Langxin Electric: A subsidiary of Yinlun Holdings, raises funds through a private placement for repayment, but distributes dividends exceeding 45 million

On March 10th, Jiangsu Langxin Electric Co., Ltd. (Langxin Electric) will have its North Exchange listing review, with CITIC Construction Investment Securities as the sponsor.

Langxin Electric’s main business involves the research and development, production, and sales of thermal management system electric drive components. It is the largest domestic supplier of electronic fans for passenger vehicle thermal management systems. Products include motor assemblies (for electronic fans), electronic fans, electronic water pumps, and air conditioning blowers. The motor assemblies are mainly sold to Yinlun Group and further assembled into electronic fans and front-end cooling modules, which are ultimately supplied by Yinlun Group to North American new energy vehicle companies.

Reviewing the situation, the actual controllers are Xu Xiaomin and his son Xu Zhengzheng, who are also the actual controllers of Yinlun Co., Ltd.; there is a directed fundraising of 220 million yuan used to repay loans, with a betting agreement involved; there are fund loans and non-invoice reimbursements; the fundraising has been reduced by 150 million yuan, yet an additional 350 million yuan is still needed; dividends over 45 million yuan have been paid in two years, putting short-term debt under pressure; aggressive expansion has prompted inquiries, with overproduction and environmental penalties involved; R&D expense ratio lags behind industry averages, and the departure of R&D personnel has raised concerns; performance growth has significantly slowed, with a notable decline in the average selling price of core products; over 70% of revenue comes from the top five customers, with Yinlun Group, an affiliate, being the largest client; procurement amounts do not match sales figures of Nanjing Julong; supplier Haoqian Industrial has only single-digit personnel insured.

Yinlun Co., Ltd. Subsidiary, Involved in Fund Lending and Non-Invoice Reimbursements

According to quick summaries, Langxin Limited was established in November 2009, completed a shareholding reform in April 2023, and was listed on the National Equities Exchange and Quotations (NEEQ) system in November. The company began counseling filings in February 2024, completed counseling in May 2025, and the North Exchange listing application was accepted the following month. After two rounds of inquiries, it is now before the review meeting.

The actual controllers are Xu Xiaomin and his son Xu Zhengzheng, who are also the actual controllers of Yinlun Co., Ltd. Langxin Electric’s controlling shareholder is Yinlun Co., Ltd., holding a direct stake of 40.67%. It is an associated party with Tiantai Yinxin, together controlling 46.01% of the company. The true controllers are Xu Xiaomin and Xu Zhengzheng, who serve as Chairman and Vice Chairman/Deputy General Manager of Yinlun Co., Ltd., respectively.

Public information shows Xu Xiaomin was born in 1958, has no permanent residence abroad, holds a college degree, and joined Zhejiang Tiantai Mechanical Factory in December 1975. He has served as the cooling equipment workshop director, production section chief, factory director, and deputy secretary of the party committee. Since 1999, he has been Chairman of Yinlun Co., Ltd.

Xu Zhengzheng was born in 1989, holds Chinese nationality, has permanent residence in the U.S., and a bachelor’s degree. From July 2012 to August 2017, he served as quality manager in the quality assurance department, assistant general manager, executive deputy general manager, and general manager of the aluminum radiator division, as well as assistant general manager of Yinlun Co., Ltd. Since September 2017, he has been Deputy General Manager, and since August 2020, Vice Chairman and Vice General Manager.

It should be noted that the initial prospectus did not identify Xu Zhengzheng as the actual controller. During the first inquiry, the exchange asked the company to clarify his and his relatives’ shareholding and positions, and why he was not recognized as a joint actual controller or acting in concert, raising questions about regulatory circumvention.

The directed fundraising of 220 million yuan was used to repay loans, with a betting agreement involved. During the counseling filing, Langxin Electric conducted a private placement, issuing 5,827,810 shares at 37.75 yuan each in December 2024 to Huawen Qingneng Fund, Zhangjiagang Jiyang Venture Capital, Ningbo Longhua Venture Capital, Anhui Cornerstone Fund, Zhangjiagang Shazhou Lake Venture Capital, Ma’anshan Jiangdong Industrial Fund, and Zhangjiagang Jinchuang No. 1 (investment institutions), raising about 220 million yuan for bank loan repayment.

The controlling shareholder Yinlun Co., Ltd. signed relevant agreements with these investors, including repurchase rights, preemptive rights, and co-sale rights, with special shareholder rights ending upon the company’s submission of listing materials to the North Exchange and becoming invalid. However, if the company fails to list or cannot successfully list before December 31, 2027, these special rights automatically and retroactively restore.

There are also fund loans and non-invoice reimbursements. In early 2022, Langxin Electric had a loan balance of 15,500 yuan to Hangjia Management Consulting Service (Hangjia Consulting), with an additional 1.2682 million yuan added that year. It also loaned 512,000 yuan to Yinji Catering Management Service (Yinji Catering). In early 2023, the loan balances were 512,000 yuan and 18,300 yuan, respectively, with no remaining balance at year-end. No further fund loans occurred afterward.

Inquiry responses show that Hangjia Consulting mainly provided services to cover expenses that could not be invoiced, with daily operational funds supplied via loans. To handle expenses without invoices, Hangjia Consulting issued consulting service invoices to the company, which paid these invoices, and employees submitted expense reimbursement requests without invoices, approved and reimbursed through Hangjia Consulting. These expenses mainly covered business entertainment, on-site quality issues, and consulting fees.

Yinji Catering was established mainly to provide catering logistics services for the issuer, with startup and operational funds supplied via loans from the company.

Qichacha shows Hangjia Consulting was established in March 2019 as an individual business operated by Yu Xiumin, and was deregistered in August 2023. Yinji Catering was established in May 2022, also as an individual business operated by Li Junfeng, and is scheduled to deregister in July 2025.

The prospectus states that Hangjia Consulting is operated by the spouse of Vice Chairman and General Manager Lu Yaoping; Yinji Catering’s manager, Huang Kaiying, is an employee of the general office. The companies controlling Jashijia Household Services and Jiaxin Catering Management, both registered in Yangshe Town, Zhangjiagang, have been deregistered. The operators are Tan Chengpeng and Huang Kaiying, respectively. The company claims that procurement from individual businesses is for enjoying small-scale taxpayer tax benefits.

The procedures for these fund loans and how employee expense reimbursements without invoices will be handled remain unclear. Why do two of the three individual businesses operated by Huang Kaiying have operators other than her? What is their relationship? Does Huang Kaiying have any hidden control behaviors?

Fundraising Reduced by 150 Million Yuan, 40 Million Yuan Cut from Additional Capital, Dividends Exceed 45 Million Yuan

According to quick summaries, for this IPO, Langxin Electric plans to raise 350 million yuan, mainly for the Wuhu new energy vehicle thermal management system components project (Phase I) and the new energy thermal management system R&D and production base. The planned investments are 250 million yuan and 100 million yuan, respectively, with the latter reduced by 110 million yuan from the initial prospectus.

Over two years, dividends paid exceeded 45 million yuan, and short-term debt pressure is high. In fact, the initial prospectus also included a 40 million yuan supplementary working capital project, meaning the total fundraising was reduced by 150 million yuan from the original declaration, a significant cut.

From 2022 to June 2025, the company’s debt ratio generally declined, from 77.14% to 69.08%, then to 53.23%, and back to 58.89%. At the end of each period, cash and tradable financial assets totaled 220 million yuan and 2.79 million yuan, respectively, while short-term loans reached 381 million yuan. Cash flow is insufficient to cover short-term debts, indicating significant pressure. This is a key reason for the planned 2024 targeted additional fundraising to repay loans.

Controversially, the company paid dividends of 21.21 million yuan in 2024 and 23.83 million yuan in 2025 (corresponding to 2023 and 2024 profit distribution plans), totaling over 45 million yuan—far exceeding the supplementary working capital project in the initial declaration.

Aggressive expansion has prompted inquiries. The fundraising projects include two major expansion initiatives: Wuhu new energy vehicle thermal management system project (Phase I) and an expansion of the electric drive component production. After reaching full capacity, the first will produce 1.6 million brushed electronic fans, 2.4 million brushless electronic fans, and 600,000 electronic water pumps annually; the second will produce 1.32 million brushed motor assemblies, 2.4 million brushless motor assemblies, and 500,000 blowers.

During the reporting period, capacity utilization rates for electronic fans and motor assemblies were 93.25%, 98.7%, 98.03%, and 88.68%, with 2024 capacity at 6.77 million units. The planned expansion will increase capacity to 7.72 million units, a substantial increase.

For electronic water pumps, utilization rates were 39.73%, 47.02%, 53.37%, and 83.09%, with 2024 capacity at 351,200 units. The expansion will add 600,000 units, also a significant increase.

The North Exchange in both inquiry rounds questioned the necessity, reasonableness, and risks of digesting the new capacity. The company responded that there is sufficient market demand, with low risk of overcapacity or idle equipment and facilities.

The prospectus warns of “risks of capacity digestion and unanticipated benefits” for the investment projects. If downstream automotive demand weakens or growth slows, or if competition intensifies in the auto parts industry, the company may face difficulties in timely absorbing the new capacity, which could prevent achieving the expected economic benefits and impact overall performance.

Overproduction and environmental penalties are also issues. Langxin Electric has exceeded its environmental impact approval capacity: in 2024, actual output of brushless motors was 4.458 million units, exceeding the approved capacity of 3.5 million units by 27.37%.

According to the “Pollution Impact Construction Project Major Change List (Trial),” increasing production capacity by over 30% constitutes a major project change. The company’s over-capacity production does not qualify as a major change, and it has completed the expansion procedures.

It should be noted that the company was penalized for environmental issues in 2022. The Suzhou Ecological Environment Bureau fined 48,000 yuan for unapproved emissions from incomplete waste gas treatment facilities, open workshop doors, and unorganized emissions of volatile organic compounds. The company has since rectified environmental issues, and the penalty has been settled. The “Credit China” record has been restored.

R&D expense ratio is below industry averages. During the reporting period, Langxin Electric’s R&D expenses were 26.28 million, 35.48 million, 41.39 million, and 20.10 million yuan, with ratios of 3.93%, 3.44%, 3.18%, and 3.38%. Compared to itself, management expenses increased significantly, reaching 17.74 million, 36.39 million, 37.95 million, and 22.42 million yuan, with ratios of 2.65%, 3.53%, 2.92%, and 3.77%. Industry peers’ average R&D expense ratios are higher, around 4.24%, 4.08%, 4.12%, and 4.50%. For example, Hengshuai Co., Ltd., Feilong Co., Ltd., Xusheng Group, and Tianlong Co., Ltd. had ratios of 3.51%, 5.76%, 4.34%, and 4.72% in 2024, with only Wencan Co., Ltd. at 2.29% lower than Langxin Electric.

Increased departure of R&D personnel has attracted attention. During the period, the number of R&D staff was 63, 81, 110, and 99. From 2023 to June 2025, personnel reductions were 13, 17, and 21, with 8, 16, and 18 resignations, and 5, 1, and 3 internal transfers. The inquiry asked for reasons behind frequent personnel changes. The company stated that it recruits more fresh graduates and trains them over cycles, selecting outstanding and suitable R&D personnel, leading to frequent additions and departures.

Performance Growth Slowing, Procurement Discrepancies with Nanjing Julong

Performance growth has significantly slowed. From 2022 to 2025, revenue increased from 668 million yuan to 1.412 billion yuan, but the growth rate declined from 61.18% to 8.53%. Net profit rose from 45 million yuan to 131 million yuan, with growth rates dropping from 110.48% to 12.75%.

The reasonableness of revenue and profit growth rate declines is a key concern. The first inquiry asked for explanations on why the growth rates decreased each period and why profit growth in 2024 was much higher than revenue, and whether there are significant differences compared to industry peers.

The company responded that vehicle sales slowed from 2022 to 2024, leading to decreased sales of main products, compounded by policy impacts, causing continuous decline in average selling prices. Although sales increased in the first half of last year, the large year-over-year decline caused the average selling price of electronic fans to drop significantly, resulting in a continued decrease in revenue growth rate.

Core product prices declined sharply. Revenue from electronic fans and motor assemblies accounted for over 95% of total revenue during the period, with electronic fans contributing 6.28 billion, 9.84 billion, 12.52 billion, and 5.52 billion yuan, respectively, and motor assemblies contributing 970 million, 1.37 billion, 1.16 billion, and 520 million yuan.

Price trends show electronic fan average selling prices at 216.56, 228.09, 224.33, and 209.16 yuan, with a cumulative decline of 18.93 yuan from the peak; motor assembly prices at 98.38, 93.47, 89.61, and 89.86 yuan, down 8.52 yuan from the high; and electronic water pump prices at 179.25, 171.19, 150.59, and 103.22 yuan, down 76.03 yuan from the peak.

The top five customers contributed over 70% of revenue. The largest customer, an affiliate Yinlun Group, contributed 2.23 billion, 3.14 billion, 3.48 billion, and 1.75 billion yuan, accounting for roughly 33%, 30%, 27%, and 29% of revenue, respectively.

The North Exchange inquired about the fairness of related-party transaction prices and whether there is any benefit transfer. The company denied any such issues.

Procurement amounts do not match Nanjing Julong’s sales figures. During the period, Nanjing Julong Technology Co., Ltd. ranked among Langxin Electric’s top five suppliers, with procurement amounts of 38.62 million, 76.27 million, 90.28 million, and 36.44 million yuan. However, the sales figures of Nanjing Julong to the top five customers ranged from 31.53 million to 64.56 million, 37.69 million to 74.94 million, and 52.24 million to 84.46 million yuan, with some discrepancies of 662,100, 1.33 million, and 5.82 million yuan, which require explanation.

Supplier Haoqian Industrial’s insured personnel are all single digits. During the period, procurement from Shanghai Haoqian Industrial Co., Ltd. was 34.94 million, 44.99 million, 57.24 million, and 13.48 million yuan.

Qichacha shows Haoqian Industrial was established in July 2010 with a registered capital of 1 million yuan, wholly owned by Guo Yan. The company’s insured personnel have been single digits from 2016 to 2024, with 2, 2, and 3 employees in recent years. How does such a company become a supplier? What is the company’s supplier review process?

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