Zhenyu Technology IPO Inquiry In-Depth Perspective: Cash Flow Dilemma, Quality Concerns, Customer Dependence, and Multiple Questions on Accounting Compliance

How does AI · Quality Claim Incidents expose potential internal control risks within a company?

Blue Whale News, April 3rd — On April 3rd, Ningbo Zhenyu Technology Co., Ltd. issued a special explanation regarding the financial issues in response to the Shenzhen Stock Exchange’s inquiry letter titled “Regarding the review inquiry letter for Ningbo Zhenyu Technology Co., Ltd.'s application to issue convertible bonds to unspecified objects” (Review Letter [2026] No. 020023). The explanation covers detailed verification and responses to 11 financial-related issues, including reasons for changes in revenue and gross profit margin, comparability with industry peers, significant differences in operating cash flow and net profit, impact of quality claims, customer concentration, accounting treatment of accounts receivable and notes, inventory and fixed asset impairments, debt repayment capacity, environmental penalty compliance, and financial investments.

During the reporting period, Zhenyu Technology’s main business revenue increased from 5.04B yuan to 5.7B yuan, but net cash flow from operating activities remained negative for a long time, recording -997 million yuan, -558 million yuan, and -497 million yuan from 2022 to 2024, only turning positive to 240 million yuan in the first three quarters of 2025. The company explained that this discrepancy stems from a severe mismatch in credit periods with customers and suppliers—downstream major customers like CATL and EVE Energy generally settle with “90 days after invoice date + 6 months bank acceptance bills” or longer cycles, while upstream aluminum and silicon steel suppliers often require “payment upon delivery” or “30 days after invoice,” leading to substantial working capital occupation. More notably, the company proactively used sales bills that could have been used for collections to pay for non-operational projects such as equipment and factory construction, further exacerbating the operating cash flow gap. Although the company cited similar phenomena in industry comparables like Huaxin Jingke and Jinyang Precision, data shows that Kedaali’s operating cash flow remained consistently positive during the same period, highlighting a significant gap with Zhenyu Technology. The so-called “mismatch” is actually a passive choice under weak bargaining power, not an industry norm; the so-called “bill activation” was not supported by quantitative evidence such as pledge discount scale, financing costs, or actual collection efficiency, only described in trend terms as a way to evade scrutiny.

In 2022, Zhenyu Technology faced a product quality issue resulting in a customer claim of 44.6441 million yuan, accounting for 43.07% of that year’s net profit. The inquiry letter requested clarification on whether this incident affected subsequent cooperation. The company only vaguely stated that “related customer cooperation was not significantly affected,” without disclosing specific compensation agreement terms, responsibility determination process, or rectification measures, nor whether this triggered customer re-evaluation or order reduction. More concerning, the company admitted in its reply that “no other similar situations occurred during the reporting period,” but failed to provide a complete ledger of product quality complaints, internal quality incident grading reports, or third-party testing records, lacking supporting evidence. Coupled with the continuous decline in revenue from motor iron core business in 2023 and 2024, and significant fluctuations in gross profit margin of lithium battery structural parts in 2024, the massive claim reveals critical gaps in quality control that cannot be ignored.

Zhenyu Technology’s sales revenue from its top five customers accounts for as high as 73.92%, with the largest customer alone contributing 46.01%, far exceeding industry safety thresholds. The company claims this is due to “lithium battery manufacturers’ high requirements for structural part quality, performance, and safety, with long certification cycles and high replacement costs,” thus maintaining stable relationships. However, its main customers CATL, Ruipu LanJun, and EVE Energy are themselves accelerating the construction of in-house structural part production lines or supporting secondary suppliers. By 2024, CATL’s self-supply ratio of structural parts had increased to about 35%, and Ruipu LanJun announced plans to expand its structural parts base. Although Zhenyu Technology mentioned signing “long-term agreements” with customers, it did not disclose key contract terms such as contract duration, minimum purchase commitments, or breach responsibilities, making the so-called “stability” lacking contractual basis. A more realistic risk is that the proportion of sales to its largest customer has been continuously decreasing over the past five years—from 56.93% in 2022 to 46.01% in the first three quarters of 2025—a decline of over 10 percentage points—indicating a substantial loosening of customer dependence, yet the company has not developed effective plans for alternative customer development or flexible capacity adjustments.

Accounts receivable on the books surged from 1.5B yuan at the end of 2022 to 3.81B yuan at the end of September 2025, accounting for 58.57% of operating revenue. The receivables turnover rate plummeted from 5.29 to 2.57, significantly below the industry average of 3.25. The company explained that starting in 2024, some customers switched to supply chain bills for settlement, leading to a large amount of “customer-paid but not yet due” bills included in accounts receivable. However, data shows that by the end of 2024, the balance of supply chain bills reached 1.07 billion yuan, accounting for 35.26% of accounts receivable; meanwhile, the total amount of notes receivable and receivables financing dropped sharply from 873 million yuan in 2022 to 384 million yuan at the end of September 2025, indicating the company is increasingly packaging receivables into accounts receivable to avoid financial asset classification regulation. This accounting treatment essentially masks the true collection pressure and did not clarify whether the timing of note termination recognition complies with standards or whether impairment provisions cover the risks of bill acceptance, raising suspicions of asset quality manipulation through reclassification.

The book value of construction in progress was 1.08B yuan at the end of 2022, sharply falling to 432 million yuan at the end of 2024, then rising again to 605 million yuan at the end of September 2025, showing significant volatility. The company claimed this was due to “gradual release of previously expanded capacity,” but did not specify which projects were transferred from construction in progress to fixed assets or whether the timing of such transfers met the standard of “ready for use.” It also did not disclose whether there were completed projects not yet transferred or delayed transfers to adjust depreciation expenses. More worryingly, the book value of fixed assets soared from 1.55B yuan to 3.92B yuan over three years—an increase of 153.53%—yet the impairment reserve balance remained zero. Against the backdrop of rapid capacity expansion and intensified competition in the lithium battery industry, the company provided no assessment of risks related to key equipment technological iteration, declining capacity utilization, or future disposal obstacles, raising doubts about the adequacy of impairment provisions.

As of the end of September 2025, Zhenyu Technology’s current ratio was 1.15, quick ratio 0.97, and asset-liability ratio 64.43%. While seemingly manageable, compared to industry peers, its current ratio is lower than Kedaali (1.32) and Xiangxin Technology (1.28), and its quick ratio is below Huaxin Jingke (1.05). Notably, the short-term loan balance was not disclosed in the inquiry response, but the semi-annual report for 2025 shows short-term loans of 1.24B yuan, accounting for over 30% of current liabilities. In the context of just turning positive in operating cash flow, high accounts receivable, and continuous inventory growth, the company’s short-term debt repayment capacity heavily relies on refinancing. The proposed fundraising of 1.88 billion yuan, with 350 million yuan explicitly allocated for “supplementing working capital and repaying bank loans,” reveals the underlying difficulty of insufficient self-owned funds to cover debts.

Zhenyu Technology and its subsidiaries have incurred three environmental administrative penalties in the past three years, totaling 724k yuan in fines, including Changzhou Zhenyu’s 200k yuan fine in 2023 for irregular wastewater treatment plant operation, Ningde Zhenyu’s 486k yuan fine in January 2025 for entrusting unqualified units with hazardous waste disposal, and Suzhou Fanst’s 38k yuan fine in August 2025 for failure to operate pollution control facilities simultaneously. The penalties span over two and a half years, involve wastewater, hazardous waste, and air pollution, and cover subsidiaries across Jiangsu, Fujian, and Zhejiang, reflecting regional gaps in environmental management systems. The company only states “rectification completed” or “obtained approval from authorities” without disclosing the amount invested in rectification, third-party acceptance reports, or upgraded environmental compliance audits, nor whether these penalties have affected customer ESG reviews or order flow. Under stricter “dual carbon” regulations, such repeated violations go beyond typical operational flaws and could cause substantial harm to investors’ legitimate rights.

The latest trading financial assets on the books amount to 287 million yuan, other receivables 18.0287 million yuan, other current assets 129 million yuan, and other non-current assets 92.2766 million yuan. The inquiry letter requested a detailed check on whether these are financial investments. The company only vaguely stated that “they do not constitute financial investments,” but did not provide a thorough explanation per the “Opinions on the Application of Securities and Futures Laws No. 18,” including background, purpose, synergy with main business, or post-investment management of each item. For example, the 287 million yuan of trading financial assets did not disclose specific product types, underlying assets, expected yields, or holding periods, making it impossible to determine whether they are disguised wealth management or fund lending; whether related-party funds are involved in other receivables was also not clarified. Under the current regulatory environment prohibiting listed companies from disguising financial investments as strategic investments, such vague responses are unlikely to dispel market concerns about using raised funds for disguised refinancing or arbitrage.