Change is a constant in the corporate world, a phenomenon that can reshape the landscape of entire industries within momentsThe pace of transformations, particularly in 2024, has been notable, sending ripples across sectors, and creating tremendous implications for stakeholders involved.

Recent dramatic shifts include Haier Group's strategic investment in Shanghai Laister and the pharmaceutical powerhouse Shuangcheng Pharmaceuticals venturing into the semiconductor domain by acquiring Olans TechnologySo far, nearly 130 companies have announced changes in their actual controlling entities this year alone.

What drives these corporations to initiate such significant power transitions?

One major reason is resource integration, which, in turn, leads to new growth opportunitiesThe likes of Hualing Precision, Lanzhou Yellow River, and companies like Dengkang Dental and Chuan Instrument, under national reform initiatives, are set to enhance their resource pools, paving the way for unexplored avenues of development.

Moreover, companies looking to the future recognize that proactive change can help them capture emerging opportunities before their competitorsHigh-performers in sectors like commercial aerospace, artificial intelligence, humanoid robotics, and cross-border e-commerce have shown a willingness to adaptMost of the companies undergoing transformations share robust market potential, pointing to the smart driving industry, which offers a staggering market size of 17 trillion yuan.

On November 29, Junsheng Electronics, a leader in the automotive chip sector, announced its acquisition of controlling shares in Xiangshan Co., a move indicating its ambitions within smart car technologiesAs one of the first suppliers to achieve mass production in the 5G-connected vehicular sector, Junsheng Electronics now claims a 24% global market share in automotive passive safety, backed by a staggering order book worth 70 billion yuan.

Xiangshan, recognized as a pioneer in automotive smart cockpit components, boasts long-term partnerships with major automobile brands including Audi, Mercedes-Benz, BMW, BYD, Geely, and NIO

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Unlike many who seek swift transformations through singular strategic maneuvers, these two companies engaged in a protracted "round battle" lasting five to six years.

Xiangshan previously committed 2.55 billion yuan to acquire 63% of the shares in Junsheng's subsidiary, QingyingSubsequently, Junsheng Electronics invested a further 980 million yuan across multiple stakes to ascend to the position of Xiangshan’s largest shareholder, thus gaining actual controlThis strategic interplay underscores the mutual interests at stake.

Junsheng Electronics' acquisition illustrates a dual victory: it realizes nearly 1.6 billion yuan of asset monetization while reclaiming its position as the leading shareholder in XiangshanBut what does this acquisition mean for Junsheng Electronics?

While they may not appear to be natural rivals, the two companies have a history rooted in transformation and collaborationJunsheng Electronics can expect to benefit significantly from Xiangshan's capabilities beyond its traditional automotive safety services.

The first area of additional growth lies in the rapidly-evolving smart cockpit segment, a vital area for the future of new energy vehiclesPredictions suggest that China's smart cockpit market will exceed 120 billion yuan by 2026, with a penetration rate anticipated to reach 81%. Junsheng has already laid substantial groundwork in this sector, positioning itself far ahead of competitors like Desay SV and Huayang Group.

Notably, Junsheng Electronics is the exclusive supplier for Huawei's automotive domain control systemsRevenue forecasts estimate that Huawei alone could contribute approximately 396 million yuan to Junsheng's income by 2025. Conversely, Xiangshan focuses on air management and luxury accessories, cultivating lasting collaborations not only with global automotive powerhouses but also with innovative players in the new energy vehicle industry.

This shift in shareholding is mutually beneficial, enabling Junsheng to strengthen its foothold in emerging fields and expand its customer base significantly.

The second area of potential growth involves the new energy power conversion and charging sector, where Junsheng has established a solid presence

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The company successfully began mass production of an 800V high-voltage fast-charging model, leading to an influx of orders totaling over 37.6 billion yuan during the first three quarters of 2024. Xiangshan brings added international business expansion and applications in new fields, having secured compliance with international standards and developed globally recognized charging products.

However, amidst this wave of acquisitions, it’s important to note that Xiangshan represents just a small fraction of Junsheng Electronics' broader strategyMany companies focus on product sales, but Junsheng has consistently opted for a “buy-and-scale” strategy to transform itself from a mere automotive plastic parts supplier to a leader in automotive electronics and smart driving technology.

In the first three quarters of 2024, Junsheng Electronics reported revenue of 41.135 billion yuan, alongside new orders worth 70.3 billion yuan, reflecting its robust financial standingThis acquisition is not merely a transactional maneuver but a strategic enhancement to its already prosperous portfolio.

Nevertheless, such bold acquisitions require substantial financial backingJunsheng Electronics previously recorded significant goodwill following its acquisition of KSS and its subsidiaries, amassing a staggering USD 1 billion in intangible assets, of which 5.494 billion yuan remains as of Q3 2024.

This goodwill raises concerns; any impairment could deal a severe blow to Junsheng’s financial reliability, necessitating adequate cash reserves to shield against potential risksHowever, the cash on hand appears limited—by Q3 2024, Junsheng reported merely 6.482 billion yuan, while its total liabilities soared to 40.593 billion yuan, leading to a daunting debt-to-asset ratio exceeding 66%.

Moreover, Junsheng Electronics has been grappling with low profitability, often failing to generate significant earningsDespite a rebound since 2022, the company's gross margin by Q3 2024 lingered at 15.59%, with a net profit margin of only 3%, significantly lower than peers such as Desay SV and Bertly.

In light of these challenges, Junsheng Electronics has opted for fundraising

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