Ligo New Energy IPO Concerns: Poor Operating Cash Flow and Continuous Decline in Gross Profit Margin

Ask AI · Why did Li Gao New Energy (力高新能) withdraw its IPO and then go for it again?

Radar Finance Produced by Li Lei Finance | Written by: Li Yihui | Edited by: Shanhai

On the evening of March 27, the Shenzhen Stock Exchange website showed that Li Gao New Energy Technology Co., Ltd. (hereinafter “Li Gao New Energy”)’s Growth Enterprise Market (GEM) IPO has been accepted for review.

This is not the company’s first attempt to go public. As early as June 2023, Li Gao New Energy submitted an application to the Shenzhen Stock Exchange for an initial public offering of shares and listing on the GEM. However, after going through two rounds of inquiries, the company voluntarily withdrew its listing application in August 2024. Now, Li Gao New Energy, making a comeback, still has many potential concerns.

According to the prospectus, Li Gao New Energy is a leading domestic BMS (battery management system) enterprise. Based on NE Times’ statistics, in 2024 and 2025 China’s BMS market for new energy passenger vehicles, the company’s installed volume ranks third after BYD and CATL, and ranks first among third-party BMS manufacturers.

In this push for a listing, after deducting issuance costs, Li Gao New Energy plans to raise approximately RMB 1.925 billion in funds in the order of priority, to be invested in the Yangtze River Delta New Energy Vehicle Control System Intelligent Manufacturing Center project, the Li Gao New Energy Industrial Park Phase III project, the R&D Center construction project, and replenishment of working capital.

Radar Finance, upon reviewing the prospectus, found that in recent years Li Gao New Energy’s gross margin has continued to decline. From 2022 to the first three quarters of 2025, its gross margin on main business was 44.89%, 41.95%, 34.27%, and 29.87%, respectively. The company said this is mainly due to multiple factors, including lower retail prices of new energy vehicles and the transmission of those price reductions to parts companies, fluctuations in raw material procurement prices, and changes in product mix.

In addition, during the reporting period, the net cash flow from operating activities was -RMB 45.7552 million, -RMB 82.6494 million, -RMB 1.6712 million, and -RMB 271 million, respectively, indicating that the company’s core business lacks sufficient “cash-generating” ability. In response, the company explained that this is mainly because it needs to purchase raw materials in advance based on customer requirements, while delivery of its main products, customer acceptance, and payments all require a certain period. As the company’s operating revenue grew rapidly, the balances of inventories and accounts receivable increased significantly.

Facing competition from vehicle OEMs and battery manufacturers

Tianyancha shows that Li Gao New Energy’s predecessor, Li Gao Co., Ltd., was established on February 5, 2010. According to the prospectus, Li Gao Co., Ltd. was jointly established by Yang Haosheng, Xu Ming, Shang Hui, Liu Xiantian, and Anhui Rongke.

As of the date of signing of this prospectus, Yantai Lanfeng directly holds 22.07% of Li Gao New Energy’s shares, making it the controlling shareholder of the company. At the same time, Han Chao Wang is the 100% shareholder of the executive affairs partner Shenzhen Lanfeng of Yantai Lanfeng, and he is also the executive affairs partner of Yantai Wanghui and Yantai Caigao. Wang Han Chao indirectly controls 28.73% of the voting rights of Li Gao New Energy through the aforementioned entities, and is the company’s actual controller.

Wang Han Chao graduated from Peking University. He previously worked at Shanghai Datang Mobile Communication Equipment Co., Ltd. and Huawei Technologies Co., Ltd., served as Deputy Representative of Huawei’s representative office, and as Minister of the Global Transportation Industry Systems Department. He is currently the chairman of Li Gao New Energy.

From May to July 2017, Yantai Lanfeng collectively acquired 79.50% of the equity interest in Li Gao Co., Ltd. After completion of this transaction, the company’s controlling shareholder changed to Yantai Lanfeng, the company’s actual controller changed to Wang Han Chao, and the company’s management team changed as well to include Wang Han Chao, Wang Yun, He Su, Liu Feng, and others with Huawei backgrounds.

As of now, besides Wang Han Chao serving as the company’s chairman, Wang Yun, He Su, and Liu Feng are all directors and deputy general managers of Li Gao New Energy.

The prospectus shows that Li Gao New Energy is a domestic BMS leading enterprise. It has long focused on independent R&D, production, sales, and services of BMS modules, and has gradually expanded, based on the BMS module business, into new energy management and control system products such as high-voltage distribution modules, as well as PCBA (printed circuit board assembly) component assemblies and electronic and electrical comprehensive application solution businesses related to wire harnesses.

From an industry position perspective, the prospectus cites data from NE Times, stating that from 2022 to 2025, the company’s domestic BMS market share for new energy passenger vehicles was 7.9%, 7.1%, 9.6%, and 15.5%, respectively.

In 2025, the company’s market ranking was third in the industry, behind only Fudi Battery (the globally #1 supplier by new energy vehicle sales—BYD’s supporting battery manufacturing company) and CATL (the #1 battery factory globally by installed capacity of power batteries).

The prospectus shows that as a third-party BMS manufacturer, Li Gao New Energy faces competition from both large-scale new energy vehicle OEMs and battery manufacturers.

This is because BMS products are core components of new energy batteries. Both vehicle OEMs and battery manufacturers tend to develop and manufacture their own BMS products. Compared with third-party BMS manufacturers, vehicle OEMs are typically larger in scale and have stronger R&D capabilities; battery manufacturers are more familiar with battery production processes and battery performance.

According to GGII statistics, in China’s installed volume of BMS enterprises for power lithium batteries for new energy vehicles from 2023 to 2025, the market share of third-party BMS manufacturers was 25.1%, 25.3%, and 28.8%, respectively. Vehicle OEMs and battery manufacturers, leveraging their respective advantages, occupy relatively high market shares.

Therefore, although Li Gao New Energy, as a representative of third-party BMS enterprises, is growing its market share relatively quickly, as overall industry competition intensifies and, against the backdrop of upstream and downstream companies cutting costs and improving efficiency, the company faces risks that market competition will intensify and its market share may be squeezed by vehicle OEMs and battery manufacturers.

Gross margin declines, and net operating cash flow has remained negative for the long term

From a performance perspective, Li Gao New Energy’s operating revenue from 2022 to the first nine months of 2025 was RMB 559 million, RMB 803 million, RMB 1.633 billion, and RMB 1.916 billion, respectively; during the same periods, net profit attributable to the parent company was RMB 90.6889 million, RMB 96.2591 million, RMB 160 million, and RMB 212 million, respectively.

In terms of revenue composition, the company’s main products are BMS products for power batteries used in new energy vehicles. For each new energy vehicle, one BMS product system needs to be installed. During the reporting period, the sales revenue of BMS modules was RMB 483 million, RMB 706 million, RMB 1.163 billion, and RMB 1.282 billion, accounting for 89.11%, 89.89%, 73.43%, and 67.44% of operating revenue, respectively.

Li Gao New Energy’s other products include wire harnesses, high-voltage distribution modules, and PCBA component assemblies. During the reporting period, besides BMS modules, the sales revenue of the company’s other main operating products was RMB 59.0587 million, RMB 79.4279 million, RMB 421 million, and RMB 619 million, respectively, accounting for 10.89%, 10.11%, 26.57%, and 32.56% of main business revenue, respectively.

It is worth noting that although the company’s leading product, the BMS module, has seen its sales volume increase year by year, its unit price has declined. The data show that from 2022 to the first nine months of 2025, the BMS module sales volume was 0.7595 million units, 1.3328 million units, 2.7470 million units, and 3.2406 million units, respectively. The corresponding average selling prices were RMB 636.51/PCS, RMB 529.82/PCS, RMB 423.3/PCS, and RMB 395.56/PCS.

The reason is that, under the combined impact of factors such as the reduction of retail prices of new energy vehicles and the transmission of those price cuts to parts enterprises, and fluctuations in raw material procurement prices, the average selling price of BMS modules has shown a downward trend year by year.

Price wars in the new energy vehicle sector undoubtedly affect the profitability of related companies in the supply chain. Because the average selling price of the main products declined, during the reporting period, Li Gao New Energy’s gross margin on main business was 44.89%, 41.95%, 34.27%, and 29.87%, respectively. Among them, the gross margin of the company’s main product, the BMS module, was 45.35%, 44.38%, 42.23%, and 39.99%, respectively. The gross margins of the company’s main business and its main products show a declining trend.

In addition, during the reporting period, the net cash flow generated from operating activities was -RMB 45.7552 million, -RMB 82.6494 million, -RMB 1.6712 million, and -RMB 271 million, respectively, indicating to a certain extent that the company’s core business “cash generating” ability is insufficient, and there are clear shortcomings in overall financial health.

In response, the company explained that this is mainly because the company needs to purchase raw materials in advance according to customer needs, while delivery of the company’s main products, customer acceptance, and payment all require a certain period. As the company’s operating revenue grew rapidly, the balances of inventories and accounts receivable increased significantly.

The prospectus shows that at the end of each period during the reporting period, the balances of accounts receivable were RMB 363 million, RMB 569 million, RMB 977 million, and RMB 1.216 billion, respectively. As a proportion of operating revenue for the respective period, they were 64.9%, 70.82%, 59.86%, and 63.43%, respectively—overall a relatively high proportion.

With accounts receivable at a relatively high scale, Li Gao New Energy’s accounts receivable turnover ratio is lower than that of comparable companies in the same industry. According to the prospectus, during the reporting period, the company’s accounts receivable turnover ratio was 2.27 times, 1.72 times, 2.11 times, and 1.75 times, respectively. The average values of comparable companies in the same industry were 2.37 times, 2.39 times, 2.23 times, and 3.02 times, respectively.

In response, Li Gao New Energy stated that its accounts receivable turnover ratio is close to the industry average. However, the balance of accounts receivable for which bad debt provisions were made on a specific-item basis is relatively large, which drags down the company’s overall accounts receivable turnover ratio.

Industry insiders analyze that, generally speaking, a low accounts receivable turnover ratio implies a long cash collection cycle, that payment timetables are easily affected by customers, which can lead to bad debts, potentially directly eroding profits, and thus constitutes a key financial risk that will be closely examined during IPO review.