Ourun Electric Couple Controls Nearly 99% Voting Rights, Dividends Exceed 30 Million, Multiple Suspicious Related Party Transactions

On March 17, Zhejiang Oulun Electric Co., Ltd. (Oulun Electric) will have a hearing for listing on the Beijing Stock Exchange, with Guolian Minsheng Securities as the sponsor.

Oulun Electric is a comprehensive enterprise engaged in R&D, design, manufacturing, sales, and service of environmental regulation equipment. Its main products include dehumidifiers, portable air conditioners, car refrigerators, and air source heat pumps. The products are widely used in industries such as power, electronics, pharmaceuticals, paper, food, agricultural and sideline products, venues, warehouses, and laboratories.

Review shows that married couple Chen Xianyong and Zhan Xiaoying hold nearly 99% of voting rights; they have previously provided funds to the company’s actual controllers’ son and brother; there are issues with accounting corrections and inadequate contract seal management; the company plans to raise 753 million yuan, with a reduction of 50 million yuan in working capital, and over 30 million yuan in dividends; rapid expansion has led to two inquiries about capacity utilization; R&D expenses lag behind sales expenses, with the lowest R&D expense ratio among peers; R&D personnel account for less than 10%, raising questions about qualification as a high-tech enterprise; invention patents account for less than 5%, while average salaries of R&D staff are rising; last year’s quarterly performance fluctuated significantly, with slower growth in Q1 this year; mobile air conditioners account for 55% of revenue, with 60% of income from overseas; related-party sales exist, with the counterpart being a company controlled by the actual controller’s son; Deyao Packaging, a related company, became a major supplier in its second year.

Married couple Chen Xianyong and Zhan Xiaoying hold nearly 99% of voting rights and have previously provided over 4 million yuan in funds

According to quick summaries, Oulun Limited was established in December 2009, completed share reform in October 2022, and was listed on the New Third Board in October 2024, currently at the Innovation Tier. The company began filing for guidance and record-keeping as early as January 2023, completed guidance in May 2025, and the listing application was accepted the following month, after two rounds of inquiries, leading to this hearing.

The controlling couple Chen Xianyong and Zhan Xiaoying hold nearly 99% of voting rights. The controlling shareholder is Chen Xianyong, with actual control jointly held by Chen Xianyong and Zhan Xiaoying, with direct shareholdings of 55.97% and 37.31%, respectively. Chen Xianyong also indirectly holds 2.75% through Oujing Hangzhou and is the company’s executive partner. Together, they control 98.88% of the company.

Chen Xianyong, born in 1971, holds a master’s degree. He has been a teacher at Tongcun Middle School in Kaihua County, director of the wood products division at Kaihua Building Materials Factory, general manager of Kaihua Building Materials Wood Products Company, and since June 2005, executive director and general manager of Songjing Electric. Since December 2009, he has served as executive director, chairman, and general manager.

Zhan Xiaoying, born in 1973, also holds a master’s degree. She has worked in finance and supervision roles at Kaihua Building Materials and Songjing Electric. Since October 2022, she has been a director of the company.

The couple’s nearly 99% voting rights and key positions pose risks of improper control by the actual controllers. Oulun Electric states that if the controllers misuse their control to influence operations, personnel, or finances, it could threaten normal company operations and harm minority shareholders.

Funds were previously extended to the controllers’ son and brother. The company has funds occupied, with a balance of 3.676 million yuan in early 2022, increasing by 775,000 yuan during the period. Specifically, the initial loan to Zhan Zuhou was 3.676 million yuan, with an additional 93,700 yuan, and repaid by the end of the period; the loan to Chen Qian was 681,400 yuan, with a balance of 76,100 yuan at period-end, repaid by early 2024. Chen Qian and Zhan Zuhou are the controllers’ son and brother. The company claims the funds were due to insufficient compliance awareness, supported by loan agreements, internal approval documents, bank receipts, and interest calculation tables.

Are Chen Qian and Zhan Zuhou employees? If not, why did the company extend funds to them? What were the funds used for? When exactly were the loans made? Were proper procedures followed? Have similar behaviors occurred before? How will future risks be managed? These are key concerns for the Beijing Stock Exchange.

Accounting corrections and inadequate contract seal management. In 2022, 2023, and the first half of 2025, Oulun Electric corrected accounting errors, with adjustments to owners’ equity of -5.3778 million, -1.7055 million, and 422,300 yuan, representing -1.59%, -0.36%, and 0.05% of pre-correction owners’ equity. Revenue corrections were -7.276 million, -7.464 million, and -426.45 million yuan; net profit corrections were -2.5413 million, 3.6723 million, and 422,300 yuan.

These errors stem from misunderstandings of accounting standards and poor communication with procurement, HR, and R&D departments. The company plans to improve through staff training and better interdepartmental communication.

Additionally, contract seal management is inadequate. For example, a委托加工协议 (commissioned processing agreement) signed in 2024 with Hangzhou Songjing Electric lacked a signature and date; some contracts signed offline with clients were not properly recorded in seal management logs.

Clearly, Oulun Electric needs to strengthen internal controls, especially as it prepares to go public and face investors, emphasizing compliance and internal procedures.

Proposed raise of 753 million yuan, with a 50 million yuan reduction in working capital, and over 30 million yuan in dividends

According to quick summaries, in this IPO, Oulun Electric plans to issue no more than 19 million or 21.85 million shares, raising approximately 753.71 million yuan. Funds will be used for annual production of 600,000 dehumidifiers, 15,000 air source heat pumps, 30,000 heat pumps, R&D center construction, and working capital, allocated as approximately 459 million, 95 million, 99 million, and 100 million yuan respectively.

The working capital increase is reduced by 50 million yuan; the prospectus does not disclose dividends. The revised working capital figure in the listing document is 50 million yuan less than the initial filing. From the debt ratios, the company’s current assets and liabilities show a high cash position—cash increased from 201 million to 655 million yuan, and financial assets from 1.35 million to 40.64 million yuan—while short-term borrowings decreased from 60 million to about 30 million yuan. Long-term debt at the end of the period was about 20 million yuan. The cash flow indicates interest-bearing liabilities are several times higher than cash, raising questions about the necessity of the working capital increase.

Interestingly, the company paid a dividend of 32.16 million yuan on May 28, 2025, accounting for 15.46% of net profit attributable to shareholders that period. The controllers, Chen Xianyong and Zhan Xiaoying, received 18.70 million and 12 million yuan respectively.

The dividend suggests a cash outflow during a period when the company is raising funds. Is this contradictory? Both IPO documents do not disclose dividend details—was this an omission? Does it comply with disclosure requirements?

Rapid expansion and capacity utilization. During the reporting period, capacity utilization increased significantly: 61.62%, 85.48%, 94.09%, and 96.53%. Dehumidifiers and portable air conditioners had utilization rates of 64.08%, 90.58%, 98.66%, and 99.28%; from 2023 to mid-2025, heat pump utilization was 15%, 36.25%, and 80.49%.

In 2024, dehumidifier and heat pump production volumes were 2.3414 million and 8,700 units, respectively, representing 25.63% and 517.24% of the planned capacity expansion, indicating aggressive expansion. Future capacity digestion should be closely monitored.

The Beijing Stock Exchange requested quantification of whether the new capacity from dehumidifier and heat pump projects risks being idle, and whether risks are fully disclosed. The company’s prospectus warns of risks if market demand is below expectations or competition intensifies, potentially leading to unsold capacity and adverse economic effects.

R&D expenses lag behind sales expenses, with the lowest R&D expense ratio among peers. During the period, R&D expenses increased steadily: 35 million, 39 million, 50.7 million, and 33.7 million yuan, with ratios decreasing from 3.6% to 2.71%. Sales expenses are much higher: 63.78 million, 68.72 million, 95.91 million, and 57.27 million yuan, with ratios of 6.56%, 5.58%, 5.91%, and 4.61%. Industry averages for R&D expense ratios are higher—around 3.8% to 4.4%. After 2023, peers’ ratios exceed those of Oulun Electric, e.g., DeYe Co., Ousheng Electric, Midea, Hisense, and Gree all above 3.65%.

R&D personnel account for less than 10%. How does the company qualify as a high-tech enterprise? R&D expenses mainly cover staff salaries and materials—about 45% and 41.6% in 2024. R&D staff numbered 129 and 130 in 2024 and early 2025, representing 9.56% and 7.79%. The company claims to be a high-tech enterprise, which requires at least 10% of staff engaged in R&D activities. In 2024, it does not meet this criterion. Was it compliant earlier? If not, qualification might be revoked, risking penalties.

In 2024-2026, the company benefits from a 15% preferential tax rate, but the impact of R&D personnel proportion is significant—accounting for over 10% of profits. If the qualification is lost, the company could face tax penalties.

Invention patents account for less than 5%. R&D staff averaged 84.75, 96.42, 113.5, and 130.33 people, with salaries rising from 163,800 to 204,700 yuan annually. Compared to regional peers, salaries are generally declining or stable, except for the company’s own staff. As of the signing date of the prospectus, the company held 345 patents, with only 16 invention patents (~4.64%). In March 2025, core technical personnel Fang Zhibin left.

Quarterly performance growth slowed, 60% of revenue from overseas, related-party sales and procurement present

Last year’s quarterly performance fluctuated significantly. From 2022 to 2025, revenue grew steadily: 972 million, 1.232 billion, 1.623 billion, and 2.037 billion yuan; net profit attributable to shareholders was 92 million, 140 million, 208 million, and 230 million yuan.

Quarterly, revenue was 527 million, 716 million, 465 million, and 329 million yuan, with growth rates slowing: 55.16%, 28.33%, 9.05%, and 9.83%. Net profits were 5.83 million, 9.17 million, 5.02 million, and 3 million yuan, with growth rates of 72.59%, 12.41%, -20.87%, and 2.13%.

In Q1 2026, revenue is projected between 551 million and 609 million yuan, with growth of 5%–15.66%; net profit between 60 million and 66 million yuan, up 3%–13.89%. Growth is expected to slow compared to Q1 2025.

Mobile air conditioners account for 55% of revenue, with 60% from overseas. Main revenue sources are dehumidifiers and portable air conditioners. Dehumidifier revenue declined from 595 million, 669 million, 894 million, to 420 million yuan, decreasing from 61.42% to 33.81%. Portable air conditioners increased from 336 million, 470 million, 569 million, to 685 million yuan, rising from 34.64% to 55.13%. They have overtaken dehumidifiers as the main revenue source.

Overseas markets contribute about 55 million, 696 million, 1.014 billion, and 746 million yuan, representing 54.88%, 56.47%, 62.47%, and 60.07% of total revenue. Europe, North America, and Asia are key regions.

Related-party sales involve the controller’s son’s company. In 2022, BUBLUE was the third-largest customer, with sales of 32.29 million yuan, decreasing to 2.43 million and 436,900 yuan in subsequent years. BUBLUE is controlled by the controllers’ son, Chen Qian, and sells dehumidifiers on Amazon overseas. The decline reflects regulatory adjustments. BUBLUE’s registration was canceled in 2024.

The fairness of related-party transactions attracted the exchange’s attention. The company compared BUBLUE’s sales prices with market prices for similar models and with other customers. From 2022 to 2024, the average unit price for Model 2 sold to BUBLUE was about 535–549 yuan, while to non-related customer A it was about 571–590 yuan, higher than BUBLUE’s. Why did BUBLUE pay higher prices despite higher purchase volume? Is this consistent with commercial logic?

Deyao Packaging, a related company, became a major supplier in its second year. The company purchased cartons and packaging materials from Huzhou Deyao Packaging, with increasing purchase amounts. Deyao Packaging was founded in August 2021, with a registered capital of 3 million yuan, controlled by the controller’s aunt Wang Junli, who held 50% before exiting in late 2024. The company’s performance and ownership structure suggest high dependency and possible shareholding arrangements, which warrant further scrutiny.

These issues—related-party transactions, ownership structures, and procurement practices—are key points for the Beijing Stock Exchange’s review.