Doing business with competitors, letting his nephew be a supplier, the Guangdong boss born in the 1960s launches an IPO for Jingge New Materials

Questioning AI · How does relying on competitors for raw materials affect a company’s independence?

Gross profit margin declines year by year.

Author | Yang Guoguo

Editor | Liu Qinwen

When you play games on your phone for a long time and feel it getting hot, or when your electric vehicle still runs stably after fast charging, it all relies on the silent contribution of heat conduction materials. These materials are embedded into polymer matrices to quickly transfer heat generated by electronic components. Thermal powder materials are like the “heat dissipation guardians” of electronic devices.

Among them, Guangdong Jinge New Materials Co., Ltd. (hereinafter “Jinge New Materials”) is a deep player in this industry. Its main products include thermal powder materials, flame-retardant powder materials, and wave-absorbing powder materials. Its downstream applications cover high-growth sectors such as new energy vehicles, consumer electronics, 5G communications, and photovoltaic energy storage, with thermal powder materials contributing nearly 70% of revenue, making it the company’s core pillar.

On February 19, 2025, Jinge New Materials was listed on the New Third Board, and the company is currently preparing for a listing on the Beijing Stock Exchange, with a “review” meeting scheduled for March 27.

01

Annual revenue exceeds 500 million yuan,

Gross profit margin declines annually

Thermal powder materials are a type of functional powder material, which also includes flame-retardant powders and wave-absorbing powders. Flame-retardant powders act as the “fireproof armor” for electronics and electrical appliances; wave-absorbing powders are the invisible “electromagnetic guardians,” absorbing stray electromagnetic waves in 5G communication devices and military stealth technology to ensure signal quality and information security.

These are all main products of Jinge New Materials. From 2023 to 2025, Jinge New Materials’ operating income increased from 385 million yuan to 534 million yuan, and net profit attributable to the parent increased from 41.23 million yuan to 57.48 million yuan. While it appears to maintain growth, several key indicators are flashing red.

As the company’s primary revenue source, thermal powder materials contributed 359 million yuan in 2025, accounting for 67.25%. In recent years, its sales volume increased from 18,100 tons in 2023 to 29,800 tons in 2025, and sales revenue from 269 million yuan to 359 million yuan, but the unit price has been declining steadily, from 14,800 yuan/ton in 2023 to 13,700 yuan/ton in 2024, and 12,000 yuan/ton in 2025.

In addition, the unit prices of the company’s other two major products, flame-retardant powders and wave-absorbing powders, are also decreasing. The wave-absorbing powder sales price dropped from 34,800 yuan/ton to 21,300 yuan/ton, a nearly 40% decrease.

The prospectus estimates that, all else being equal, a 5% decrease in the unit price of main products over three years would reduce revenue by approximately 19.93 million yuan, 23.37 million yuan, and 26.68 million yuan respectively, indicating that price fluctuations have a significant impact on performance.

The downward price trend, combined with rising raw material costs, has caused the company’s gross profit margin to fall from 25.28% in 2023 to 22.36% in 2025, a continuous decline over three years.

While falling prices have indeed led to increased sales volume, this has also caused Jinge New Materials’ production to exceed the capacity approved in environmental impact assessments. From 2022 to 2024, overproduction rates were 37.61%, 38.86%, and 5.57%. It was only in 2025, before the IPO, that capacity utilization dropped to 94.96% and rectification was completed.

Source: “Inquiry Reply Letter”

What worries investors even more is that the company’s financial condition is facing “dual high” pressures. At the end of each reporting period, accounts receivable balances were 85 million yuan, 134 million yuan, and 128 million yuan, accounting for 29.88%, 41.9%, and 34.67% of current assets, respectively.

Meanwhile, inventory balances were 61.73 million yuan, 74.04 million yuan, and 85.17 million yuan, accounting for 21.6%, 23.2%, and 23.06% of current assets, respectively—more than half of current assets.

Notably, during the reporting period, Jinge New Materials recorded asset impairment losses of -1.62 million yuan, -2.29 million yuan, and -2.22 million yuan, all related to inventory write-downs. This shows that the “dual high” of accounts receivable and inventory not only ties up a large amount of operating capital but also increases the risk of future bad debts and asset devaluation.

02

Doing business with competitors,

Questioning the fairness of prices

Jinge New Materials’ supply chain relationships are another key point and also a significant operational risk.

From 2023 to 2025, the company’s procurement from its top five suppliers was 128 million yuan, 192 million yuan, and 208 million yuan, accounting for 46.77%, 51.83%, and 51.68% of annual procurement respectively, indicating high concentration. During this period, the top five suppliers remained quite stable, including China Aluminum New Materials, Lianrui New Materials, Lu Chang Chemical, Yufa Group, and Zexi New Materials.

Since the company’s raw materials mainly include spherical alumina, alumina, and aluminum hydroxide, the upstream alumina market is dominated by giants like China Aluminum Group, leading to high industry concentration. Therefore, the company’s largest supplier, China Aluminum New Materials (a subsidiary of China Aluminum Group), is also a major supplier for its competitors Tianma New Materials and Yishitong. The company’s long-term procurement from this supplier is consistent with industry norms and is considered reasonable.

However, from 2022 to 2025, Lianrui New Materials, Zexi New Materials, and Baitu Co., Ltd. are not only among the top five suppliers but are also listed as main competitors.

In 2023-2025, the combined procurement amount from Lianrui New Materials, Zexi New Materials, and Baitu accounted for up to 91.4% of the total procurement during this period.

Baitu Co., Ltd. was the second-largest supplier in 2022 but was no longer among the top five suppliers from 2023 onward.

Lianrui New Materials, in 2023-2025, is not only the company’s second-largest supplier but also its largest supplier of spherical alumina raw materials. The procurement amounts for each period were 26.34 million yuan, 54.41 million yuan, and 51.19 million yuan, showing a year-on-year increase.

Regarding the unit prices paid to Lianrui New Materials and other suppliers, the company “has applied for exemption from disclosure” in the “Inquiry Reply Letter,” so the specific prices are unknown.

However, it is known that the company’s procurement unit prices from Lianrui New Materials have been continuously decreasing and are lower than those from other similar suppliers. This has attracted the Beijing Stock Exchange’s attention, which questioned the fairness of procurement prices and whether there was any benefit transfer.

Source: “Inquiry Reply Letter”

In response, Jinge New Materials stated that the company is the main customer of Lianrui New Materials’ spherical alumina products. Based on changes in procurement and future cooperation expectations, the company purchases at strategic partner prices according to the framework agreement, which explains the declining unit prices over the periods. The company does not receive rebates from major suppliers.

Although the company explained that, to ensure consistent product quality, performance, and delivery reliability, it does not easily change verified core raw material suppliers, long-term dependence on competitors for raw materials—creating a “both friend and foe” relationship—inevitably increases supply chain complexity and risk.

03

The actual controller’s nephew is an “exclusive supplier,”

Multiple related parties “disappear” before IPO

Behind Jinge New Materials’ push for the Beijing Stock Exchange is an “industry leader”—Huang Chaoliang.

Huang Chaoliang, born August 1969, from Guangdong, with a high school education. He started in the ceramics industry, joining Sihui Huali Ceramics as a sales manager in 1991, and the next year, he took on roles as responsible person and vice chairman in several Huaxing-related companies. Over the next two decades, he worked at companies like Jinge Fire Protection, Jinsui Freight, Vico, and Sanshui Kaichao, accumulating experience as director, manager, and supervisor. In 2012, he officially founded Jinge New Materials.

To date, Huang controls 73.22% of the company directly and indirectly, serving as chairman and general manager, forming an absolute controlling position.

It is worth noting that many of the company’s “directors, supervisors, and senior managers” hold multiple positions, often with related parties.

Source: “Prospectus”

Even more concerning, just before the IPO, several related parties “collectively” deregistered.

For example, the nephew of the actual controller, Huang Yicong, and his spouse Li Danhong, who control Guangzhou Shengteng Trading Co., Ltd. (“Shengteng Trading”), and Guangzhou Qianteng Trading Co., Ltd.; the spouse of director and deputy general manager Liu Zhen’s sister, Long Zhijie, controlled Changshu Jiajin Textile Co., Ltd.; and director Zhou Songgan previously operated a sole proprietorship, Foshan Chancheng Quanyue Le Electronic Commerce Service Department.

These companies were deregistered in April 2024, February 2022, January 2025, and November 2024, respectively, with relatively concentrated timing.

Among them, Shengteng Trading is an “exclusive” supplier to Jinge New Materials, with only the company as its customer. It began cooperation in October 2019 and ended in March 2023. The company mainly procures auxiliary materials like additives from Shengteng Trading, with procurement amounts of 667,700 yuan, 3.03 million yuan, 5.91 million yuan, 5.13 million yuan, and 185,700 yuan from 2019 to 2023.

Source: “Inquiry Reply Letter”

In response, the company explained that purchasing from Shengteng Trading helps maintain confidentiality and is one of its technical confidentiality measures. As the company develops and matures, confidentiality management has been strengthened. Additionally, as the variety of purchased materials expands, the core components in formulations are less likely to be leaked through a single supplier, so the company has gradually ceased procurement from Shengteng Trading.

Jinge New Materials plans to raise about 205 million yuan for capacity expansion, R&D, and working capital. Whether this funding can help break through current bottlenecks and achieve high-quality development remains to be seen. What do you think of Jinge New Materials’ story? Feel free to leave a comment below.

Author’s note: Personal opinions are for reference only.