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

Ask AI · How does Hongshida respond to risks from fluctuations in the Apple industry chain?

Kunshan Hongshida Intelligent Technology Co., Ltd. (hereinafter referred to as “Hongshida”) is advancing its listing on the Beijing Stock Exchange (BSE). Recently, the company’s IPO review status in relation to its registration has been updated to “Registration.” As a company that has been deeply involved in the intelligent manufacturing equipment sector, Hongshida’s performance is highly tied to the Apple industry chain. While its revenue scale continues to grow steadily, the company is also facing multiple challenges: the order fluctuation risk brought by its heavy dependence on the “Apple supply chain,” the reasonableness of the parallel occurrence of a major customer’s “equity investment and procurement surge,” and compliance scrutiny triggered by concentrated revenue recognition in the fourth quarter. In addition, the prospectus (registration version) shows that the bad-debt provision ratio for a single customer has increased to 80%, which has also drawn market attention to the company’s quality of earnings and its ability to withstand risks.

Large customers take equity and procurement surges

Hongshida is a high-tech enterprise specializing in the R&D, production, and sales of intelligent automation equipment, intelligent flexible production lines, accessories, and consumables. The company is committed to providing precise, stable, and reliable intelligent manufacturing solutions for global consumer electronics, new energy, and pan-semiconductor fields.

According to the prospectus, from 2023 to 2025 (hereinafter referred to as the “Reporting Period”), Hongshida’s operating revenue was 4.76 billion yuan, 6.49 billion yuan, and 6.64 billion yuan, respectively, and its net profit was 0.39 billion yuan, 0.53 billion yuan, and 0.70 billion yuan, respectively. However, the risk of high customer concentration cannot be ignored—its sales revenue to its top five customers accounted for as much as 68.93% of the company’s total sales revenue in 2025. Among them, Luxshare Precision ranked first with 1.75 billion yuan (representing 26.37% of annual sales revenue), and Foxconn ranked second with 0.96 billion yuan (representing 14.47% of annual sales revenue).

According to the first round of inquiry responses, Hongshida’s dependence on the “Apple supply chain” has shown a fluctuating upward trend. From 2022 to 2024, the proportion of revenue derived from the “Apple supply chain” to main business revenue was 77.34%, 62.37%, and 76.64%, respectively, and in the first half of 2025 it rose further to 81.79%. This means that the vast majority of the company’s orders are constrained by Apple’s 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, some of Hongshida’s customers’ orders have shown sharp fluctuations. For example, Tai Jun Technology generated revenue of 854.75 million yuan in 2022, but Tai Jun Technology’s net profit for the first three quarters of 2025 was -16.32 billion New Taiwan dollars, down 630.69% year on year. In recent years, the company’s capital expenditures such as fixed-asset investment have decreased year by year; as a result, its procurement from Hongshida fell sharply to 1.8124 million yuan in the first half of 2025. By contrast, Foxconn’s procurement increased from 1.9909 million yuan in 2023 to 96.0998 million yuan in 2025.

In addition, the equity investment actions of major customers such as Pegatron Holdings and Dongshan Precision around the time just before Hongshida’s IPO have also drawn regulatory attention. The inquiry response report shows that on January 20, 2023, Pegatron Investment (a subsidiary of Pegatron Holdings) and Dongshan Investment (a subsidiary of Dongshan Precision) made capital contributions of 20.00 million yuan and 28.80 million yuan, respectively, using their own cash, and the capital increase price was 26.67 yuan per share. After completion of this capital increase, Pegatron Investment and Dongshan Investment held 2.11% and 3.04% of the company’s shares, respectively. Among them, Pegatron Holdings’ procurement share increased from 4.07% in 2022 to 15.58% in 2024, and it contributed revenue of 101 million yuan in 2024. However, in 2025, Hongshida’s sales to Pegatron Holdings fell back to 48.7818 million yuan.

In this regard, the BSE raised questions: after Pegatron Holdings became a shareholder in Hongshida, why did Hongshida’s sales revenue to it increase significantly, why did its gross margin rise and remain higher than Hongshida’s average gross margin? Is there any situation of transferring benefits? Hongshida stated that during the Reporting Period, the growth in sales revenue to Pegatron Holdings was mainly due to Pegatron Holdings’ increased demand for automation equipment arising from its expansion plan. The increase in revenue from Pegatron Holdings is reasonable and matches its operating performance and expansion investment.

Revenue recognition compliance is further questioned

Seasonal fluctuations in financial data are another key focus of the BSE’s regulatory inquiries. The prospectus shows that from 2023 to 2025, the fourth-quarter revenue accounted for 55.25%, 48.08%, and 41.53% of the company’s total revenue, respectively, and in the second half of each year, the proportion of main business revenue has long remained at over 70%. In December 2024 alone, the company achieved main business revenue of 221 million yuan, accounting for 34.08% of the company’s revenue for that year.

Regarding the compliance of revenue recognition, the BSE required Hongshida to explain, among other matters, the reasonableness of why the revenue proportion in each company’s fourth quarter is higher than that of comparable companies, whether the revenue recognition amounts and timing are true and accurate, and whether the relevant internal controls are sound and effective.

Hongshida explained that during the Reporting Period, the company’s higher fourth-quarter revenue proportion in each period was mainly because the company mainly provides customized intelligent manufacturing equipment for consumer electronics, new energy, and pan-semiconductor fields. From obtaining orders to the final project delivery, multiple complex process flows are involved, and the production and delivery cycle is relatively long. Compared with companies in the same industry, the company’s fourth-quarter revenue proportion is higher mainly because, compared with peer companies, the company’s products are more concentrated in the module segment rather than the finished-product segment.

On the accounts receivable side, Hongshida’s asset quality faces significant pressure from provisioning. The company’s customer in the photovoltaic energy storage sector, Lvfeng New Energy Technology (Changshu) Co., Ltd. (hereinafter referred to as “Lvfeng New Energy”), had a post-period payment collection ratio of only 0.30%. In the second-round inquiry responses, the company stated that after the Reporting Period, Lvfeng New Energy collected relatively little from the company’s accounts receivable because its downstream customers are mainly customers in the photovoltaic energy storage sector, and delays in downstream customers’ payments caused it to collect from the company more slowly. Lvfeng New Energy is still operating, but its capital turnover faces temporary difficulties, and there is credit risk. Based on the principle of prudence, the company has, by the end of October 2025, made a bad-debt provision at 50% of the accounts receivable balance, and the amount of the bad-debt provision was 40.933 million yuan.

However, according to the latest disclosure in the March 2026 prospectus (registration version), because Lvfeng New Energy shows signs of increased credit risk, the company has, at the end of 2025, increased the bad-debt provision at 80% of the accounts receivable balance, and the amount of the bad-debt provision was 65.494 million yuan. 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 16.373 million yuan.

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

Expanding beyond the “Apple supply chain” shows results yet to be verified

Possibly to hedge against the risks arising from dependence on the “Apple supply chain,” Hongshida is trying to build a new growth engine focusing on new energy and pan-semiconductors, and has already achieved some breakthroughs in the pan-semiconductor field. For example, the “fully automatic chip heat-sink implanting machine” developed by the company was selected as the first major equipment set in Jiangsu Province in 2024 (the first batch of such major equipment). The product has successfully achieved supply to well-known chip packaging and testing manufacturers such as Huatian Technology. The company’s TIM placement equipment enables micron-level alignment accuracy and is applicable to heat dissipation solutions for high-performance chips such as CPUs and GPUs. It plays an important role in manufacturing AI server motherboards and has successfully been supplied to Wistron.

This time, Hongshida’s planned IPO fundraise is 217 million yuan. Of this, 66.3411 million yuan is intended for the intelligent manufacturing equipment capacity expansion project, 50.6120 million yuan for the construction of the R&D center, 40.00 million yuan for repaying bank loans, and 60.00 million yuan to supplement working capital.

Regarding the necessity of the projects funded by the offering, Hongshida stated that intelligent manufacturing equipment can be widely applied in industrial production, enabling effective replacement of manual labor. While enhancing the quality of industrial products, it also reduces production costs. The R&D center construction project is, on the one hand, based on the company’s currently existing products and conducts innovative research and development on key technology points within them. On the other hand, it carries out forward-looking research and development targeting other application fields such as pan-semiconductors according to market development trends, thereby strengthening the company’s comprehensive technical R&D capability and market competitiveness.

However, judging from the revenue structure, the effectiveness of Hongshida’s business expansion is still not obvious. In 2024, consumer electronics revenue of 543 million yuan continued to dominate. New energy revenue decreased from 139.1697 million yuan in 2023 to 82.7672 million yuan, and pan-semiconductor revenue was 20.6442 million yuan, accounting for less than 4%. According to the content of the inquiry responses, three newly added customers in the new energy sector—Ningbo Yongneng, Pingmei Shenma, and Lvfeng New Energy—because the intelligent equipment they purchased can meet production demand in phases, the transaction scale with the company has shown a downward trend during the Reporting Period.

Regarding core issues such as the substantive expansion plan for non-“Apple supply chain” business and the risk exposure to impairment of accounts receivable, a reporter from Economic Information Daily called and sent a letter 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 deeply marked by the “Apple supply chain.” Although the company has demonstrated certain highlights in technical strength and business extension, it still faces multiple challenges in its business model, including excessively high customer concentration and the need to further strengthen the standardization of internal controls. Whether listing on the BSE can truly help it achieve a value leap from “dependence on the Apple supply chain” to “enabling AI and semiconductors” remains to be tested by both subsequent market conditions and business performance.