Hongshida IPO: The "Fruit Chain" Dependency Syndrome Awaits Resolution

Kunshan Hongshida Intelligent Technology Co., Ltd. (hereinafter referred to as “Hongshida”) is advancing its listing on the Beijing Stock Exchange, and its IPO review status was recently updated to “registration.” As a company deeply rooted in the field of intelligent manufacturing equipment, Hongshida’s performance is highly intertwined with Apple’s industry chain. While the company’s revenue scale has grown steadily, it also faces multiple tests: the risk of order fluctuations caused by its high dependence on the “iPhone supply chain” (“guo chain”); the reasonableness of the parallel relationship between big customers “taking equity and sharply increasing procurement”; and compliance scrutiny triggered by concentrated revenue recognition in the fourth quarter. In addition, the prospectus (registration version) shows that the provision for bad debts for the company’s single largest customer has risen to 80%, which has also drawn market attention to the company’s earnings quality and its ability to withstand risks.

After Big Customers Take Equity, Procurement Amount Increases Sharply

Hongshida is a high-tech enterprise specializing in the R&D, production, and sales of intelligent automation equipment, intelligent flexible production lines, as well as parts and consumables. It is committed to providing precise, stable, and reliable intelligent manufacturing solutions for sectors including global consumer electronics, new energy, and pan-semiconductors.

According to the prospectus, from 2023 to 2025 (hereinafter referred to as the “reporting period”), Hongshida’s operating revenue was RMB 476 million, RMB 649 million, and RMB 664 million, respectively, and its net profit was RMB 39 million, RMB 53 million, and RMB 70 million, respectively. However, the risk of customer concentration cannot be ignored—In 2025, the company’s sales revenue to its top five customers accounted for as much as 68.93% of total sales revenue. Of that, Luxshare Precision ranked first with RMB 175 million (representing 26.37% of annual sales), while Foxconn ranked second with RMB 96 million (representing 14.47% of annual sales).

Based on the first-round reply to inquiries, Hongshida’s dependence on the “iPhone supply chain” shows a fluctuating upward trend. From 2022 to 2024, the share of revenue sourced from the “iPhone supply chain” in operating business revenue was 77.34%, 62.37%, and 76.64%, respectively. In the first half of 2025, it increased further to 81.79%. This means that the vast majority of the company’s orders are constrained by Apple and its contract manufacturers’ procurement strategies and capital expenditure cycles.

This “dependence” is especially evident in changes in orders from major customers. Affected by changes in end-customer demand and the company’s own operating conditions, Hongshida has seen sharp fluctuations in orders from some customers. For example, Taijun Technology generated revenue of RMB 85.4775 million in 2022, but in the first three quarters of 2025, its net profit was -RMB 1.63B in New Taiwan dollars, down 630.69% year over year. In recent years, the company’s capital expenditures such as fixed-asset investments have declined year by year, causing Hongshida’s procurement amount in the first half of 2025 to drop sharply to RMB 1.8124 million. By contrast, Foxconn’s procurement amount surged from RMB 1.9909 million in 2023 to RMB 96.0998 million in 2025.

In addition, the equity investments by major customers—Pengluding Holding and Dongshan Precision—around the time of Hongshida’s IPO have also drawn regulatory focus. The inquiry reply report shows that on January 20, 2023, Pengding Investment (a subsidiary of Pengding Holding) and Dongshan Investment (a subsidiary of Dongshan Precision) contributed RMB 20 million and RMB 28.8 million in cash from their own funds, respectively, to increase capital. The issuance price for this capital increase was 26.67 yuan per share. After the completion of this capital increase, Pengding Investment and Dongshan Investment held 2.11% and 3.04% of the company’s shares, respectively. Among them, Pengding Holding’s procurement share increased from 4.07% in 2022 to 15.58% in 2024, and revenue contributed in 2024 was RMB 101 million. But in 2025, Hongshida’s sales to Pengding Holding fell to RMB 48.7818 million.

In response, the Beijing Stock Exchange raised questions: After Pengding Holding took a stake in Hongshida, why did Hongshida’s sales revenue growth to it rise significantly, gross margin increase, and surpass Hongshida’s average gross margin? Was there any situation of value transfer? Hongshida stated that during the reporting period, the growth in sales revenue to Pengding Holding was mainly due to Pengding Holding’s increased demand for automation equipment arising from its capacity expansion plan. Hongshida said the increase in revenue from Pengding Holding was reasonable, and matched its operating performance and capacity expansion investment.

Compliance on Revenue Recognition Is Also Under Scrutiny

Seasonal fluctuations in financial data are another key focus of regulatory inquiries into Hongshida. The prospectus shows that from 2023 to 2025, the share of revenue in the fourth quarter was 55.25%, 48.08%, and 41.53%, respectively, and that in the second half of the year, the share of operating business revenue has long remained above 70%. In December 2024, the company generated operating business revenue of RMB 221 million in a single month, accounting for 34.08% of the company’s revenue for that year.

Regarding the compliance of revenue recognition, the Beijing Stock Exchange required Hongshida to explain, among other things, the rationale for the fourth-quarter revenue share in each period being higher than that of comparable companies; whether the revenue amounts and timing recognized were true and accurate; and whether the relevant internal controls were sound and effective.

Hongshida explained that during the reporting period, the reason the company’s fourth-quarter revenue share was relatively high was that it mainly provides customized intelligent manufacturing equipment for sectors such as consumer electronics, new energy, and pan-semiconductors. From obtaining orders to final project delivery, multiple complex process steps are involved, and the production and delivery cycle is long. Compared with peer companies, the company’s fourth-quarter revenue share is also higher mainly because its products are more concentrated in the module segment rather than the finished-goods segment, compared with peer companies.

On the accounts receivable side, Hongshida faces significant pressure on asset quality due to increased provisioning. For the photovoltaic and energy storage sector customer Lvyin New Energy Technology (Changshu) Co., Ltd. (hereinafter referred to as “Lvyin New Energy”), its post-period collection ratio of receivables was only 0.30%. In the company’s second-round inquiry reply, it stated that after the reporting period, Lvyin New Energy collected a small amount of Hongshida’s accounts receivable because its downstream customers were mainly customers in the photovoltaic and energy storage sector; delays in downstream collections caused Lvyin New Energy to collect from Hongshida more slowly. Lvyin New Energy is still operating at present, but its capital turnover faces temporary difficulties, creating credit risk. Based on the principle of prudence, the company had already provisioned for bad debts at the end of October 2025 at 50% of the accounts receivable balance, with the bad debt provision amounting to RMB 4.0933 million.

However, according to the latest disclosure in the March 2026 prospectus (registration version), due to signs that Lvyin New Energy’s credit risk had increased, the company has provisioned for bad debts at the end of 2025 at 80% of the accounts receivable balance, with the bad debt provision amounting to RMB 6.5494 million. If its future cash flows cannot be improved, the company will still face further bad debt risk; if bad debts occur in full, the company will further increase bad debt losses by RMB 1.6373 million.

Hongshida admitted that if the company mismanages its accounts receivable in the future or if customers’ operating and financial conditions deteriorate, it faces the risk that it may not collect on time, and even that some accounts receivable may be uncollectible. This will adversely affect the company’s asset liquidity and operating performance.

Expanding Beyond the “iPhone Supply Chain”: Results Still Need Verification

To hedge against the risks associated with dependence on the “iPhone supply chain,” Hongshida is trying to build a new growth engine centered on new energy and pan-semiconductors, and has achieved certain breakthroughs in the pan-semiconductor field. For example, the company’s developed “fully automatic chip placement and heat dissipation fin placement machine” was selected as the first major set (unit) of major equipment in Jiangsu Province in 2024. The product has successfully been delivered to well-known semiconductor packaging and testing manufacturers such as Huatian Technology. The company’s developed TIM贴装 equipment enables micron-level alignment precision and is suitable for thermal management solutions for high-performance chips such as CPUs and GPUs. It plays an important role in manufacturing AI server motherboards and has successfully been delivered to Wistron Datacom.

Hongshida’s planned IPO fundraising this time is RMB 217 million. Of this amount, RMB 66.3411 million is intended for capacity expansion projects for intelligent manufacturing equipment, RMB 50.6120 million for the construction of an R&D center, RMB 40.0 million to repay bank loans, and RMB 60.0 million to supplement working capital.

Regarding the necessity of the raised-projects, Hongshida stated that intelligent manufacturing equipment can be widely applied in industrial production. It can effectively replace labor, while improving the quality of industrial products and reducing production costs. The R&D center construction project is, on the one hand, based on the company’s existing products and focuses on conducting innovative R&D on key technical areas among them. On the other hand, it conducts forward-looking research and development for other application areas such as pan-semiconductors according to market development trends, thereby enhancing the company’s overall technical R&D strength and market competitiveness.

However, judging from the revenue structure, the effectiveness of Hongshida’s business expansion has not yet become evident. In 2024, consumer electronics revenue of RMB 543 million still dominates. New energy revenue fell from RMB 139.1697 million in 2023 to RMB 82.7672 million, and pan-semiconductor revenue was RMB 20.6442 million, accounting for less than 4%. According to the inquiry reply, among the three new customers added in the new energy sector—Ningbo Yongneng, Pingmei Shenma, and Lvyin New Energy—whose procurement of intelligent equipment could meet production needs on a phased basis, the trading scale between them and the company during the reporting period has shown a downward trend.

Regarding the core issues such as the substantive expansion plan for non–“iPhone supply chain” business and the exposure to impairment risks on accounts receivable, a reporter from Economic Information Daily contacted and sent letters to Hongshida. However, as of the time this article was published, no response had been received. Industry insiders analyze that, overall, Hongshida is still a company with a deep imprint of the “iPhone supply chain.” Although the company has demonstrated certain highlights in technical strength and business extension, its business model still faces multiple challenges, including excessively high customer concentration and the need to further strengthen the standardization of internal controls. Whether listing on the Beijing Stock Exchange can truly help the company achieve a value leap from “dependence on the iPhone supply chain” to “enabling AI and semiconductors” will still require subsequent tests of both the market and performance.