Lükong Transmission Still Loss-Making with R&D Expense Ratio Declining: Top Two Customers Remain Shareholders, Repeatedly Penalized for Violations

Port Business Observer by Shi Zifu

In mid-December 2025, Suzhou Green Control Transmission Technology Co., Ltd. (hereinafter referred to as Green Control Transmission) submitted its application to the ChiNext Board, with China International Capital Corporation serving as the sponsor.

On March 12, the Shenzhen Stock Exchange official website showed that the company disclosed its first round of inquiry responses, covering 12 major issues. On March 23, the company updated its prospectus.

This is not Green Control Transmission’s first IPO. In December 2022, the company sought to list on the STAR Market under the fourth set of listing standards. After entering the inquiry stage, in March 2023, the company chose to proactively withdraw its listing application due to considerations of its own business and future development. Is Green Control Transmission ready for a comeback?

1

2024 turns losses into profits, undistributed profits are negative

Tianyancha shows that Green Control Transmission was established in 2011. The company is an innovative leading enterprise focused on power transmission systems for new energy commercial vehicles, based on technological innovation related to electric drive systems, providing customers with electric drive systems, components, and related technical development and services.

The electric drive system is the power source and core component of new energy vehicles and non-road mobile machinery, including motors, automatic transmissions, controllers, electric drive axles, etc.

Green Control Transmission’s main products are divided into pure electric drive systems and hybrid drive systems. From 2022 to 2024 and January-June 2025 (hereinafter referred to as the reporting period), the company’s revenue from electric drive systems was 635 million yuan, 676 million yuan, 1.166 billion yuan, and 1.135 billion yuan, accounting for 92.05%, 91.19%, 90.91%, and 95.49% of the respective period’s revenue, highlighting its main business.

Besides electric drive systems, other revenue sources include components and accessories, technology development and services, and other products, which constitute a smaller proportion during the period.

During the reporting period, sales volume of electric drive systems grew rapidly, with sales of 21,991 units, 24,872 units, 42,486 units, and 40,183 units respectively. The unit sales prices were 28,900 yuan/unit, 27,200 yuan/unit, 27,400 yuan/unit, and 28,200 yuan/unit.

In 2024 and the first half of 2025, the sales volume of electric drive systems achieved rapid growth. Meanwhile, during 2023, 2024, and the first half of 2025, prices fluctuated by -5.88%, 0.74%, and 2.92%, causing some variation in unit prices.

Regarding sales channels, during the reporting period, Green Control Transmission adopted a direct sales model to customers. For some clients, sales were made via consignment, meaning the company shipped products to designated warehouses based on client instructions, and clients took actual delivery as needed.

In the reporting period, revenue from consignment sales of electric drive systems was 375 million yuan, 451 million yuan, 771 million yuan, and 813 million yuan, increasing each period. The company stated that this was mainly due to rapid growth in consignment revenue from clients such as XCMG Group, Sany Group, Dongfeng Motor, among others.

Overall revenue performance during the period showed that the company achieved revenues of 712 million yuan, 770 million yuan, 1.328 billion yuan, and 1.219 billion yuan, with net profits of -99.43 million yuan, -12.33 million yuan, 48.04 million yuan, and 68.30 million yuan, respectively. After deducting non-recurring gains and losses, net profit attributable to parent was -101 million yuan, -39.56 million yuan, 40.45 million yuan, and 61.73 million yuan. Green Control Transmission recorded net losses in 2022 and 2023, turning profitable in 2024.

It is worth noting that government subsidies also contributed to the company’s profitability. During the periods, government grants recognized in profit or loss were 5.54 million yuan, 10 million yuan, 9.83 million yuan, and 5.35 million yuan, accounting for -5.50%, -25.28%, 24.29%, and 8.66% of net profit attributable to parent after non-recurring items.

If future government subsidy policies are canceled or their support is reduced, it could adversely affect the company’s operating performance and profitability.

In the past three fiscal years, due to continuous negative undistributed profits, the company has not distributed dividends or profits. As of the end of June 2025, the undistributed profit was -203 million yuan. The company stated that the timing of turning profits positive remains uncertain, posing a risk that cash dividends or profit distributions may not be possible for some time.

In 2025, the company’s operating revenue is projected to be 3.354 billion yuan, with a net profit (the lower of pre- and post-non-recurring profit) of 141 million yuan. As of the end of 2025, the undistributed profit remains negative at -118 million yuan.

Regarding gross margin, during the period, the company’s comprehensive gross profit margin was 7.13%, 16.77%, 19.78%, and 19.38%, showing fluctuations but an overall upward trend.

2

Top five customers account for 60%, with the top two still being shareholders

Due to high market concentration in the downstream automotive industry, customer concentration for Green Control Transmission is also high. During the reporting period, the combined sales revenue from five major customers was 478 million yuan, 486 million yuan, 825 million yuan, and 731 million yuan, representing 67.12%, 63.04%, 62.11%, and 59.95% of the company’s total operating income.

Among downstream clients, major customers such as XCMG Group, Sany Group, Dongfeng Motor, Xiamen King Long, and BAIC Foton have significant influence on business operations. XCMG Group and Sany Group have become key customers.

During the period, sales revenue from Sany Group was 197 million yuan, 173 million yuan, 257 million yuan, and 175 million yuan, accounting for 27.64%, 22.5%, 19.37%, and 14.38% of operating income. From XCMG Group, sales were 134 million yuan, 169 million yuan, 299 million yuan, and 238 million yuan, representing 18.79%, 21.9%, 22.5%, and 19.56%. By 2024, these two clients contributed over 40% of Green Control Transmission’s revenue.

Zhang Xiaorong, director of the Deep Technology Research Institute, commented: Over-reliance on major clients poses three risks: first, weak bargaining power, vulnerable to profit squeeze from “annual reduction” clauses; second, high accounts receivable leading to cash flow pressure; third, performance tied to a single customer, which could cause significant impact if relationships change or downstream demand fluctuates.

However, the company disclosed in its inquiry responses that in the second half of 2025, it has developed 42 new clients with signed orders, and obtained 98 new orders, with an expected sales amount exceeding 120 million yuan, demonstrating ongoing capacity to develop new customers and orders. Meanwhile, cooperation with existing clients continues to deepen, with 3,621 new orders in the second half of 2025, expected to generate over 2.6 billion yuan in sales.

It is noteworthy that Sany Group and XCMG Group are not only core customers but also indirect shareholders of the company. As a result, the fairness of related-party transactions has attracted attention.

As of the date of the prospectus, Sany Heavy Industry holds 1.89% of the company’s shares; XCMG Group, through Minpu Yunsheng and Xuzhou Yunxiang, holds approximately 1.8%.

In 2025, the top five customers account for 59.10%, with sales to XCMG Group and Sany Group accounting for 21.84% and 10.99%, respectively.

3

Cash outflow persists, weaker debt repayment capacity than peers

Along with high customer concentration, accounts receivable from downstream clients have also increased.

At each period’s end, the company’s accounts receivable balance was 269 million yuan, 404 million yuan, 518 million yuan, and 833 million yuan, accounting for 20.53%, 26.78%, 25.09%, and 27.13% of total assets. The receivables’ balances were 331 million yuan, 458 million yuan, 583 million yuan, and 928 million yuan, with the end-of-period balances representing 46.47%, 59.42%, 43.9%, and 38.07% of operating income.

During the same periods, due to some clients’ delayed payments, the company made provisions for bad debts, with provisions of 62.48 million yuan, 53.78 million yuan, 64.65 million yuan, and 94.80 million yuan. Accounts receivable turnover rates were 2.34, 1.95, 2.55, and 3.23 times per year (annualized).

In 2025, accounts receivable on the books totaled 1.484 billion yuan, accounting for 48.16% of operating income.

Similarly, inventory also ties up significant funds. At each period’s end, inventory was valued at 244 million yuan, 270 million yuan, 399 million yuan, and 613 million yuan, representing 18.64%, 17.90%, 19.31%, and 19.96% of total assets. Inventory balances were 284 million yuan, 324 million yuan, 441 million yuan, and 662 million yuan; inventory impairment provisions were 40.73 million yuan, 54.47 million yuan, 42.60 million yuan, and 48.17 million yuan.

Inventory turnover rates were 2.36, 2.11, 2.78, and 3.56 times per year (annualized).

Due to increases in accounts receivable and inventory, the company’s cash flow has been consistently negative.

At each period’s end, net cash flow from operating activities was -297 million yuan, 5.2 million yuan, -185 million yuan, and -616 million yuan, totaling -538 million yuan over the period.

The company explained that in 2022, net cash flow from operating activities was 19.8 million yuan less than net profit, mainly due to decreases in accounts payable and notes payable. In 2023, net cash flow from operations exceeded net profit by 17.53 million yuan, mainly due to increases in operating payables. In 2024 and the first half of 2025, net cash flow from operating activities was lower than net profit by 233 million yuan and 130 million yuan, mainly because of increases in accounts receivable, inventory, and other operating assets, offset by increases in accounts payable.

In its inquiry responses, the company reiterated that fluctuations in operating cash flow and multiple periods of negative cash flow are mainly due to strategic working capital investments to support rapid sales growth, including stocking raw materials to cope with price fluctuations and increased accounts receivable and inventory during business expansion, consistent with its high-growth stage.

In 2025, net cash flow from operating activities is projected at -175 million yuan, with total cash flow from operating activities over the period at -354 million yuan.

At each period’s end, the company’s short-term borrowings were 390 million yuan, 420 million yuan, 579 million yuan, and 587 million yuan. Meanwhile, cash and cash equivalents at each period’s end were 27.34 million yuan, 47.45 million yuan, 109 million yuan, and 289 million yuan, indicating a significant short-term liquidity gap.

Regarding debt repayment capacity, at each period’s end, the company’s asset-liability ratio (consolidated) was 69.54%, 74.78%, 75.88%, and 73.41%; current ratio was 0.94x, 0.97x, 1.06x, and 1.08x; quick ratio was 0.61x, 0.68x, 0.75x, and 0.77x. By 2025, the asset-liability ratio is expected to rise to 79.78%, with a current ratio of 1.02x and quick ratio of 0.77x.

Compared to industry peers, whose average asset-liability ratios are 57.71%, 59.15%, 66.05%, and 66.88%, and current ratios are 1.46x, 1.29x, 1.19x, and 1.17x, Green Control Transmission’s higher leverage indicates less favorable financial structure, mainly due to the company’s lack of equity financing on the capital markets and limited financing channels. As of June 2025, the asset-liability ratio decreased slightly, mainly due to a new round of financing.

The company states that with this IPO, its current ratios and quick ratios will improve, further strengthening short-term debt repayment capacity.

4

Decreasing R&D expense ratio weakens competitiveness; repeated violations and penalties

For this IPO, Green Control Transmission plans to raise 1.58 billion yuan, with 1.38 billion yuan allocated to a project producing 100,000 sets of new energy medium- and heavy-duty commercial vehicle electric drive systems annually, and 200 million yuan for R&D center construction.

Given its pursuit of STAR Market listing, the company’s technological attributes have attracted external attention. During the reporting period, R&D expenses were 55.34 million yuan, 47.67 million yuan, 76.85 million yuan, and 50.42 million yuan, accounting for 7.77%, 6.19%, 5.79%, and 4.14% of revenue, showing a declining trend in R&D intensity. In 2025, the R&D expense ratio further decreased to 3.59%.

The prospectus discloses that the average R&D expense ratio of comparable companies during the period was 10.26%, 8.28%, 6.04%, and 5.98%. Among them, Jingjin Electric’s R&D ratio is notably higher. Excluding Jingjin Electric, the average R&D ratios of comparable companies are 7.60%, 6.47%, 5.55%, and 6.50%.

As of June 2025, among Green Control Transmission’s 1,397 employees, PhDs accounted for 0.21%, master’s degree holders 4.51%, undergraduates 24.98%, and associate degree or below 70.29%, the highest proportion.

Additionally, since nearly 90% of the raised funds are used for capacity expansion, at each period’s end, the company’s capacity utilization rates were 76.7%, 54.06%, 90.03%, and 120.20%, indicating a significant need for further capacity expansion.

As of the signing date of the prospectus, the controlling shareholder and actual controller is Li Lei. Li Lei directly holds 125 million shares, accounting for 32.23% of the pre-issuance total share capital; through Wujiang Qiandian Investment Management Co., Ltd., he indirectly controls about 44.19 million shares, or 11.41%; Li Lei’s direct and indirect holdings total approximately 169 million shares, representing 43.64% of the pre-issuance share capital.

In terms of internal control and compliance, in 2022, due to tight capital turnover, Green Control Transmission had related-party loans. The actual controller Li Lei lent 29.7 million yuan to the company; Wujiang Qiandian Investment Management lent 6.9 million yuan. By June 2022, these loans had been repaid.

In 2022, Lu Tingke and others borrowed funds from the company, mainly for personal housing, totaling 154,300 yuan. These loans were repaid by June 2022.

On January 7, 2022, the Suzhou Industrial Park Ecological Environment Bureau issued an administrative penalty decision, fining Green Control New Energy 30,000 yuan for operating paint dipping processes without fully enclosed equipment.

On January 12, 2022, the Suzhou Industrial Park Fire Rescue Brigade issued a penalty of 30,000 yuan for illegal construction used as storage in the east and north workshops of Plant No. 1.

On March 1, 2022, the same brigade issued a penalty of 15,000 yuan for continued illegal storage in the same plant, which had not been rectified after re-inspection on January 13, 2022.

On October 28, 2022, Jiangling Street Office of Wujiang District, Suzhou, issued a penalty of 6,000 yuan for failure to renew special operation welding and cutting certificates.

On January 3, 2025, the Ecological Environment Bureau of Suzhou Industrial Park fined Green Control New Energy 33,280 yuan for emissions of volatile organic compounds without proper pollution control measures.

(Gangwan Finance Production)