Xinwei Communications raises 6 billion yuan through a private placement to pursue a "second growth curve": nearly half of the funds raised are invested in commercial satellite projects. Why engage in such large-scale financing when dividends over three years amount to less than 200 million yuan?

Everyday Economic Reporter | Cai Ding Everyday Economic Editor | Bi Luming

On the evening of March 13, Xinwei Communications (SZ300136, stock price 64.13 RMB, market value 62.05 billion RMB) disclosed a private placement plan. The company intends to issue shares to no more than 35 specific investors, raising no more than 6 billion RMB. After deducting issuance costs, the net funds will be used for commercial satellite communication devices and components projects, RF devices and components projects, and chip heat dissipation devices and components projects.

According to the announcement, the proposed private placement has been approved by Xinwei Communications’ third meeting of the sixth board of directors held today, and still needs to be submitted for approval at the company’s first extraordinary general meeting in 2026. Xinwei Communications will hold the first extraordinary general meeting on March 30, 2026, to review the proposal.

Additionally, based on the maximum scale of this issuance (no more than approximately 290 million shares), the controlling shareholder Peng Hao’s shareholding ratio will decrease from 19.48% to no less than 14.99%, remaining the company’s ultimate controller. Therefore, this private placement will not result in changes to the company’s controlling shareholder or ultimate controller.

Nearly half of the funds raised will be invested in the “Commercial Satellite Communication Devices and Components Project”

Regarding the purpose of this private placement, Xinwei Communications states that firstly, it aims to continue increasing production investment to consolidate its leading advantage in the “first growth curve”; secondly, to promote the landing of competitive new product lines and drive rapid growth of the “second growth curve”; thirdly, to optimize the capital structure.

“The completion of this issuance will further optimize the capital structure, increase total assets and net assets, reduce financial risks, enhance the company’s overall competitiveness, improve sustainable profitability and risk resistance, and lay a solid foundation for future financing and long-term sustainable development,” Xinwei Communications said.

The announcement shows that the 6 billion RMB private placement will be used for three projects: commercial satellite communication devices and components, RF devices and components, and chip heat dissipation devices and components. Among them, the commercial satellite communication devices and components project is the main fundraising project, with a total investment of about 3.563 billion RMB, and planned use of 2.85 billion RMB (47.5% of the total funds raised).

Image source: Xinwei Communications announcement

Regarding the market’s most concern, the commercial satellite project, Xinwei Communications states that the project’s implementation entity is its wholly owned subsidiary Xinwei Communications (Jiangsu) Co., Ltd., located at No. 369 Jinlong Avenue, Jintan District, Changzhou City, Jiangsu Province. The construction period is 36 months, utilizing existing factory buildings with renovations, and does not involve new land acquisition.

Xinwei Communications notes that, to date, the project has obtained the investment project filing certificate issued by the Development and Reform Bureau of Jintan District, Changzhou City. Environmental impact assessment procedures are still underway. The company also states that, based on feasibility studies and project revenue estimates, the project has good economic benefits. After implementation, it will bring stable cash inflows and improve overall profitability.

The construction periods for the three major fundraising projects are all three years

The plan shows that Xinwei Communications has been a long-term supplier for North American commercial satellite clients. This indicates the company’s attempt to leverage its existing high-frequency, high-speed connectors to extend into array antennas and modules, positioning itself early for the ground terminal boom of low-earth orbit satellite internet.

Furthermore, Xinwei Communications repeatedly emphasizes breakthroughs in underlying materials in the plan. For example, in the RF device field, the company has mastered the mass production of its self-developed LCP film and flexible copper-clad laminates; in the chip heat dissipation field, it has mastered advanced TIM1 formulations based on liquid metal and polymer materials. This “materials—parts—modules” one-stop capability helps the company gain higher added value amid the wave of domestic substitution.

However, a reporter from the Daily Economic News (hereinafter “the reporter”) noticed that Xinwei Communications’ cash dividends in 2022, 2023, and 2024 were 48.38 million RMB, 96.76 million RMB, and 47.62 million RMB respectively. The total cash dividends over the past three years amount to only about 193 million RMB, accounting for just 10.52% of the three-year net profit attributable to shareholders (1.832 billion RMB). Compared with the massive private placement of no more than 6 billion RMB announced at once, the disparity between financing needs and dividend payout ratio may attract market attention.

Image source: Xinwei Communications announcement

It is also worth noting that the construction periods for the three major projects in this private placement are all 36 months (3 years). On one hand, key factors such as “satellite launch capacity, network service continuity, terminal costs, and scaled user cultivation” in the satellite internet industry are highly uncertain. When capacity is fully released after three years, whether the new capacity can be fully absorbed by the market remains uncertain; on the other hand, after large investments and production, the significant increase in fixed assets will lead to higher depreciation and amortization expenses, which may exert some pressure on future performance.

Cover image source: Daily Economic News media library