Honor is making a push for an IPO

Author | Huang Yu

Editor | Liu Baodan

Honor, which has been independent from Huawei for four years, has finally completed a key step before its IPO.

Recently, Honor announced that the shareholding reform, which started in the fourth quarter of 2024, was completed on December 28. The company name has changed from Honor Terminal Company to "Honor Terminal Co., Ltd."

Honor stated that this shareholding reform involves changes in the company's form and name, but does not affect the company's daily operations. After the completion of the reform, Honor will timely initiate the IPO process to achieve strategic development in the next phase, promoting the company's entry into the capital market through its initial public offering.

Four years ago, Huawei divested Honor by selling all its shares to Shenzhen Zhixin New Information Technology Co., Ltd., which is actually controlled by the Shenzhen State-owned Assets Supervision and Administration Commission. In November 2022, after introducing six strategic shareholders including BOE Technology Group, the number of shareholders increased to 15, and at that time, Honor had already become a mixed-ownership enterprise, although it was still a limited liability company in nature.

Now that the shareholding reform is complete, Honor's business registration information has also changed.

According to Qichacha information, on December 30, the company changed from Honor Terminal Company to "Honor Terminal Co., Ltd.," and the nature of the enterprise changed from a limited liability company to a joint-stock company.

At the same time, the number of shareholders of Honor Terminal Co., Ltd. has now increased to 23, with the original shareholder Hangzhou Weitong Equity Investment Partnership (Limited Partnership) exiting, and new shareholders including China Mobile and CHINA TELECOM.

The completion of the shareholding reform means that Honor's listing has entered the countdown stage. According to relevant regulatory provisions, once the reform is completed, Honor can enter the "listing guidance" and other listing processes, officially aiming for the capital market.

Unlike Huawei, which is firmly against going public, Honor has been holding a "listing script" since its independence four years ago. In November last year, amid rampant rumors of a backdoor listing, Honor clearly stated for the first time that it would enter the capital market through an IPO, while officially announcing a change in leadership, with Wu Hui, the former chairman of Shenzhen Water Group, becoming the new chairman of Honor.

By August this year, Honor disclosed plans to initiate the corresponding shareholding reform in the fourth quarter and subsequently start the IPO process. At that time, Wall Street Insights learned that Honor expected to successfully go public as early as the end of this year or early next year.

In the second half of the year, Honor continued to optimize its equity structure and introduced new investors. In August, Honor announced that it "has received investment from China Mobile"; in September, an affiliated enterprise of China Reform Holdings Corporation Limited, Hangzhou Weitong Equity Investment Partnership (Limited Partnership), invested in Honor, with the former being a central enterprise managed by the State-owned Assets Supervision and Administration Commission of the State Council.

On October 11, A-share company Sanrenxing announced that it plans to contribute RMB 51.5 million as a limited partner to Wuhu Borui Cornerstone Equity Investment Partnership, which will make a special investment in Honor At the end of October, Honor announced that China Telecom, funds under CICC Capital, funds under Cornerstone, TeFa Fund, and the new round of agent investment platform JinShi XingYao have invested in Honor.

When it was sold by Huawei four years ago, Honor was valued at about 100 billion yuan. The valuation of Honor's latest financing has not been disclosed, but Wall Street News previously obtained a pre-IPO financing plan from a financial advisor indicating that Honor plans to submit materials for listing on the ChiNext in 2024, with this round of pre-IPO valued at 200 billion yuan.

As 2024 is about to end, Honor may find it difficult to submit the listing application materials on time. However, the call for listing has already sounded, and one of Honor's key tasks ahead is to tell a good story to the capital market and seek to maximize its valuation. But this is destined to be a tough battle.

Public data shows that before its independence, Honor held about 15% of the domestic market share. During the initial period after its independence, Honor was regarded as the weakest among all core smartphone brands, with its market share once plummeting to a low of 3%.

Later, as Honor rebuilt its capabilities and Huawei fell silent, Honor, seen as a "Huawei alternative," took over a significant portion of the market share lost by Huawei and began to re-emerge in the market.

IDC data shows that by 2022, Honor's market share in the domestic market reached 18.1%, ranking second, with shipments increasing by 34.4% year-on-year to approximately 51.77 million units, making it the only brand among the top five smartphone manufacturers to achieve double-digit growth.

However, Honor's good days did not last long.

In the second half of last year, with the return of Huawei's 5G phones, Honor's market share inevitably faced pressure. IDC data shows that in 2023, Honor's domestic shipments decreased by 10.3% year-on-year, and its market share fell by 1 percentage point to 17.1%, still ranking second.

By the second quarter of this year, Honor's shipments decreased by 3.7% year-on-year, and its market share dropped to 14.5%, ranking fourth.

In the third quarter, the trend of declining sales for Honor further intensified, becoming the brand with the largest year-on-year decline in shipments among the top five smartphone manufacturers in China, down 22.5% year-on-year, with a market share of 14.6%, ranking fifth. During the same period, vivo ranked first with a market share of 18.6%, Huawei ranked third with a market share of 15.3%, and its shipments increased by 42% year-on-year.

Competing in overseas markets has become an inevitable choice for Honor to tell a more compelling business story.

According to Honor's development blueprint, 2022 is its overseas debut year, and 2023 is its European debut year. Zhao Ming pointed out that Honor aims to make Europe its "second home market," with overseas sales expected to exceed those in China in the next three to five years.

However, from the perspective of global market share, Honor has not yet entered the top five and remains in the "Others" category.

Once, Huawei phones shone brightly in the global market. In the future, whether Honor can seize the two major opportunities of going public and AI to achieve a key leap in the global market remains uncertain But for Honor, this is a choice with no way out.

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