[IPO Value Perspective] Behind NuTaige’s Continuously Declining Gross Margin: The Intractable 'Big-Client Syndrome' and Price Cuts Exceeding Those of Peers

Its development history has largely determined its revenue composition. From the perspective of core business segments, automotive suspension system components constitute its primary source of revenue, accounting for 72.86%, 71.28%, and 61.86% of total revenue over the past three years, respectively. Other automotive component businesses have grown rapidly, increasing from 3.44% in 2018 to 12.67% in 2020. Overall, although China’s automobile production and sales volumes have declined in recent years, NuTaige’s core business revenue has shown steady annual growth: RMB 284.85 million, RMB 409.68 million, and RMB 483.85 million in 2018–2020, respectively. However, contrary to this revenue growth, NuTaige’s gross margin has continuously declined over the same period. Its consolidated gross margin fell from 42.23% in 2018 to 33.22% in 2019 and further to 28.74% in 2020—a decline of −9.01 percentage points in 2019 and −4.48 percentage points in 2020. In fact, excluding the insignificant 'other business' segment, NuTaige’s core business gross margins were even lower—41.93%, 32.69%, and 28.63% over the same three-year span. Given the substantial growth in core business revenue, NuTaige’s sharp gross margin contraction warrants deeper investigation. Heavily impacted by customers’ 'annual price reduction' requirements—far exceeding industry peers Looking at gross margins across individual product categories, the gross margin for suspension system plastic parts remained relatively stable during the reporting period. For interior/exterior plastic parts, gross margins were 24.36%, 10.26%, and 5.35% over the past three years. The steep drop in 2018 was primarily due to the establishment of NuTaige (Dongguan) Co., Ltd. in Dongguan to handle interior/exterior business; high initial investment coupled with insufficient order volume led to negative gross margins for the subsidiary in both 2019 and 2020. Excluding this impact, NuTaige’s interior/exterior plastic parts gross margins were 21.82% in 2019 and 10.47% in 2020. Mold gross margin fluctuations were driven by shifts in the revenue mix between in-house and outsourced molds—outsourced molds carry comparatively lower gross margins. Regarding the gross margin decline, NuTaige attributed it mainly to changes in product pricing and raw material procurement costs. During the reporting period, a 1% increase in the average selling price of NuTaige’s key products would raise gross margin by 0.58%, 0.67%, and 0.71%, respectively; conversely, a 1% rise in raw material costs would reduce gross margin by 0.35%, 0.38%, and 0.42%, respectively. In terms of raw materials, NuTaige primarily uses aluminum ingots and plastic pellets. Direct material costs accounted for over 50% of total production costs throughout the reporting period—representing a notably high proportion. Since 2021, robust rebounds in international oil prices and continued improvement in the chemical industry prosperity index have driven sustained increases in plastic pellet prices. As the global economy gradually recovers, demand for chemical raw materials is expected to rise, potentially pushing plastic pellet market prices even higher. From the above data, product pricing appears to exert a more pronounced effect on gross margin. On product pricing, NuTaige noted that annual price adjustments are standard practice across the automotive component industry, with customers typically requiring a certain degree of annual price reduction for newly mass-produced items.

NuTaige (301229.SZ): Amid the Surge of Automotive Lightweighting, Profitability Fails to Conceal a Deteriorating Trend

From 2018 to the first half of 2021 (hereinafter referred to as the 'reporting period'), the Company’s business scale expanded annually, generating revenues of RMB 287 million, RMB 413 million, RMB 496 million, and RMB 263 million, respectively; year-on-year growth rates for 2019–2021H1 were 43.96%, 19.93%, and 49.05%. Net profits totaled RMB 50.86 million, RMB 42.99 million, RMB 57.43 million, and RMB 29.36 million, with year-on-year growth rates of −15.45%, 33.55%, and 186.99% for 2019–2021H1. In 2021, NuTaige achieved revenue of RMB 549 million, up 10.71% year-on-year, while net profit attributable to ordinary shareholders amounted to RMB 52.51 million—a 8.56% decline year-on-year. This decline stemmed primarily from surging global commodity prices, which raised procurement costs for key raw materials—including aluminum ingots and certain grades of plastic pellets—and consequently reduced gross margin on core business operations. According to Zhidong Finance APP, concentration levels remain low across most sub-segments of the automotive component supplier industry. As a Tier-2 supplier to OEMs, NuTaige operates in a narrow space squeezed between dominant Tier-1 suppliers upstream and raw material suppliers downstream. Facing rising aluminum prices upstream and powerful end customers downstream, NuTaige lacks pricing power—resulting in consecutive annual gross margin declines. During the reporting period, its gross margins stood at 42.23%, 33.22%, 28.74%, and 26.89%. The prospectus states that NuTaige’s primary raw materials are aluminum ingots and plastic pellets. Throughout the reporting period, direct material costs consistently accounted for over 50% of total production costs—a notably high share. Since 2021, large-scale stimulus packages introduced by major global economies and ultra-loose monetary policies adopted by central banks have kept global liquidity conditions extremely accommodative. Coupled with renewed outbreaks of overseas COVID-19 infections constraining supply-side capacity, global commodity prices have trended upward. Impacted by recent commodity price hikes, NuTaige’s average procurement price for aluminum ingots in H1 2021 rose 17.67% versus the 2020 average; functional-part plastic pellets and interior/exterior plastic pellets increased by 6.05% and 15.99%, respectively. Rising raw material costs also increased cash outflows for raw material purchases, causing net cash flow from operating activities to decline year-on-year. Should key raw material prices continue to surge significantly, NuTaige’s product gross margins will further erode, adversely affecting its operational performance. NuTaige can only mitigate these pressures through two avenues: first, leveraging economies of scale to reduce costs; second, adjusting product prices. Yet, facing dominant Tier-1 suppliers—and especially given that nearly half its revenue comes from BASF—NuTaige has little choice but to continually cut prices. Soaring raw material costs, coupled with weak bargaining power vis-à-vis major downstream customers, make NuTaige’s path as a Tier-2 supplier anything but easy.

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