Holy Fire Holdings Hong Kong IPO: Borrowing Money While Paying Dividends, Controlling Couple Pockets Huge Profits; Performance Highly Dependent on Single Customer, Nearly 70% of Assets Are Receivables

Issuer: Sina Finance Listed Company Research Institute

Author: Jun

On March 13, 2026, Shenghuo Holdings Group Co., Ltd. (formerly “Shenghuo Technology Group Co., Ltd.”,简称 “Shenghuo Holdings” or “the Company”) updated its prospectus and submitted an application for listing on the Main Board of the Hong Kong Stock Exchange, with Cinda International serving as the sole sponsor.

Behind rapid performance growth, Shenghuo Holdings’ customer concentration is abnormally high, with revenue and profit heavily dependent on its largest client. Meanwhile, Shenghuo Holdings has recently acquired a state-owned enterprise client in a certain country, which has driven revenue growth but also resulted in large and increasing accounts receivable balances, with operational cash flow temporarily deteriorating. As of the end of January this year, Shenghuo Holdings’ accounts receivable still accounted for 82.06% of current assets.

To maintain normal business operations, as of the end of January this year, Shenghuo Holdings’ short-term loans rose to 36.9 million yuan, while cash and cash equivalents were only 16.56 million yuan, significantly increasing liquidity risk. In this context, Shenghuo Holdings has been borrowing money while paying dividends, with nearly all net profits of the past three years distributed to the actual controllers, a husband and wife.

Pre-IPO Aggressive Dividend Payouts Enable the Controlling Couple to Profit Handsomely

Shenghuo Holdings is a comprehensive professional brand marketing service provider integrating digital technology services, digital marketing, brand consulting, full-service advertising planning, integrated marketing, and media integration communication. Its main businesses include information technology and data services, brand management, and media placement, offering “one item, one code” full-chain digital transformation solutions for corporate clients.

The main operating entity of Shenghuo Holdings is Guangdong Shenghuo Media Technology Group Co., Ltd. (“Shenghuo Technology”). In November 2016, Shenghuo Technology was listed on the New Third Board and publicly transferred. In April 2025, considering the company’s overall strategic development plan, to better focus on business management, improve decision-making efficiency, reduce operating costs, and protect shareholders’ interests, Shenghuo Technology delisted from the New Third Board.

Comparison of Revenue between Shenghuo Technology and Shenghuo Holdings

Interestingly, according to financial reports disclosed during Shenghuo Technology’s listing period, its revenue sometimes even exceeded that of the parent company Shenghuo Holdings. Financial data shows that in 2022, 2023, and the first half of 2024, Shenghuo Technology’s revenue was 124 million yuan, 160 million yuan, and 72.92 million yuan, respectively, with the differences compared to Shenghuo Holdings’ revenue being 11.34 million yuan, -3.14 million yuan, and 785,500 yuan.

Under IFRS, the core purpose of consolidated financial statements is to present the financial position, operating results, and cash flows of a group of companies as a single economic entity. The assets, liabilities, income, and expenses of subsidiaries are fully included, but “internal transactions” within the group (between parent and subsidiaries or among subsidiaries) are eliminated, reflecting only transactions with external third parties. Normally, in 2022, Shenghuo Technology’s revenue was over 10 million yuan higher than that of the parent company, likely due to offsetting internal group transactions.

Shenghuo Technology’s 2022 Annual Report

However, according to Shenghuo Technology’s 2022 Annual Report, its sales revenue from the top five customers was 103 million yuan, 7.19 million yuan, 5.05 million yuan, 1.74 million yuan, and 1.41 million yuan, which do not match the previously mentioned differences. Shenghuo Technology explicitly stated that it has no related-party relationships with these top five customers.

This raises the question: where did the additional over 10 million yuan of revenue in 2022 come from? Are these transactions commercially substantive, or is there possible revenue inflation?

Before the IPO, Zhong Jian and his spouse Luo Xinyan controlled a total of 95.8% of Shenghuo Holdings’ shares, making them the company’s controlling shareholders and actual controllers; Hui Ju BVI and Daming BVI held 3.2% and 1.0%, respectively. Additionally, Shenghuo Holdings’ management team has a strong “family” character: Executive Director Luo Zhiyong is Zhong Jian’s brother-in-law, and Shenghuo Technology’s supervisor and media director Zhong Zhiyong is Zhong Jian’s nephew.

Experts indicate that in Chinese listed companies, it is common for controlling shareholders to abuse control rights to misappropriate company assets and funds, transfer profits, and engage in related-party transactions. Under a dominant shareholding structure, the controlling shareholder’s influence can affect the independence of independent directors, supervisory boards, and intermediaries, making it difficult to safeguard minority shareholders’ interests. Moreover, highly concentrated ownership can lead to governance failures, allowing major shareholders to make decisions based on personal interests, often resulting in a “one-man rule” phenomenon, which may jeopardize minority shareholders’ rights.

It is noteworthy that Shenghuo Holdings has engaged in aggressive pre-IPO dividend distributions, with the controlling couple profiting significantly. In 2024 and 2025, the company declared and paid dividends of 10.4 million yuan and 77.6 million yuan, accounting for 31.32% and 201.00% of net profit for those periods, respectively; cumulative dividends over three years totaled 88 million yuan, accounting for nearly 89% of total net profits.

This means Shenghuo Holdings has distributed almost all profits earned over the past three years to the actual controllers. Based on the latest shareholding ratios, the controlling couple has at least pocketed 65 million yuan. Additionally, Zhong Jian’s annual salary has consistently exceeded 1.1 million yuan, with a total of 3.379 million yuan received over the past three years.

Performance Highly Dependent on a Single Client; Nearly 70% of Assets Are Accounts Receivable

Financial data shows that from 2023 to 2025, Shenghuo Holdings achieved revenues of 163 million yuan, 252 million yuan, and 301 million yuan, with net profits of 27.15 million yuan, 33.2 million yuan, and 38.61 million yuan, respectively.

Behind this rapid growth, Shenghuo Holdings’ customer concentration is abnormally high, with 40% of revenue relying on its largest client. During the reporting periods, revenue from the top five clients accounted for 91.2%, 79.8%, and 91.3% of total revenue, with the largest client (Client A) contributing 78.6%, 49.3%, and 40.4%, respectively.

However, Shenghuo Holdings’ customer loyalty is low; only one client, Client A, overlapped over the three years. Revenue from Client A was 128 million yuan, 124 million yuan, and 122 million yuan, showing a decreasing trend.

More critically, the gross profit margin for Client A was the highest among all clients, reaching 38.5%, 35.9%, and 37.2% from 2023 to 2025. In contrast, gross margins for other major clients were only 16.3%, 10.3%, and 13.3% during the same period.

This indicates that Shenghuo Holdings’ revenue dependence on Client A is coupled with profitability reliance. As revenue from Client A declines, its proportion of total revenue decreases sharply, and the company’s overall gross profit margin is severely diluted. In 2024, the company’s comprehensive gross profit margin was 24.1%, a significant drop of 10.1 percentage points year-on-year, further decreasing to 24% in 2025.

Note that Client A is a leading food and beverage group listed on the Hong Kong Main Board, engaged in the production and distribution of fast-moving consumer goods (specifically instant noodles and beverages) in China. It is highly likely that this client is Tingyi (Cayman Islands) Holding Corp. (Master Kong). Additionally, Master Kong appeared in Shenghuo Technology’s 2018 Annual Report as its second-largest customer.

Master Kong’s Revenue Trends over the Past Five Years

Public information indicates that Master Kong is facing a “mid-life crisis.” From 2020 to 2024, its revenue grew slowly from 78.717 billion yuan to 80.651 billion yuan, with a compound annual growth rate of only 0.8%, far below the industry average of about 6%.

In the first half of 2025, Master Kong’s revenue was approximately 40.092 billion yuan, down 2.7% year-on-year, with sales dropping over 1.1 billion yuan. Its instant noodle business revenue was 13.465 billion yuan, down 2.5%, and beverage revenue was 26.359 billion yuan, down 2.6%, losing 706 million yuan compared to the same period in 2024.

Furthermore, in 2024, Shenghuo Holdings successfully established a business relationship with Client H, generating sales of 32.39 million yuan that year. In 2025, revenue from Client H surged to 117 million yuan, a year-on-year increase of 262.13%, accounting for 39% of the company’s total revenue, nearly equal to that of Client A.

However, cooperation with Client H is a double-edged sword. On one hand, increased procurement by Client H significantly boosted the company’s revenue scale; on the other hand, as a large state-owned enterprise group, Client H enforces strict budget management, centralized procurement, and multi-layer approval processes. Payments require rigorous approval procedures, resulting in longer payment cycles and leading to large and growing accounts receivable balances.

Shenghuo Holdings’ Accounts Receivable Changes

From 2023 to 2025, Shenghuo Holdings’ accounts receivable turnover days were 117.3, 180.1, and 206.0 days, nearly doubling the collection period. As of the end of 2025, accounts receivable stood at 159 million yuan, accounting for 69.46% of total assets, up 28.18 percentage points from the end of 2023.

During the same period, net cash flow from operating activities was 14.947 million yuan, -40.758 million yuan, and 30.587 million yuan, with significant fluctuations. The cash flow in 2024 deteriorated sharply mainly due to increased accounts receivable.

By the end of 2025, Shenghuo Holdings had only 3.702 billion yuan in cash and cash equivalents, while interest-bearing debt had risen to 68.083 million yuan, with a funding gap exceeding 30 million yuan. Short-term loans reached 35.3 million yuan, a 16-fold increase from the end of 2023, significantly increasing short-term repayment pressure.

As of the end of January this year, Shenghuo Holdings’ cash and cash equivalents halved to only 16.56 million yuan, while short-term borrowings further increased to 36.9 million yuan, significantly heightening liquidity risk. The company stated that prior to the IPO, bank financing had been fully utilized.

Interestingly, despite tight liquidity, Shenghuo Holdings still chose to borrow money to pay dividends. In 2025, the company repaid 6.463 million yuan of loans and borrowed 50.8 million yuan from banks; simultaneously, it paid dividends of 57.89 million yuan, resulting in a net cash outflow from financing activities exceeding 17 million yuan.

If Shenghuo Holdings does not continue borrowing from banks, its current cash flow level makes it difficult to sustain normal operations after large dividend payouts.

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Responsible Editor: Company Observer