IPO Radar | Fundraising and Capacity Expansion During Industry Surplus Period, Longxin Intelligence Mired in Controversy

Ask AI · Longxin Intelligent: Why Persist with IPO Fundraising During Industry Downturn?

As a national-level specialized and innovative “Little Giant” enterprise, Changzhou Longxin Intelligent Equipment Co., Ltd. (Stock code: 874520.BJ) has attracted market attention with its pursuit of listing on the Beijing Stock Exchange. This company, with over 20 years of experience in high-end micro-nano composite material preparation equipment, has built a client base including industry giants like CATL and Hunan Youneng, thanks to its core businesses in grinding equipment, drying equipment, and automated material production lines.

However, the downstream lithium iron phosphate (LFP) industry has experienced phased overcapacity, slowing Longxin Intelligent’s performance growth. Additionally, Ji Mian News found that the company faces high dependency risks, with sales to its top five clients soaring to 69.32%, along with financial pressures from high accounts receivable and inventory levels, and disputes over the mismatch between fundraising expansion and industry adjustment cycles.

Dispute Over 458 Million Yuan Investment During Industry Overcapacity

Longxin Intelligent plans to raise 458 million yuan in its IPO, which will be allocated to expanding production equipment and supporting automation lines for micro-nano materials, building large-scale automated equipment, and establishing R&D centers. The core expansion project aims to add 500 new devices and 50 production lines. Yet, the company’s own financial situation raises questions about the necessity of this fundraising.

Longxin Intelligent is not “short of money” for listing. During the reporting period (2022 to June 2025), the company has frequently increased capital and dividends: in 2022, it paid out 83.2 million yuan in cash dividends, and in 2023, another 43 million yuan. As of June 2025, the company held 280 million yuan in trading financial assets, mainly bank wealth management products.

“A clearer explanation is needed on whether the core driver for the company’s listing is capacity expansion or early-stage investment exit,” said an institutional investor who has long followed BSE IPOs. “Early investors like Zhongbi Fund and Hongde Guang Investment have held shares for years, and there’s potential for exit after this listing.” These investors entered around 2023 at a high price of 18.33 yuan per share.

Market concerns also focus on the prospects of the invested funds. Longxin Intelligent operates in a downstream industry—particularly the LFP sector—that is currently suffering from phased and structural overcapacity. Since 2023, industry competition has intensified, production rates are low, and even leading companies are experiencing losses. The company plans to significantly increase capacity but has not disclosed clear customer reserves or order support data in its prospectus. An investor told Ji Mian News, “Expanding capacity during an industry downturn without confirmed customer orders could mean that the day of commissioning will be the day when utilization rates plummet and depreciation erodes profits.”

Performance Decline and Dependence on Major Customers

Longxin Intelligent’s rollercoaster performance clearly reveals its vulnerability due to extreme dependence on a single downstream sector.

From 2022 to 2024, revenue rose from 336 million yuan to 604 million yuan; net profit increased from 87.16 million yuan to 143 million yuan, then fell back to 120 million yuan. In 2025, the company expects revenue of 634 million yuan, up 5%, with net profit of 118 million yuan, down 1.7%. The core reason for this volatility is the phased and structural overcapacity in the downstream LFP industry since 2023, which has intensified competition, lowered production efficiency, and caused profit declines.

Data source: WIND

The sharp compression of profit margins is directly reflected in the plunge of gross profit margin. Longxin Intelligent’s overall gross margin dropped from 41.35% in 2023 to 34.26% in 2024, a decline of over 7 percentage points within a year. Additionally, the gross margin of new orders—representing future profit potential—fell from a high of 40.48% in 2023 to 26.92% in the first half of 2025. The company explained this decline as due to decreased downstream market activity and increased customer bargaining power, forcing it into price wars. While this strategy maintains revenue scale, it damages the company’s “self-sustaining” profitability.

This loss of bargaining power is closely related to the customer structure. From 2022 to mid-2025, sales to the top five clients accounted for 48.68%, 64.83%, 66.95%, and 69.32%, respectively, showing a rising trend. These clients are mainly industry giants in new energy battery materials. Longxin Intelligent has established business relationships with companies like Hunan Youneng, Rongtong Gaoke, CATL, and Gotion High-tech, whose orders are a significant revenue pillar. However, such high customer concentration also poses binding risks, limiting pricing flexibility. An industry analyst told Ji Mian News, “CATL and other giants have strong bargaining power, which can push down equipment prices and may require suppliers to prepay funds or extend payment terms. More importantly, if these large clients choose to build their own equipment lines or support new suppliers in the future, it could significantly impact Longxin Intelligent’s performance.”

Dangerous “Financial Statement Games”

If declining performance is an obvious “external wound,” then deteriorating financial quality is an “internal injury.” Longxin Intelligent’s financial statements show “profitable on paper but cash flow under pressure,” with high accounts receivable and inventory levels, and a divergence between operating cash flow and net profit.

Accounts receivable at each period-end were 80.45 million yuan, 112.28 million yuan, 145.25 million yuan, and 190.17 million yuan, respectively, showing continuous growth. The amounts and proportions of receivables over one year old are also increasing. The rapid growth in receivables correlates with overcapacity in downstream industries and tight customer cash flows.

As of June 2025, the top ten accounts receivable owed by the company’s clients totaled over 133 million yuan, accounting for 71.84% of the top ten receivables. The overdue amounts are mainly from key clients like Hunan Youneng, Rongtong Gaoke, Gotion High-tech, Chuangpus, and Dongyang Sunshine. The company states reasons such as “internal payment scheduling inconsistent with contractual agreements” and “customer financial strain causing delayed payments.”

Data source: Prospectus

As of late October 2025, the collection rate for these overdue receivables was only 13.24%. The company explained this as “collection data being recent relative to the reporting period.” Compared to a 42.33% collection rate at the end of 2024, the slowdown indicates that downstream clients’ financial pressures are increasingly passing upstream, raising the risk of bad debts.

High accounts receivable directly drain cash flow. Despite net profits exceeding 350 million yuan from 2022 to 2024, the net cash flow from operating activities in the first half of 2025 was negative 25.64 million yuan. The company attributes this to reduced prepayments, but a deeper reason may be loosened collection terms to secure orders.

Inventory levels at each period-end were 389.71 million yuan, 631.87 million yuan, 506.96 million yuan, and 414.91 million yuan, respectively, remaining high throughout. A large portion consists of goods in transit and work-in-progress, mainly due to long lead times for large equipment and production lines. These shipped but not yet installed or commissioned products pose potential risks. If client projects stall or technical routes change, these goods could face long-term storage or returns, leading to inventory impairments.

With risks and challenges intertwined, Longxin Intelligent needs to provide the market with clearer answers.