The provision ratio for bad debts from a single customer increases to 80%. Hongshida IPO: The "fruit chain" dependency issue remains to be resolved.

(Source: Economic Information Daily)

Kunshan Hongshida Intelligent Technology Co., Ltd. (hereinafter referred to as “Hongshida”) is advancing its listing on the National Equities Exchange and Quotations (NEEQ). Recently, its IPO review status on record has been updated to “registration.” As a company deeply engaged in the intelligent manufacturing equipment sector, Hongshida’s performance is highly tied to the Apple industrial chain. While its revenue scale has grown steadily, the company also faces multiple challenges: the risk of order fluctuations stemming from its heavy dependence on the “iPhone supply-chain” (“guo chain”), the reasonableness of running in parallel the situation where a major customer takes an equity stake and procurement surges, and compliance scrutiny arising from the concentrated revenue recognition in the fourth quarter. In addition, the prospectus (registration version) shows that the company’s bad-debt provision ratio for a single customer has increased to 80%, drawing market attention to the quality of its profitability and its ability to withstand risks.

Major customer takes an equity stake; procurement amount surges

Hongshida is a high-tech enterprise specializing in R&D, production, and sales of intelligent automation equipment, intelligent flexible production lines, parts, and consumables. It is committed to providing precise, stable, and reliable intelligent manufacturing solutions for global consumer electronics, new energy, and broad semiconductor sectors, among others.

According to the prospectus, from 2023 to 2025 (hereinafter referred to as the “reporting period”), Hongshida’s operating revenue was RMB 476 million, RMB 649 million, and RMB 664 million, respectively; its net profit was RMB 39 million, RMB 53 million, and RMB 70 million, respectively. However, concentration risk among customers cannot be ignored— in 2025, sales revenue to the top five customers accounted for as much as 68.93% of the company’s total sales. Among them, Luxshare Precision ranked first with RMB 175 million (annual sales revenue as a share: 26.37%); Foxconn ranked second with RMB 96 million (annual sales revenue as a share: 14.47%).

Based on the first-round inquiry response, Hongshida’s level of reliance on the “iPhone supply-chain” shows an upward fluctuation trend. From 2022 to 2024, the proportion of revenue derived from the “iPhone supply-chain” to operating business revenue was 77.34%, 62.37%, and 76.64%, respectively. In the first half of 2025, it further rose to 81.79%. This means that the majority of the company’s orders are constrained by Apple’s procurement strategy and the cycle of capital expenditures of its contract manufacturers.

Such “dependence” is especially evident in changes to major customers’ orders. Influenced by changes in end-customer demand and the company’s own operating conditions, some of Hongshida’s customers’ orders have experienced sharp fluctuations. For example, Taijun Technology contributed revenue of RMB 85.4775 million in 2022, but Taijun Technology’s net profit in the first three quarters of 2025 was -1.632 billion New Taiwan dollars, a year-on-year decline of 630.69%. In recent years, its capital expenditures such as fixed-asset investment have declined year by year, causing Hongshida’s procurement amount in the first half of 2025 to drop sharply to RMB 1.8124 million. By contrast, Foxconn’s procurement amount surged from RMB 1.9909 million in 2023 to RMB 96.0998 million in 2025.

In addition, the equity-staking behavior of major customers, namely Pegatron Holding and Dongshan Precision, around the eve of Hongshida’s IPO has also drawn regulators’ focused attention. The inquiry response report shows that on January 20, 2023, Pegatron Investment (a subsidiary of Pegatron Holding) and Dongshan Investment (a subsidiary of Dongshan Precision) each contributed RMB 20 million and RMB 28.8 million in cash from their own funds, respectively, with the share increase pricing of 26.67 yuan per share for both. After completion of this capital increase, Pegatron Investment and Dongshan Investment held shares in the company at proportions of 2.11% and 3.04%, respectively. Among them, Pegatron Holding’s procurement share increased from 4.07% in 2022 to 15.58% in 2024, and revenue contributed in 2024 was RMB 101 million. However, in 2025, Hongshida’s sales revenue to Pegatron Holding fell back to RMB 48.7818 million.

In response, the NEEQ raised questions: after Pegatron Holding became a shareholder of Hongshida, what was the reason for Hongshida’s relatively large increase in sales revenue to it, its gross margin rising and being higher than Hongshida’s average gross margin? Was there any situation of improper transfer of benefits? Hongshida said that during the reporting period, the growth in sales revenue to Pegatron Holding was mainly due to an increase in demand for automation equipment arising from Pegatron Holding’s expansion plan. The increase in revenue from Pegatron Holding was reasonable and matched its operating performance and expansion investment situation.

Revenue recognition compliance further questioned

Seasonal fluctuations in financial data are another focus of the NEEQ’s inquiry of Hongshida. The prospectus shows that from 2023 to 2025, the company’s fourth-quarter revenue as a proportion of total revenue was 55.25%, 48.08%, and 41.53%, respectively, while its second-half revenue from operating businesses has long maintained at over 70%. In December 2024, operating business revenue achieved in a single month was RMB 221 million, accounting for 34.08% of the company’s revenue for the year.

Regarding the compliance of revenue recognition, the NEEQ required Hongshida to explain, among other issues, the reasonableness of why the revenue proportion in each period’s fourth quarter is higher than that of comparable companies; whether the amount and timing of revenue recognition are true and accurate; and whether the relevant internal controls are sound and effective.

Hongshida explained that during the reporting period, the relatively high fourth-quarter revenue proportion in each period was mainly because the company mainly provides customized intelligent manufacturing equipment for sectors such as consumer electronics, new energy, and broad semiconductors. From obtaining orders to final delivery of projects, it involves multiple complex process workflows, and the production and delivery cycle is long. Compared with peer companies, the company’s higher fourth-quarter revenue proportion is mainly due to the company’s products being more concentrated in the module segment rather than the finished product segment, as opposed to peer companies.

On the accounts receivable side, Hongshida’s asset quality faces significant pressure for provisioning. The company’s customer in the photovoltaic energy storage sector, Lvjin New Energy Technology (Suzhou) Co., Ltd. (hereinafter referred to as “Lvjin New Energy”), had a post-period collection ratio of only 0.30%. In the second-round inquiry response, the company stated that after the reporting period, Lvjin New Energy had collected relatively small amounts of the company’s accounts receivable because its downstream customers are mainly customers in the photovoltaic energy storage sector. Delays in downstream customer payments made Lvjin New Energy’s collections from the company slower. Lvjin New Energy is still operating, but its capital turnover is facing temporary difficulties and there is a credit risk. In accordance with the principle of prudence, the company had, as of the end of October 2025, accrued bad-debt provisions at 50% of the accounts receivable balance; the amount of bad-debt provisions was RMB 4.0933 million.

However, according to the latest disclosures in the March 2026 prospectus (registration version), due to signs that Lvjin New Energy’s credit risk has increased, the company has, at the end of 2025, accrued bad-debt provisions at 80% of the accounts receivable balance, with the amount of bad-debt provisions being RMB 6.5494 million. If its future cash flows are unable to improve, the company will still face additional bad-debt risks. If bad debts occur in full, the company will further increase bad-debt losses by RMB 1.6373 million.

Hongshida acknowledged that if the company’s accounts receivable management is improper in the future or customers’ operating and financial conditions deteriorate, the company faces risks such as being unable to collect on time, and even some accounts receivable being unrecoverable. This would adversely affect the company’s asset liquidity and operating performance.

Expansion beyond the “iPhone supply-chain”—effect pending assessment

Perhaps to hedge the risk of relying on the “iPhone supply-chain,” Hongshida is trying to build a new growth engine focusing on new energy and broad semiconductors, and has achieved certain breakthroughs in the broad semiconductor field. For example, the “fully automatic chip flip-heat sink attachment machine” it developed was selected as a major equipment item for the first batch in Jiangsu Province in 2024. The product has successfully achieved supply to well-known chip packaging and testing manufacturers such as Huatians Technology. Also, the TIM dispensing and attaching equipment it developed can achieve micrometer-level alignment accuracy, and is suitable for heat dissipation solutions for high-performance chips such as CPUs and GPUs. It plays an important role in the manufacturing of AI server motherboards and has successfully been supplied to Weixinsci Tong.

For this IPO, Hongshida plans to raise RMB 217 million. Among the planned uses, RMB 66.3411 million will be invested in an intelligent manufacturing equipment capacity expansion project, RMB 50.6120 million in the construction of a R&D center, RMB 40 million to repay bank loans, and RMB 60 million to supplement working capital.

Regarding the necessity of the raised-funds projects, Hongshida said that intelligent manufacturing equipment can be widely applied in the industrial production sector, enabling effective replacement of human labor. While improving the quality of industrial products, it can also reduce production costs. The R&D center construction project is, on the one hand, based on the company’s current products and conducts innovative research and development on key technical points within them. On the other hand, it conducts forward-looking research and development for other application areas such as broad semiconductors based on market development trends, thereby strengthening the company’s comprehensive technology R&D capability and market competitiveness.

However, from the revenue structure, the effectiveness of Hongshida’s business expansion has not yet been evident. In 2024, consumer electronics revenue of RMB 543 million still dominates. New energy revenue fell from RMB 139.1697 million in 2023 to RMB 82.7672 million, and broad semiconductor revenue was RMB 20.6442 million, accounting for less than 4%. According to the inquiry response, the three newly added customers in the new energy sector—Ningbo Yongneng, Pingmei Shengtai, and Lvjin New Energy— were able to meet production demand in phases because the intelligent equipment they purchased can satisfy production needs at particular stages. During the reporting period, the transaction scale with the company had shown a downward trend.

For the core questions, including substantive expansion plans for non-“iPhone supply-chain” business and the risk exposure to impairment of accounts receivable, a reporter from Economic Information Daily called and wrote to Hongshida, but as of the time of publication, no response had been received. Industry insiders analyze that overall, Hongshida is still a company with a deep “iPhone supply-chain” imprint. Although the company has shown some highlights in terms of technological strength and business extension, in its business model it still faces multiple challenges such as excessively high customer concentration and the need to strengthen the standardization of internal controls. Whether listing on the NEEQ can truly help it achieve a value leap from “depending on the iPhone supply-chain” to “enabling AI and semiconductors” still remains to be tested by both subsequent market performance and business results.

(Readers’ mailbox: znhwuyong@163.com)

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