Why Can't Honghai Technology Spend Its IPO Money? R&D Center Delayed 15 Months Due to "Being Separated by a Wall"?

How does the idle capital from over half of the fundraising impact investor confidence?

Before going public, companies spend heavily on fundraising, but after listing, more than half of the raised funds remain “dormant.”

Author | Liu Qinwen

Editor | Gao Yuanshan

Summer is approaching. When consumers turn on air conditioners to enjoy the cool breeze, few think about the small but crucial component behind that cold air—the heat exchanger. This tiny part hides the core secret of air conditioning cooling: refrigerant absorbs heat and vaporizes in the evaporator, releases heat and condenses in the condenser. Through this heat exchange process, heat from indoors is “transported” outside.

Wuhan Honghai Technology Co., Ltd. (920108.BJ, hereafter “Honghai Technology”) is an upstream supplier providing heat exchangers and structural parts for well-known home appliance companies like Midea and Haier. In February 2025, as the first new stock of the Year of the Snake on the Beijing Stock Exchange, Honghai Technology was listed with much fanfare, carrying the label of “First Snake Year Stock.” At that time, the market had high expectations for its R&D investment and capacity expansion.

However, just one year after listing, the company delivered a shocking report card. Between February and March 2026, Honghai Technology repeatedly announced: core R&D projects delayed by 15 months, net profit attributable to shareholders plummeted 74.44% in 2025, and over 49 million yuan of raised funds were used to purchase low-yield financial products. These moves made “going public and then changing face” the most direct market perception of the company.

01#

First Year of Listing: Revenue Grows but Profit Does Not

Net Profit “Snapped at the Ankle”

On February 27, 2026, Honghai Technology disclosed its “2025 Annual Performance Brief,” delivering its first annual report after listing. The data showed the company achieved operating revenue of 520.3 million yuan, up 13.09% year-over-year; but net profit attributable to shareholders was only 16.73 million yuan, a sharp decline of 74.44% from 65.54 million yuan in the same period last year.

Source: Announcement

On the surface, the 520.3 million yuan revenue represents a double-digit increase, but a closer look reveals this growth was achieved at the expense of profits—a “blood-spattered expansion.”

To understand Honghai Technology’s performance changes, we need to look at its business model and revenue structure.

The company’s main business involves R&D, design, manufacturing, and sales of home appliance parts such as air conditioner structural components, heat exchangers, and display-related structural parts. Its main clients include Midea Group, Haier Group, and Chimei Innolux.

In an air conditioning system, the heat exchanger plays a core role in energy conversion—both the evaporator and condenser fall under this category. These seemingly insignificant components form the foundation of the air conditioner’s cooling and heating functions.

From a business segment perspective, Honghai Technology’s revenue sources can be divided into four parts. The basic segment is air conditioner structural parts, which have long supplied Midea. In the first half of 2025, this segment generated 112 million yuan. The company operates a “dual distribution” model with Midea—purchasing raw materials like steel and copper pipes from Midea and supplying finished products back to Midea.

From 2021 to 2023, and the first half of 2024, the sales to Midea were 306 million yuan, 443 million yuan, 582 million yuan, and 460 million yuan respectively, accounting for 41.81%, 50.16%, 46.53%, and 49.29% of the respective period’s revenue.

Heat exchanger business is the second-largest revenue source, with 82 million yuan in the first half of 2025. Next are display structural parts and other products, with revenues of 29 million yuan and 77 million yuan in the first half of 2025.

The revenue increase in 2025 was mainly driven by overseas business, handled by its subsidiary Thailand Honghai, which began trial production at the end of 2024. It mainly supplies plastic parts, stamped structural parts, heat exchangers, and other products to clients like Midea, Haier, Chimei Innolux, and Lida Xin. In the first half of 2025, Honghai Technology’s overseas revenue grew 157.82% year-over-year to 124 million yuan, becoming the main driver of revenue growth, but also a significant factor in profit consumption due to still being in early operational stages.

Source: Announcement

Regarding the sharp decline in net profit, the company provided three explanations in its announcement: Thailand Honghai is still in its initial operation phase, with high costs and fixed cost allocation; affected by policy pullback in the domestic home appliance market, raw material price increases, and fierce price competition, the company’s heat exchanger orders shrank; and increased financing costs due to expanded loans and exchange rate fluctuations.

02#

Fundraising Projects Also “Changed Face”:

One terminated and repurposed, another delayed by 15 months

More shocking than the performance change is the pace of the company’s fundraising project progress.

As the first Year of the Snake stock on the Beijing Stock Exchange, Honghai Technology was highly anticipated. At the time of listing, the company painted a clear growth picture: expanding capacity to seize market share, investing in R&D to build a technological moat, and supplementing working capital to optimize financial structure.

The market responded positively—online subscription rate was only 0.03%, with over 360 billion yuan of funds frozen. On February 6, 2025, Honghai Technology listed on the Beijing Stock Exchange.

On the first day of trading, the stock opened 223.5% higher, with an initial price of 18.02 yuan, reaching a peak of 20 yuan during the day, and closing at 19.28 yuan, a 246.14% increase, with a total market value exceeding 2.314 billion yuan. On March 10, 2025, the company exercised its over-allotment option, raising an additional net amount of 15.34 million yuan, bringing total net fundraising to 108 million yuan.

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At that time, the “Prospectus” showed that the raised funds were planned to be invested in three projects: the heat exchanger and CNC sheet metal intelligent manufacturing base construction, the home appliance parts R&D center, and working capital supplementation.

Among these, the heat exchanger and CNC sheet metal intelligent manufacturing base was the key project, with an investment plan of 82.37 million yuan. Once operational, it was expected to add capacity for 2.808 million air conditioner heat exchangers and 3 million CNC sheet metal parts annually.

Notably, CNC sheet metal was a new product area for the company, with higher technical content than traditional stamping. At that time, the company had already secured new clients in security, automation, medical, and new energy fields, including Hikvision, HeMeida, and Chu Yi.

The home appliance parts R&D center was planned to invest 8.095 million yuan, tasked with technological development, product innovation, and process optimization. The company emphasized in the prospectus that this project was necessary to enhance R&D strength, build a high-level innovation platform, and diversify product offerings. Additionally, 17.81 million yuan was allocated for working capital.

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However, just one year after listing, aside from the working capital project, the other two projects changed. The heat exchanger project was repurposed due to “industry supply and demand pressures,” and the R&D center was delayed by 15 months due to “change of implementation location.”

In January 2026, the company terminated the “Heat Exchanger and CNC Sheet Metal Intelligent Manufacturing Base” project, reallocating the remaining 51.81 million yuan of raised funds to the new project “Wuhan Honghai Next-Generation Intelligent Manufacturing Innovation Production Base.”**

The company attributed the termination to risks associated with leased factory premises, industry supply-demand pressures, and optimization of capacity layout.

On March 10, 2026, Honghai Technology issued another announcement stating that the “home appliance parts R&D center” project’s completion date would be extended from March 10, 2026, to June 9, 2027—an extension of 15 months.

The company explained that the delay was due to a change of location—from leased premises to a self-owned factory just a wall apart—requiring acceptance of the new building before proceeding with secondary renovations and equipment installation, thus delaying progress.

More concerning is the efficiency of fund use. As of February 23, 2026, the R&D center had only used 2.97 million yuan of the raised funds, with a utilization rate of 36.66%; overall, the company’s fund utilization was only 48.93%. This means more than half of the raised funds are still sitting idle in the account.

What about the “dormant” funds? Honghai Technology chose to invest large amounts of raised capital into low-yield financial products.

Looking at the financial records, in August 2025, the company invested 61.1 million yuan of raised funds into a notice deposit with an annualized yield of only 1.55%, which was recovered after just 16 days.

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In June 2025, Honghai Technology’s board approved using no more than 90 million yuan of idle funds for cash management. On February 11, 2026, the company disclosed that it had used 49.5 million yuan to purchase a seven-day notice deposit at Hankou Bank, with an expected annualized yield of only 0.7% to 0.85%.

“Honghai Technology’s over 50% idle funds, even used for low-yield financial management, starkly contrasts with the financing difficulties faced by many small and medium-sized enterprises, reflecting a misallocation of capital market resources. Capital markets should direct funds toward the most efficient and promising enterprises, but in this case, the funds are ‘sleeping,’ unable to create industrial value and contradicting investors’ expectations for capital use,” said Yuan Shuai, co-founder of New Wisdom New Quality Productivity Conference.

Wu Zewei, a special researcher at Su Commercial Bank, further commented, “The delays in fundraising projects and idle funds will weaken market confidence in new stock fundraising projects. Investors may doubt the feasibility of new projects and the rigor of corporate governance, potentially increasing the risk premium for the entire new stock sector in the long term, as investors demand higher returns to compensate for information asymmetry and performance risks.”

The most direct reflection of market sentiment is stock price. As of the close on March 17, 2026, the stock price was 11.8 yuan, down nearly 40% from the peak of 19.28 yuan in March 2025, with a total market value of 2.032 billion yuan.

03#

From Honghai to United Imaging,

Why can’t IPO fundraising be spent?

In fact, it’s not uncommon for companies like Honghai Technology to change or delay their fundraising projects after listing.

The STAR Market “fundraising king” United Imaging Healthcare (688271.SH) announced in December 2025 that two major projects would be delayed by one year, involving over 7.788 billion yuan of raised funds, accounting for more than 72% of the IPO net proceeds of 10.72 billion yuan. The “Next-Generation Product R&D Project” was postponed from April 2026 to April 2027, and the “High-end Medical Imaging Equipment Industrialization Fund” from January 2026 to January 2027.

Jinchun Co., Ltd. (300877.SZ)’s “Annual Production of 12,000 Tons of Wet-Process Degradable Spunlace Nonwoven Fabric Project” was delayed twice: first from February 2025 to February 2026, then to October 2026. By the end of 2025, it had invested 97.56 million yuan, with an investment progress of only 48.49%.

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Xuchang Zhihui (920496.BJ), listed on the Beijing Stock Exchange for only a year and a half, has experienced “two changes and one delay” in three major fundraising projects. The “Park Integrated Energy Low-Carbon Control System” project was delayed 17 months to June 2027; the “New Energy Storage” and “Photovoltaic Power Generation” projects changed their use due to market environment changes, with remaining funds redirected to new projects. By the end of 2025, the low-carbon control project had invested 15.78 million yuan, with a progress of only 39.45%.

In summary, delays are common across different sectors and scales. R&D projects, in particular, frequently experience delays, with many companies’ R&D centers and technological upgrade projects being postponed. The reasons are often market environment changes, and some projects are severely behind schedule.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, pointed out that these cases serve as warnings: the costs of default are severely disproportionate to the benefits of financing. Even after successful listing, if projects are delayed or performance falters, companies only face procedural disclosure requirements rather than substantive penalties. This institutional environment tends to encourage a “listing as an end” mentality—companies beautify project prospects during IPO to achieve high valuation, then adjust at will under the guise of “market environment changes.” If this trend spreads, the capital market risks becoming a “story financing” racecourse, where truly solid companies are at a disadvantage in valuation competitions.

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However, regulators have taken notice. In May 2025, the China Securities Regulatory Commission revised and issued the “Regulations on the Supervision of Fundraising by Listed Companies,” clarifying that funds must be used exclusively for designated purposes, with strict supervision of changes in use, further strengthening the safety and regulation of fundraising.

Lin Xianping, associate professor at Zhejiang University City College and former deputy secretary-general of the Civil and Commercial Committee of China Legal Advisory Center, suggested that current regulations are too soft, mainly relying on information disclosure, lacking rigid penalties. He recommended establishing a full-cycle dynamic tracking system for fundraising projects—linking significant delays, frequent changes, and long-term idle funds with refinancing, equity incentives, director and supervisor accountability, and sponsor evaluations; strengthening review of the necessity and pace of investment, and strictly controlling over-raising and inefficient fundraising to uphold the bottom line of serving real industry with capital.

Do you know if the companies you follow have experienced similar situations? Feel free to leave comments below.

Author’s note: Personal opinions only, for reference.