Xinsheng Technology Under Continuous Regulatory Scrutiny; Wang Haijiang and Spouse's 99% Controlling Stake Received 73.5 Million Dividend Before IPO

Changjiang Business Reporter Zhang Lu

Leading computer embroidery machine company Xinsheng Technology makes a second attempt to enter the capital market and is finally approved.

On March 12, the 2026 23rd review meeting of the Beijing Stock Exchange Listing Committee announced that Zhejiang Xinsheng Technology Co., Ltd. (hereinafter referred to as “Xinsheng Technology”)'s initial public offering application has been approved, making it the first IPO company in 2026 to be approved after a second review following a temporary suspension, successfully opening the door to the capital market.

As a “Little Giant” recognized by the Ministry of Industry and Information Technology for specialized, refined, distinctive, and innovative development, Xinsheng Technology has seen rapid performance growth in recent years, with gross profit margin rising from 20.27% to 25.58%, significantly outperforming industry peers.

However, behind this impressive growth, the company still faces many unresolved issues. During the reporting period, the company’s overseas revenue has long accounted for over 50%, with third-party payments totaling 407 million yuan from 2022 to 2024, raising regulatory concerns about the authenticity of revenue and the compliance of payments.

Meanwhile, Changjiang Business Reporter noted that Xinsheng Technology’s R&D expense ratio has been steadily declining and is significantly lower than industry peers. The company is controlled by a married couple holding a combined 99.05% stake, with prominent issues such as family-style management, frequent changes of CFOs, and concentrated related-party transactions. Even after passing the review smoothly, its governance weaknesses and financial risks remain significant.

Authenticity of Overseas Sales Under Scrutiny

Data shows that Xinsheng Technology was founded in 2004, mainly engaged in the research, development, production, and sales of computer embroidery machines. Its products include two main series: flat embroidery machines and special machines, widely used in clothing, home textiles, shoes, and hats, with its own brand “SINSIM.” According to the China Sewing Machinery Association, the company holds about 13% of the market share, ranking first among computer embroidery machine companies in 2024, claiming to be an industry leader.

Financially, Xinsheng Technology has shown excellent performance during the reporting period. From 2022 to the first half of 2025 (hereinafter referred to as “the reporting period”), the company achieved operating revenues of 600 million yuan, 704 million yuan, 1.03 billion yuan, and 655 million yuan, with net profits attributable to shareholders of 52.60 million yuan, 58.86 million yuan, 120 million yuan, and 87.78 million yuan, respectively.

Gross profit margins increased from 20.27% in 2022 to 20.35% in 2023, then jumped to 23.16% in 2024, and further rose to 25.58% in the first half of 2025, even surpassing industry peers.

However, the Changjiang Business Reporter observed that as a company heavily reliant on exports, Xinsheng Technology’s overseas revenue has long maintained around 50%, with 53.37% in the first half of 2025.

Regionally, during the reporting period, overseas sales were highly concentrated in Pakistan and India, which contributed nearly 40% of revenue. Key export customers include M. RAMZAN and related parties in Pakistan, and LIBERTY, ALLIANCE in India. The company claims to have “stable cooperation for many years” with these clients. However, concerns about the authenticity of these customers’ revenue and the sustainability of overseas market growth have become focal points of regulatory inquiries. The company was previously suspended at the first review due to these issues.

More alarmingly, the scale of third-party payments remains high. According to the prospectus and inquiries from the Beijing Stock Exchange, from 2022 to 2024, third-party payments totaled 143 million yuan, 107 million yuan, and 157 million yuan, respectively, totaling 407 million yuan over three years, accounting for 23.78%, 15.15%, and 15.28% of revenue in each period. Among these, cross-border foreign exchange-capable third-party payments accounted for 6.12%, 8.28%, and 6.57% of revenue, mainly concentrated in regions with strict foreign exchange controls such as India and Pakistan.

The core regulatory concern is that Xinsheng Technology recognizes revenue only upon receipt of USD, making it difficult to effectively track the source of funds and the final sales, creating obvious blind spots in verification.

Due diligence by underwriters shows that in 2022, only 15.64% of third-party payment communication records with customers were reviewed, and in the first half of 2025, only 31.41%. Nearly 70% of transactions lack original instructions from customers authorizing third-party payments. Additionally, only 52.45% of terminal customer equipment usage was verified in the first half of 2025, meaning nearly half of the final destination of goods could not be confirmed, further fueling doubts about revenue authenticity. Some customer responses were inconsistent or not received, increasing the risk of non-compliance in payments.

Family Control of 99% Raises Internal Control Risks

Despite the “Little Giant” label for specialized, refined, and innovative enterprises, Xinsheng Technology appears to lack core technological breakthroughs, suffers from insufficient R&D investment, and faces concerns about sustainable growth.

The prospectus shows that during the reporting period, R&D expenses were 23.45 million yuan, 25.55 million yuan, 32.40 million yuan, and 18.17 million yuan, with R&D expense ratios of 3.91%, 3.63%, 3.15%, and 2.77%, respectively, showing a declining trend. In comparison, industry peers’ average R&D expense ratios were 4.19%, 5.51%, 5.07%, and 5.34%, indicating Xinsheng Technology’s R&D investment is significantly below industry levels.

The company’s R&D team is also weaker than peers. As of June 2025, Xinsheng Technology had 46 R&D personnel, accounting for 4.57% of total employees. By the end of 2024, comparable companies like Jack Technology had 1,289 R&D staff (18% of employees), and Shangong Shenbei had 401 R&D personnel (8.25%).

More concerning is the high concentration of equity ownership and internal governance risks. The prospectus discloses that the actual controllers, Wang Haijiang and Yao Xiaoyan, control 99.05% of voting rights through direct and indirect means, with only 0.95% held by external shareholders. Under absolute control, family-style management is prominent, with 13 relatives of the controllers and senior executives holding positions across the company and subsidiaries, including directors, sales, administrative, and production roles, with internal checks and balances nearly nonexistent.

Meanwhile, the core management team is highly unstable, with the CFO position changing three times in three years. Chen Haifeng left in November 2022, and Liao Kaimin resigned in March 2025.

This “family-style” management is also accompanied by related-party transactions. From 2022 to the first half of 2025, Xinsheng Technology continuously purchased machinery from Shen Gong Machinery, controlled by the controllers’ cousin, with amounts of 5.76 million yuan, 7.80 million yuan, 16.02 million yuan, and 16.82 million yuan, respectively. These related-party transactions accounted for over 80% of the other party’s revenue, raising questions about fairness.

Funding and dividend distribution also attract market scrutiny. As of June 2025, the company’s cash and short-term financial assets totaled 560 million yuan, with short-term borrowings of only 71.28 million yuan, indicating ample liquidity. Moreover, from 2022 to 2024, the company paid dividends of 21 million yuan, 21 million yuan, and 31.5 million yuan, totaling nearly 73.5 million yuan, mostly benefiting the controllers’ family.

Interestingly, Xinsheng Technology plans to raise 449 million yuan in this IPO, with 50 million yuan allocated to supplement working capital.