichuan's significant market presence, particularly in the electric vehicle motor controller domain, where it holds an impressive 11% market share—second only to BYD, and leading among third-party suppliersSuch achievements are bolstered by robust partnerships with reputed automotive manufacturers like Li Auto, Xiaomi, and Xpeng, further solidifying Huichuan Technology's foothold in the burgeoning NEV landscape.

Beyond NEVs, Huichuan Technology's developments in servo systems warrant attention

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With an overwhelming share of about 28% in China's servo systems market as of mid-2024, the company's prowess outshines competitors such as Siemens and YaskawaThe growing demand for automation solutions further amplifies Huichuan's position, as the domestic servo system market is predicted to experience significant growth in the coming years—reaching an estimated scale of 23.5 billion yuan by 2025.

As Huichuan Technology continues to innovate within the servo systems arena, it is also expanding its footprint in the industrial robotics spaceThe company has diversified its product line, extending from SCARA robots to six-axis robots, with the latest offerings catering to a variety of sectors, including automotive and lithium battery manufacturingIn 2024, Huichuan is set to launch several new six-axis robots, capable of handling maximum loads of 300 kg, addressing the growing needs within these industries.

By strategically venturing into humanoid robotics, Huichuan is positioning itself at the cutting edge of technological advancements

The company is currently developing key components, including motors and actuators, which signify its intent to play a crucial role in this emerging marketThe market for industrial robots is robust, with Huichuan securing a 9% market share in mid-2024, positioning itself third overall, while also dominating the SCARA segment with a remarkable 26% share.

A noteworthy aspect contributing to Huichuan's success is its open-minded approach towards research and innovationThe company has consistently invested over 8% of its revenue into R&D, reflecting its commitment to advancing core technologies in motors and industrial roboticsIn the first three quarters of 2024 alone, Huichuan's R&D expenditure reached 2.206 billion yuan, reinforcing its competitive edge in an increasingly crowded market.

Moreover, Huichuan's efforts towards diversification are yielding substantial returns in the form of increasing contracts

The company's contract liabilities escalated from 344 million yuan in 2020 to a staggering 1.028 billion yuan by the third quarter of 2024—an increase of 300%. This surge highlights the robust demand within the downstream sectors, indicating a promising trajectory for future revenue generation as these contracts convert into actual sales.

To support this growth in demand, Huichuan Technology is actively ramping up its production capabilitiesThe substantial investment in a 5 billion yuan project to expand NEV production capacity in Suzhou aims to roll out additional facilities over the next five years, underpinning future growth potential.

With the ongoing momentum in its various business lines, Huichuan's financial performance reflects impressive advancementsRevenue surged from 11.511 billion yuan in 2020 to an estimated 30.420 billion yuan in 2023, showcasing a remarkable compound annual growth rate (CAGR) of 38.26%. Furthermore, net profits attributable to shareholders soared from 2.100 billion yuan to 4.742 billion yuan, with a CAGR of 31.19% during the same period.

By the end of the first three quarters of 2024, Huichuan reported revenue of 25.397 billion yuan, representing an annual growth of 26.22%. This sharp increase was further bolstered by sales in the NEV sector, which alone reached 10.4 billion yuan, up a staggering 96%. The broader general automation segment, inclusive of industrial robotics, added another 10.9 billion yuan, marking a growth of 4%.

Despite challenges within the wider market ecosystem, Huichuan Technology's performance remains resilient, suggesting robust anti-cyclical capabilities