IPO Weekly Report: Lanxin Electric Faces Performance Decline Risk, Related Party Transactions with Yinlun Stock Come Under Inquiry

During the week of March 9 to March 15, a total of 6 companies applying for listing passed review at the Shanghai, Shenzhen, and Beijing Stock Exchanges: 2 submitted registration applications, and 4 had their registrations approved.

Among the 6 companies approved, 1 applied for an IPO on the Shanghai Main Board, and 5 applied to be listed on the Beijing Stock Exchange. Notably, Quanzhou Jiade Li Electronic Materials Co., Ltd. (“Jiade Li”), which applied for an IPO on the Shanghai Main Board, passed review on March 13.

At the review meeting, Jiade Li was asked whether there is a risk of significant decline in operating performance. The company’s representative explained based on factors such as reliance on overseas raw materials and equipment, recent geopolitical tensions, supply and price fluctuations of key raw materials, core competitive advantages, supplier switching cycles, and cost transmission capabilities.

The 5 companies approved for listing on the Beijing Stock Exchange are Jiangsu Langxin Electric Co., Ltd. (“Langxin Electric”), Hebei Caike New Materials Technology Co., Ltd., Zhejiang Xinsheng Technology Co., Ltd., Guangzhou Kelei Ridi Medical Equipment Co., Ltd., and Xiangyang Zhengda Seed Industry Co., Ltd. (“Zhengda Seed”).

Langxin Electric’s controlling shareholder is Yinlun Co., Ltd. (002126.SZ). According to the prospectus disclosed on March 3, this year, Yinlun nominated the chairman and three directors of Langxin Electric, holding four of the six non-independent director seats. Yinlun mainly participates in corporate governance through the board, maintaining independence in daily operations.

During the review meeting, related-party transactions between Langxin Electric and Yinlun Co., Ltd. were questioned. The company was asked to explain the independence of its operations and the fairness of related-party transactions, considering the systems and implementation of related-party transaction management.

In the prospectus, Langxin Electric noted potential independence risks. The company and Yinlun Co., Ltd. have issued commitments such as “Letter of Commitment to Reduce and Standardize Related-Party Transactions,” “Letter of Commitment to Avoid Competition,” and “Letter of Commitment Not to Occupy Company Funds,” aimed at strengthening independence. However, due to numerous transactions with related parties during the reporting period (2022–2024 and the first half of 2025), if future commitments are not adhered to, it could adversely affect the company’s independence.

Additionally, Yinlun’s subsidiaries, Shanghai Yinlun Heat Exchange System Co., Ltd. (“Shanghai Yinlun”) and Yinlun TDI, LLC (“TDI”), are involved in electronic fan blade and guard assembly businesses, which compete with Langxin Electric. The company stated that if commitments to avoid competition are not effectively enforced, there is a risk of competition.

Beyond related-party transactions, the stability and sustainability of Langxin Electric’s operating performance were questioned, specifically whether there is a risk of significant decline in future performance.

From 2022 to the first half of 2025, Langxin Electric’s revenue was 668 million yuan, 1.031 billion yuan, 1.301 billion yuan, and 595 million yuan, respectively. The compound annual growth rate from 2022 to 2024 was 39.50%, but in the first half of 2025, year-over-year growth slowed to 6.09%.

Similarly, net profit growth has slowed. The company achieved net profits of 45.31 million yuan, 81.23 million yuan, and 116 million yuan from 2022 to 2024, with rapid growth. However, due to intensified competition in the downstream passenger vehicle industry since 2025 and increased pressure to lower upstream component prices, net profit in the first half of 2025 was 44.34 million yuan, up only 1.41% year-over-year, indicating a slowdown.

The company projects that from January to March 2026, revenue will be approximately 270 million to 290 million yuan, a decrease of about 5.46% to 1.54% year-over-year; net profit attributable to shareholders will be about 12 million to 13 million yuan, a change of roughly -4.66% to 3.29%.

“Future risks include the potential rollback or cancellation of new energy vehicle subsidy policies, which could significantly reduce gross profit margins for the company as an auto parts manufacturer, and slow or even decline in net profit growth,” Langxin Electric stated.

Zhengda Seed Industry passed review on March 13. The company mainly engages in R&D, production, and sales of corn seeds, operating as an integrated seed breeding and propagation enterprise.

The company’s revenue structure is relatively simple. During 2022–2024 and the first half of 2025, seed sales accounted for 98.36%, 88.07%, 94.90%, and 98.44% of main business revenue, respectively, with corn seed sales and profits being the primary sources.

However, Zhengda Seed faces performance decline risks. From 2022 to the first half of 2025, net profits were 94.69 million yuan, 88.43 million yuan, 81.13 million yuan, and 11.94 million yuan, respectively. Net profits in 2023 and 2024 decreased by 6.61% and 8.25% compared to the previous year.

According to the prospectus, the company’s revenue in 2025 is expected to be about 361 million yuan, a decrease of 5.12% year-over-year; net profit attributable to shareholders is expected to be about 90.75 million yuan, an increase of 11.85%. For the first quarter of 2026, revenue is projected to be approximately 90.10 million to 99.59 million yuan, a change of -4.74% to 5.30%; net profit attributable to shareholders is expected to be about 22.60 million to 24.00 million yuan, up 0.09% to 6.29%.

It is noteworthy that Zhengda Investment Co., Ltd. (“Zhengda Investment”), the original shareholder of Zhengda Seed, previously applied for an IPO on the Shanghai Main Board, with the application accepted on March 2, 2023, but withdrew it after seven months.