Daily Brief China: Pateo Connect Technology, VTech, Onyx International, Guangdong Rising Mineral-Rich Mountain Copper, Full Truck Alliance , SMIC (Semiconductor Manufacturing International Corp), Beijing ESWIN Computing Technology and more

• Pateo Connect Technology (PTC HK) raised US$140m from its Hong Kong IPO in September 2025 via a primary offering of HKD102.23/share in its IPO.
• It is one of the largest domestic providers of smart cockpit and intelligent connectivity solutions in China, providing full-stack smart cockpit solution and cloud-based vehicle connectivity, for Chinese OEMs.
• In this note, we will talk about the lockup dynamics and possible placement.

• Our 2020 caution held: learning products and contract manufacturing finished FY03/2026 below FY03/2020 revenue, telecom held up only through acquisition, and EPS fell 30%.
• The bond-proxy framing failed: shareholders collected about 58% of the 2020 price in dividends, but shrinking earnings held annual returns below 8%.
• At an 8% yield and 12.5x earnings, one variable decides returns: whether earnings stop shrinking, because a 100% payout leaves nothing to compound.

• Onyx International Inc. is a global consumer technology electronics brand in the knowledge-driven productivity tools industry, offering e-paper tablets and e-notes powered by its BOOX OS.
• Onyx International Inc. was the largest knowledge-driven productivity tool brand in China and the second largest globally in 2025 with 4.2% market share.
• Revenue increased from RMB803,580 thousand in 2023 to RMB1,128,185 thousand in 2025. However, profit for the period decreased in H1 2026, and the gearing ratio increased significantly.

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• Unprecedented tight copper concentrate supply has driven 2026 annual benchmark TC/RCs to $0/t and spot rates deeply negative (reaching -$132/t to -$173/t in mid-2026), shifting immense margin from smelters to miners. Consequently, Guangdong Rising Mineral-Rich Mountain Copper (Dabaoshan) achieved a copper concentrate gross margin of 65.3% in H1 2026.
• The company’s profitability is heavily double-leveraged to both copper and sulfur. Its sulfur concentrate gross margin climbed to 74.6% in H1 2026 due to a global sulfur supply crunch driven by Middle East geopolitical tensions and explosive domestic demand from the lithium iron phosphate (LFP) battery value chain.
• Dabaoshan remains a highly vulnerable single-mine operation with a remaining mine life of only 13 years. Reinvestment and external M&A are severely constrained by the Guangdong State-owned Assets Supervision and Administration Commission (SASAC), which prioritizes production volumes and stable dividend payouts over return on invested capital (ROIC) maximization.

• Dominant Platform Ecosystem and Network Effects: Full Truck Alliance (YMM) is the undisputed leader in China’s digital freight matching market, operating the flagship Yunmanman and Huochebang mobile platforms. By connecting millions of shippers and truck drivers, YMM has transformed a fragmented logistics sector into a digitized, centralized ecosystem, driving substantial operating leverage and expanding gross margins to over 72% in recent quarters.
• Accelerating Monetization and Cash Generation: YMM has successfully transitioned its revenue mix toward high-margin transaction commissions and value-added solutions, resulting in a 3-year EPS CAGR of 118.73% and a 3-year Free Cash Flow CAGR of 252.03%. Q2 2026 operating cash flow grew 64% year-over-year to $315.51M, demonstrating superior cash conversion capabilities.
• Compelling Valuation and Shareholder Capital Return: Trading at $8.16, shares offer an attractive entry valuation (~12x FY26 P/E) well below analyst fair-value thresholds of US$9.00. The company’s expanding shareholder return program delivers an attractive 4.12% dividend yield, backed by a robust net cash balance sheet and sustainable operational cash flows.

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• Semiconductor Manufacturing International Corporation (SMIC) stands as mainland China’s premier pure-play foundry and the world’s third-largest contract semiconductor manufacturer by capacity, strategically positioned as the cornerstone of China’s semiconductor localization drive across automotive, edge AI, and consumer electronics.
• The company delivered record financial performance in Q2 2026, generating revenue of RMB 21.02 billion (up 19.7% QoQ and 36.0% YoY) and net income of RMB 3.11 billion, catalyzed by a 40% surge in AI companion chip demand, improved blended ASPs, and gross margin expansion to 22.5%-25.3%.
• Despite strong top-line momentum (10-year revenue CAGR of 16.94%), substantial ongoing capital expenditures continue to elevate depreciation headwinds, capping gross margin expansion and causing cash flow cyclicality, while persistent geopolitical export controls constrain leading-edge node scalability.

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• Strategic Linchpin of Chinese Semiconductor Localization: Semiconductor Manufacturing International Corporation (SMIC) is the indispensable anchor of mainland China’s integrated circuit (IC) manufacturing ecosystem, capturing robust domestic fabless demand across consumer, automotive, and industrial end-markets amid heightened supply chain regionalization.
• Financial Inflection and Margin Expansion: Following a resilient revenue trajectory from 222,056.55M in 2023 to 307,483.60M in 2025, SMIC demonstrated accelerated operating performance into 1H 2026, highlighted by record quarterly revenue of 100,607.22M and net margin expanding to 14.78% in Q2 2026, driven by high fab utilization and fixed-cost absorption.
• Capital Intensity vs. Geopolitical Headwinds: While heavy capital expenditure programs in 300mm mature and advanced-patterning capacity have kept annual free cash flows negative (-162,793.83M in 2025), substantial state-backed funding and captive domestic market share provide structural balance sheet protection against ongoing Western export controls on advanced tooling.

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• Sustained Profitability Remains Far Off Due to a Structural Scissors Gap: Despite solid revenue growth reaching RMB 2.43 billion in 2025, Beijing ESWIN Computing’s operating model is severely compressed by a gross margin of just 18.6% (which dropped further to 14.8% in Q1 2026) facing massive R&D overheads of RMB 1.04 billion. Achieving breakeven requires a successful scale-up of its higher-margin computing and interconnect divisions, which currently represent only 15.8% of total revenue.
• Strategic De-risking from BOE Is Underway but Client Concentration remains High: While ESWIN’s revenue dependency on its largest customer, BOE (Customer A), fell from 82.1% in 2023 to 39.3% in Q1 2026, the company’s top five customers still command 83.1% of overall sales. Real commercial terms are heavily constrained by BOE’s pricing power, resulting in aggressive “price-for-volume” concessions that have eroded human-machine interaction (HMI) chip margins down to 7.3% for core display driver components.
• RISC-V in Embedded/Automotive Ecosystems Faces a Multi-Year Adoption Lag: Despite launching high-performance SoCs like the EIC7700X (19.95 TOPS NPU, SiFive P550 cores), displacing ARM and x86 in the automotive and robotics sectors is limited by extreme software ecosystem fragmentation. Real-world migration is currently confined to deep-edge microcontrollers (MCUs) and niche co-processors, with main cockpit and safety-critical powertrain displacements pushed out beyond 2030 due to toolchain gaps and qualification barriers.