The hidden financial shoals behind Dongfang Measurement and Control's IPO: Zijin Mining's sudden stake acquisition turns it into a major client

Ask AI · Does Zijin Mining’s dual identity threaten business independence?

A sprint that can’t be avoided.

Investor Network Wu Wei

Dandong Oriental Instrument Technology Co., Ltd. (hereinafter “Oriental Instrument”) is in a crucial stage of its sprint toward an IPO on the STAR Market. Financial data show that against a “low growth” backdrop in which revenue fluctuated and the net profit attributable to shareholders has continued to decline from 2022 to 2024, the company still plans to raise as much as RMB 1.1 billion for capacity expansion and the construction of an R&D center. As an equipment manufacturer established for more than 30 years and deeply focused on the intelligent mining sector, Oriental Instrument carries distinct “family business” characteristics in both its equity structure and core management. The founder, Bao family father and son, has absolute control over the company.

In Oriental Instrument’s process of capitalization, a sudden equity stake taken in by an industrial titan right before the filing is also quite noteworthy. Among them, the investment platform Zijin Zidi (under Zijin Mining) not only made a sudden investment before the company’s IPO, but Zijin Mining Group also provided core customers with deal sizes in the tens of millions of RMB to the company. This “shareholder + major customer” dual identity, combined with the domestic substitution boom the company is positioned within and the company’s current actual revenue performance, may make Oriental Instrument’s fund-raising and expansion plan a typical case for understanding the development logic of enterprises in the intelligent mining industry chain.

Equity evolution and corporate governance: changes in valuation and the structure of control rights

Oriental Instrument was founded in 1995 and is one of the earlier companies in China to participate in the research and product manufacturing of key technologies for mine intelligence. Judging from its governance structure, the company exhibits typical intergenerational inheritance and control characteristics of a family business.

In terms of core management, the founder, Bao Liangqing, has served as the company’s general manager for a long time since 1995, and is currently the chairman of the board. His son, Bao Caiyu, started from grassroots management positions such as deputy general manager of the Beijing branch and head of the international business department, and is currently serving as the company’s vice chairman and vice general manager, taking deep part in the company’s core governance.

In terms of equity structure, before this issuance, Bao Liangqing and Bao Caiyu, the father and son, collectively controlled 87.18% of the company’s voting rights through direct shareholding, indirect shareholding via the controlling shareholder Oriental Instrument Group Co., Ltd., and controlling two employee shareholding platforms in Dandong Hengtai and Dandong Haoucheng. Such a highly concentrated equity structure gives the de facto controller absolute say in the company’s business decisions, personnel appointments and removals, and profit distribution.

Meanwhile, Oriental Instrument also has some issues in its historical evolution and internal control governance that need to be standardized. In its prospectus disclosure, in 2022, Oriental Instrument had ticket circulation activities without a real transaction background in which it paid RMB 3.1 million of intercompany receivables/payables to its subsidiaries via bills; additionally, after receiving large-amount bills receivable from customers, it engaged in “bill overage return” violations in which it directly returned RMB 0.9 million—greater than the settlement amount—in the form of bills. Moreover, at the beginning of the reporting period, Oriental Instrument and its subsidiaries had borrowed from related parties such as controlling shareholders for daily production and operations, and the issue of these funds being borrowed and lent was only cleaned up by the end of 2022.

At the level of capital operations, Oriental Instrument’s financing history and valuation changes before the IPO filing were relatively dramatic. Over nearly 27 years after its establishment, the company had not conducted external equity financing, but within just three months from September to December 2022, Oriental Instrument completed three rounds of capital increases in quick succession.

In September 2022, the de facto controller and old shareholders increased capital at a price of 1 yuan per 1 yuan of registered capital. At that time, the company’s corresponding valuation was about RMB 83 million. In the same month, the employee shareholding platform increased capital at a price of about 10.67 yuan per 1 yuan of registered capital, and the company’s valuation rose to RMB 868 million.

In December 2022, the company introduced Zijin Zidi (under Zijin Mining) and Jiangxi Copper (600362.SH) as external strategic investors. The capital increase price rose to 25.81 yuan per 1 yuan of registered capital, and the corresponding valuation also jumped to RMB 2.3 billion.

Within a short period of time, the company’s valuation rose from RMB 83 million during the internal capital increase to RMB 2.3 billion, a gain of 28 times. Accompanying the entry of external institutions was a clear timetable for going public. When Zijin Zidi and Jiangxi Copper took their stakes, both signed “bet-the-deal” agreements with the controlling shareholder, requiring Oriental Instrument to achieve a qualified IPO listing by December 31, 2025; otherwise, share repurchase provisions would be triggered. The website of the Shanghai Stock Exchange shows that Oriental Instrument’s application to list on the STAR Market was accepted on December 25, 2025, and was publicly posted.

Although to meet the IPO review requirements, all parties’ shareholders of Oriental Instrument urgently signed agreements in the month of filing to remove special rights, they also agreed on provisions for restoring the effect. The agreement states that if Oriental Instrument fails to successfully list within three years or withdraws the IPO voluntarily, the controlling shareholder’s obligation to repurchase shares will automatically resume.

Business composition and end markets: the progress of domestic substitution and current growth status

In terms of business layout, Oriental Instrument mainly provides complete intelligent solutions for sectors such as mines and cement. Its revenue structure shows a highly concentrated profile: intelligent control systems and intelligent online inspection and analysis equipment are the company’s two core pillars. In the reporting period, intelligent control systems accounted for between 43.32% and 61.95% of total revenue, while intelligent online inspection and analysis equipment remained at a stable share of between 34% and 44%.

In the competitive landscape, high-end inspection equipment for large intelligent mines has long been monopolized by overseas giants such as Thermo Fisher and Metso. Relying on core technologies such as neutron activation analysis (PGNAA) and X-ray fluorescence spectroscopy (XRF), Oriental Instrument has achieved domestic manufacturing of parts of high-end equipment.

Public data show that in 2023, the company’s industrial online elemental analysis instruments had a market share exceeding 70% in the domestic market. From the direction of product iteration, the update cycle for hardware used for large mine measurement and control is typically 10 to 15 years. To break through the ceiling of hardware sales, the company is moving toward a “combination of AI algorithms, digital twins, and system upgrades” model that integrates software and hardware, aiming to obtain sustained revenue through short-cycle iteration of software and services.

Currently, Oriental Instrument’s end-customer base mainly consists of large state-owned enterprises and central enterprises, including industry giants such as Western Mining (601168.SH), China Building Materials (3323.HK), Zijin Mining, and Jiangxi Copper. Among them, the business dealings between Zijin and the company are particularly noteworthy. In December 2022, Zijin Zidi, a subsidiary of Zijin Mining, invested nearly RMB 100 million to take a stake, holding 4.34% of the company’s shares.

In 2023, Oriental Instrument signed intelligent control system orders as high as RMB 67.3 million with Xizang Longyuan Copper Co., Ltd., a Zijin-affiliated company under Zijin. As a result, Zijin Mining Group became the company’s third-largest customer that year, contributing 8.81% of revenue. This overlap between shareholder and customer identities, while it does not cross the red line of individual downstream customer dependence in financial ratios, also does not meet the standards for related-party transactions because the shareholding is below 5%. However, the fairness of its transaction pricing and the independence of the acquisition of business are typically areas of key focus in regulatory reviews.

It is worth noting that, against the backdrop of the grand narrative of domestic substitution and the boost from major customers, Oriental Instrument’s recent performance growth has still faced real pressure. From 2022 to 2024, the company’s operating revenue was RMB 603 million, RMB 521 million, and RMB 567 million, showing relatively steady fluctuations; over the same period, the net profit attributable to shareholders was RMB 92.53 million, RMB 74.77 million, and RMB 73.08 million respectively, showing a “growth in revenue without growth in profits” pattern with year-after-year declines.

In addition, because Oriental Instrument’s customers are mostly large state-owned enterprises with strict budget approvals, project acceptance has significant seasonality concentrated in the second half of the year. As a result, the company’s apparent performance data in the first half of 2025 are at a low level: revenue was only RMB 211 million for the period, and net profit was RMB 4.3 million.

Capital position and fund-raising plan: working capital needs and considerations of expansion returns

From the microstructure of the balance sheet, Oriental Instrument currently has no rigid pressure to survive with principal and interest payments, but its working capital appears rather tight.

As of the end of June 2025, the company’s cash and cash equivalents on its books were only RMB 50.7477 million. For a high-end equipment company with annual revenue exceeding RMB 500 million, there is somewhat insufficient “cushion” to withstand risks.

The root cause of its lack of funds is that a large portion of its working capital is “locked up” between upstream and downstream parties. In Oriental Instrument’s balance sheet, the book balance of accounts receivable is as high as RMB 367 million. Due to slower approvals by state-owned enterprise customers, its cash collection cycle has been extended; at the same time, the company’s inventory balance is also as high as RMB 318 million, of which more than 86% is work in progress. These two items together have consumed nearly RMB 700 million of the company’s funds. Weak internal “self-funding” capacity means that relying solely on its own funds can no longer support the company’s expansion plan.

With the capital chain under strain, Oriental Instrument plans to issue 25% of its shares in this IPO to raise RMB 1.1 billion, with the company targeting a valuation as high as RMB 4.4 billion. This may mean that Zijin Zidi and Jiangxi Copper, which participated in the capital increase in 2022, will be able to obtain an approximately one-fold floating profit after Oriental Instrument lists.

In the fund-raising plan, Oriental Instrument intends to allocate RMB 500 million to an intelligent equipment industrialization project, RMB 500 million to the construction of an R&D center, and RMB 100 million to a sales service network. Clearly, this RMB 1.1 billion raised is not “icing on the cake,” but an extremely “urgent” antidote to break through the bottleneck in production capacity and promote the landing of AI technology—and it is also a key move for its de facto controller to resolve the crisis of bet-the-deal share repurchases.

However, in the real-world context of low growth, this heavy-asset expansion of RMB 1.1 billion is destined to be a dangerous gamble.

First is the issue of absorbing incremental capacity. The company attempts to digest the added capacity of high-end hardware through “domestic substitution,” deep binding with big players, and “going global” along the Belt and Road. But if the macro mining cycle turns downward and mining companies cut capital expenditures, an indiscriminate expansion could directly lead to a severe shortfall in capacity utilization and inventory backlogs.

Even more worth noting is the depreciation and amortization costs after the funds are deployed. After Oriental Instrument’s RMB 1.1 billion fund-raising is largely converted into fixed assets, conservative estimates indicate it will add approximately RMB 70 million to RMB 100 million in annual depreciation and amortization expenses. Yet the company’s total annual net profit is only around RMB 73 million. This means the new fixed costs already exceed the company’s existing profit pool.

In a low-growth environment where products cannot be sold at a strong pace, if the projects funded cannot generate incremental high-gross-margin revenue of several hundred million RMB according to plan, in the year production begins Oriental Instrument will very likely face a cliff-like drop in net profit or even a loss in the financial statements. This would directly cause a sharp fall in ROE and a serious dilution of earnings per share, casting a heavy shadow over long-term returns to minority shareholders.

Under the grand narrative of domestic substitution, Oriental Instrument is trying to offset the mediocre reality of profit declines by making a heavy-asset “high-stakes gamble” of RMB 1.1 billion.

This is not only a leap in capacity, but also a critical gamble by the de facto controller to ease the pressure from share repurchase and improve the company’s liquidity. When the incremental depreciation and amortization nearly reaches the current total profits, can this precision instrument carry the valuation ambition of RMB 4.4 billion? Before the market pays for “hard technology” sentiment, it needs to see clearly the tight underlying color of large-customer orders wrapping around it.