New stock preview | Jiaxuan Intelligent: 80% market share monopoly race track, the growth pains and breakthroughs of niche champions.

On June 30th, Jiangsu Jiaxuan Intelligent Industrial Technology Co., Ltd. (referred to as "Jiaxuan Intelligent") submitted its prospectus to the Hong Kong Stock Exchange for the first time, intending to list on the main board of the Hong Kong Stock Exchange, with Dongxing (Hong Kong) as the exclusive sponsor. This national-level specialized and innovative "little giant" enterprise is considered the "hidden champion" in the permanent magnet electric drive industry. It holds over 10% of the global market share in industrial permanent magnet electric drive solutions, ranking first, and its core product, the permanent magnet direct drive roller, holds over 80% of the global market share. Industrial permanent magnet electric drives are not a mainstream track. They solve power problems in heavy industrial conveyor systems in mining, ports, cement, etc. by replacing traditional "motor + gearbox" solutions with permanent magnet direct drive technology, achieving more energy-efficient and lower maintenance cost drives. In this extremely vertical field, Jiaxuan Intelligent has established a considerable moat. In a sufficiently segmented track, Jiaxuan Intelligent has already positioned itself at the forefront. However, standing in the spotlight does not mean the road ahead is smooth. Its crown of over 80% global market share is its pride, its revenue of over 9 billion is its foundation, but the net cash outflow from operating activities of 130 million and accounts receivable of 770 million are the Damocles' sword hanging over the crown. Revenue of over 9 billion vs. raw material cycle dragging down profits According to Frost & Sullivan's data, as of the entire reporting period, the company ranked first globally in terms of revenue in industrial permanent magnet electric drive solutions providers (with a market share of over 10%), industrial permanent magnet direct drive roller suppliers (with a market share of over 80%), and mining industry permanent magnet electric drive solution providers. Looking at the product structure, Jiaxuan Intelligent's products mainly include permanent magnet direct drive rollers, inner rotor permanent magnet motors, frequency converters, and wind turbine components, which are widely used in mining (coal, non-ferrous metals, ferrous metals), manufacturing (papermaking, pharmaceuticals, chemicals, cement), new energy (electric ships, new energy engineering machinery), and downstream areas such as ports and water treatment. In recent years, with its strong leading effect, Jiaxuan Intelligent's revenue has been steadily increasing, and its scale has been continuously expanding. For the years 2023 to 2025, Jiaxuan Intelligent's operating income is expected to be 762 million yuan, 873 million yuan, and 936 million yuan respectively, with a three-year compound growth rate of approximately 10.8%. The shipment volume of permanent magnet motors is expected to increase from 2,107 in 2023 to 3,061 in 2025. The gross profit margin is expected to increase from 24.1% in 2023 to 25.0% in 2024 and further to 25.7% in 2025. Steady revenue growth and continuous improvement in gross profit margins undoubtedly demonstrate the company's pricing power and economies of scale in a segmented track. However, as the profit growth rate sharply declines, Jiaxuan Intelligent's concerns about "increasing revenue without increasing profits" are gradually emerging. According to the prospectus, for the years 2023 to 2025, the company's annual profits are expected to be 21.01 million yuan, 40.84 million yuan, and 41.57 million yuan respectively. The crucial turning point is that the profit growth rate dropped sharply from 94.4% in 2024 to 1.8% in 2025. The annual profit margins are expected to be 2.8%, 4.7%, and 4.4% respectively, with a 0.3 percentage point decline in profit margin in 2025. While revenue is growing by 7.3%, profits are almost standing still. Why is that? The core answer lies in Jiaxuan Intelligent's cost structure. In 2025, the company's raw material costs accounted for a high 89.9% of its operating costs. This also means that fluctuations in the price of core material, neodymium-iron-boron permanent magnet material, are the primary factor compressing profit margins. From 2022 to 2025, the price of neodymium magnets fell from 340 yuan/kg to 220 yuan/kg, with significant industry fluctuations. When raw material prices rebound, the company will find it difficult to fully transfer costs downstream. Along with the gradual slowdown in profit growth, Jiaxuan Intelligent's cash flow is becoming increasingly tight: for the years 2023 to 2025, the company's operating cash flow remains negative, at -79.63 million yuan, -23.95 million yuan, and -13.1 million yuan respectively. Only a slight increase in cash in 2024, cash and equivalents continuously shrink by the end of 2023 and 2025. By the end of 2025, there is only 78.48 million yuan left. It is worth noting that the main reason for Jiaxuan Intelligent's tight cash flow is the high level of accounts receivable: by the end of 2025, the company's trade receivables amounted to a high 771 million yuan. Large credit sales combined with extended customer payment terms, impairment losses rising year by year, with an impairment of 10.08 million yuan in 2025. 770 million yuan in accounts receivable lying on the books, 78 million yuan in cash lying in the bank accounts - this is not an imbalance in financial structure, this is the cost that the business model must bear in its scale expansion. However, fortunately, Jiaxuan Intelligent is actively stepping out of its "comfort zone." From 2023 to 2025, the company's revenue from permanent magnet direct drive rollers changed from 484 million yuan to 488 million yuan, with the revenue share decreasing from 63.6% to 52.1%. Meanwhile, the revenue from inner rotor permanent magnet motors achieved explosive growth, with revenue increasing from 46 million yuan to 144 million yuan over three years, and the share increasing from 6% to 15.4%. The revenue from frequency converters is stable in the 200 million yuan range, contributing approximately 21.9% of the revenue in 2025; revenue from wind turbine components reached 68.15 million yuan, accounting for 7.3%. It can be seen that as the path to diversification of Jiaxuan Intelligent's products becomes clearer, this is not only a forward-looking move to diversify risks but also a necessary step for the company to tap into larger markets. The industry penetration turning point is here, with dividends and risks resonating both ways According to data cited in the prospectus from Frost & Sullivan, the global industrial electric drive track is steadily expanding, with the market size increasing from 295.2 billion yuan in 2022 to 337.1 billion yuan in 2025, and is expected to exceed 428 billion yuan by 2030. However, the real core of industry growth comes from the wave of permanent magnet electric drives replacing traditional asynchronous motors. In 2025, the global penetration rate of permanent magnet electric drives is only 2.4%, with a domestic penetration rate of 8.8%. In the future, driven by the advantages of a mature rare earth permanent magnet industry chain and the upgrading of industrial equipment, the market penetration rate is expected to quickly increase, with the global rate and domestic penetration rate likely to rise to 6.4% and 20.6% by 2030. The industry is transitioning from a niche category to a mainstream replacement track. Standing on the industry penetration turning point, Jiaxuan Intelligent is expected to enjoy multiple industry development dividends with its leading effect. On one hand, the long-term beta dividend is constructed by the dual carbon policy. Compared to traditional motors, permanent magnet direct drive saves 20%-40% in energy and reduces operating costs by 75%. Global industrial energy efficiency regulations continue to tighten, and domestic motor efficiency upgrades are mandatory. With a complete rare earth permanent magnet industry chain domestically, local companies have a global cost and technical advantage, with integrated mining, manufacturing, and end-use applications, making it difficult for overseas manufacturers to replicate. On the other hand, a full-scale explosion of demand in various downstream scenarios is occurring. The mining conveyance, industrial automation, new energy equipment, and semiconductor manufacturing sectors are all opening up new opportunities, with the industry ceiling continuing to rise. Jiaxuan Intelligent spans multiple sectors, such as mining, manufacturing, and new energy, benefiting from the expansion of multiple tracks. Lastly, the company holds a monopoly in the segmented track. Data from the prospectus shows that Jiaxuan Intelligent ranks first globally in three major segmented fields: industrial permanent magnet electric drives with a market share of over 10%, leading in mining industry permanent magnet electric drives, and a market share of over 80% for permanent magnet direct drive rollers, with virtually no direct competitors in the segmented track. The company is a national-level specialized and innovative "little giant," with nearly twenty years of technical accumulation building a moat that is difficult to overcome in the short term. However, despite the attractive track story, Jiaxuan Intelligent still faces the inevitable harsh reality. Firstly, as the track expands, cross-industry competition will emerge, diluting the segmented barriers. The company's absolute advantage of an 80% market share is built on a niche market with very low penetration of permanent magnet electric drives. As the penetration rate continues to increase, trillion-dollar traditional asynchronous motor manufacturing giants may enter the track. The general freight and electric motor industries have long been caught in homogenization and low-price competition, leading to continuously shrinking profit margins. Once traditional leaders enter with production capacity, channels, and funding, the permanent magnet electric drive segmented market landscape will undergo rapid restructuring, greatly weakening Jiaxuan's existing segmented monopoly advantage. Secondly, continuous technology iteration is needed, but there is uncertainty in the adoption and market conversion of new technologies. The technology roadmap of the permanent magnet electric drive industry continues to evolve, with the next generation of products focusing on AI online diagnostics and efficient lightweight magnetic materials. To maintain its leading position, the company must maintain high levels of long-term research and development investment. In 2025, Jiaxuan's research and development expenses were 39.2 million yuan, with research and development investment continuing to increase. However, there is uncertainty in the adoption and market conversion of new technologies. If the company falls behind in research and development compared to its peers, its segmented leadership advantage will rapidly diminish. It can be seen that while the penetration curve of the permanent magnet electric drive industry determines the long-term upward direction of Jiaxuan Intelligent in the track, the rare earth raw material cycle and cross-industry competition sow continuous hidden risks for track development. In conclusion, it is undeniable that Jiaxuan Intelligent is an imaginative "good company" - achieving global first place in an extremely segmented track, with deep technological reserves, a continuously expanding product matrix, and an opening industry space. It has reached a historical turning point where permanent magnet electric drives are moving from a niche to a mainstream market. However, between a good company and a good investment, there are valuation, timing, and uncertainties that stand in the way. While its over 80% market share proves its past success and a revenue of 9 billion supports its present, the true determinant of investment value is whether it can use healthy cash flow to realize the future of permanent magnet electric drives from 2.4% to 6.4%. When a company with an annual revenue of less than 1 billion yuan is burdened with 770 million yuan in accounts receivable and 130 million yuan in net cash outflow from operating activities, investors need to ask not only "how big is its market?" but also "can it survive to see that market?"