IPO Radar | Lightrise New Energy's performance soars, but gross profit margin declines and cash flow remains negative

Ask AI · Why is L. G. New Energy’s performance surging while its gross margin keeps falling?

Interface News reporter Zhao Yangge

With performance doubling year after year, market share landing in the top three of the industry, and CATL (300750.SZ) taking an equity stake—these glossy labels together paint a bright picture of L. G. New Energy Technology Co., Ltd. (hereinafter “L. G. New Energy”) when it relaunches its IPO.

As the largest domestic third-party BMS (battery management system) manufacturer, in the first three quarters of 2025 its revenue reached RMB 1.916 billion and net profit surpassed RMB 212 million. It seems like the company is entering a fast-growth track. However, some financial indicators in the prospectus are also sending warning signals. From the continuous slide in gross margin, to the ongoing “bleeding” of cash flow, and then to the increasingly cramped survival space—this IPO path of this “specialized, refined, unique, and new” small giant is far from as easy as it looks.

Public information shows that L. G. New Energy attempted an IPO in 2023, but in 2024 it chose to terminate the process by withdrawing its application.

Based on L. G. New Energy’s latest financial data, the revenue trend is encouraging: it soared from RMB 559 million in 2022 to RMB 1.916 billion in the first three quarters of 2025, with a compound annual growth rate of over 70% in the last three years. The company’s net profit also rose from RMB 90.689 million in 2022 to RMB 212 million in the first three quarters of 2025.

The impressive results are attributed to the rapid surge in the new energy vehicle industry in these years. According to reports, not only does L. G. New Energy’s products cover upstream manufacturers such as CATL, LG Energy Solution, CALB (3931.HK), Gotion High-Tech (002074.SZ), EVE Energy (300014.SZ), and HiTHIUM Energy, the company has also established cooperation with leading automakers including Geely, SAIC, Chery, BAIC, FAW, and Leapmotor, among others.

According to NE Times statistics, in the 2024 and 2025 China new-energy passenger car BMS markets, L. G. New Energy ranked third, and among third-party BMS manufacturers it ranked first. CATL’s investee, Shidai Zeyuan, participated in the company’s seventh capital increase in September 2025. At present, Shidai Zeyuan’s shareholding ratio is 10.95%.

Source: Prospectus

But while performance keeps climbing, another key indicator draws a sharply opposite curve—the main business gross margin fell from 44.89% in 2022 to 29.87% in the first three quarters of 2025; the gross margin of core product BMS modules also dropped from 45.35% to 39.99%. The data shows that L. G. New Energy’s average selling price for BMS modules was RMB 636.51 per PCS in 2022, but in the first three quarters of 2025 the average selling price fell to RMB 395.56 per PCS.

Comparing historical data, the company is now trapped in a competitive model of “competing on price to drive volume.” In the prospectus, L. G. New Energy candidly stated: “Given the company’s considerations to continuously improve market share and maintain stable cooperation relationships with major customers, its gross margin will be relatively lower.”

More importantly, behind this low-price strategy may also be the company’s helpless move to sustain relationships with major customers. During the reporting period, L. G. New Energy’s sales revenue from its top five customers has maintained at 80% or more since it started in 2023, and this figure was 81.86% in the first three quarters of 2025. High customer concentration naturally also means that the balance of bargaining power tends to lean toward buyers. The continuous decline in gross margin is a direct reflection of this structural imbalance.

It is worth noting that L. G. New Energy’s book profits and cash flows are also seriously misaligned.

From 2022 to the first three quarters of 2025, the company’s cumulative net profit exceeded RMB 558 million, but the net cash flow from operating activities has been negative consecutively: RMB -45.7552 million in 2022, RMB -82.6494 million in 2023, RMB -1.6712 million in 2024, and in the first three quarters of 2025 it further expanded to RMB -271 million.

The root of this dilemma of “increasing profit without increasing cash” lies in the dual backlog of accounts receivable and inventories. In 2022, L. G. New Energy’s accounts receivable balance was still RMB 363 million, but as of the end of September 2025, the company’s accounts receivable balance had surged to RMB 1.216 billion, accounting for about 63% of revenue for the period. The company’s accounts receivable turnover ratio also fell from 2.27 times in 2022 to 1.75 times in the first three quarters of 2025. This means that more than 60% of sales revenue is stuck on the books rather than turning into real cash. At the same time, the company’s inventory book balance also jumped from RMB 134 million at the end of 2022 to RMB 694 million as of the end of September 2025. Inventory turnover fell from 2.98 times in 2022 to 2.64 times in the first three quarters of 2025, with substantial funds locked up in raw materials and finished goods.

To ease capital pressure, the company has had to substantially increase external borrowings. Short-term borrowings surged from RMB 107 million in 2022 to RMB 489 million as of the end of September 2025, while long-term borrowings changed from “0” in 2022 to RMB 30 million in the first three quarters of 2025. This also caused the company’s non-current liabilities due within one year to rise from RMB 6.2904 million in 2022 to RMB 61.6218 million in the first three quarters of 2025—nearly 10 times the former.

As a result, L. G. New Energy’s asset-liability ratio kept climbing. As of the end of September 2025, the consolidated figure reached 59.74%, far above the industry peer average of 38.48%. Analyses indicate that this leveraged operating model can be sustained when the industry is booming; if downstream demand slows or the cash collection cycle lengthens, the company’s capital chain will face challenges.

Source: Prospectus

In addition to internal operating issues such as declining gross margin and tight cash flow, L. G. New Energy may also need to keep its guard up to deal with trend changes currently taking place in the BMS industry.

The BMS market has long shown a “three-way” pattern—vehicle OEMs, power battery manufacturers, and third-party manufacturers each occupy a share, while the market share of third-party manufacturers has long been constrained to below 30%. Although the company, leveraging its technological advantages, holds a leading position in the third-party camp, giants like BYD (002594.SZ) and CATL are continuously encroaching on the market boundaries.

Source: Prospectus

In 2025, more and more vehicle OEMs and battery manufacturers began developing BMS products in-house. From publicly available information, BYD is a typical example. Its subsidiary, Freudian Battery, not only achieved in-house production of blade batteries, but its BMS was also developed end-to-end in-house. The 2025 Geely Galaxy E8 is equipped with Geely’s self-developed Shendun Battery Safety System 2.0. This system includes a “vehicle-cloud integrated” BMS battery management system that can give early warnings of faults through 5G networks and AI algorithms. Changan Automobile’s independent electronic control platform “Changan Zhiyu Xin 2.0” achieved overseas mass production in Thailand in 2025, indicating that its self-developed BMS has entered a globalized supply stage.

In terms of battery manufacturers, the CATL Future Energy (Shanghai) Research Institute has jointly launched an “Imaging · Cloud BMS” intelligent battery management system with Hello Travel.

Under such circumstances, L. G. New Energy plans to raise about RMB 1.925 billion, with the vast majority going to the “Yangtze River Delta New Energy Vehicle Control System Intelligent Manufacturing Center Project” and the “L. G. New Energy Industrial Park Phase III Project.” According to the plan, these two projects will respectively add 24 and 30 SMT production lines and supporting facilities. The construction periods are 24 months and 36 months respectively. The former will add 5.76 million sets of BMS and other automotive electronic systems, while the latter will add production capacity for 7.2 million sets of BMS.

Source: Prospectus

Interface News notes that L. G. New Energy’s capacity utilization rate was once as high as 99.61% in 2024, but in the first three quarters of 2025 it fell to 77.44%. While the company explains the decline in utilization rate as being due to “ramping up new capacity,” the drop in capacity utilization comes before the fund-raising expansion. In that case, when it launches large-scale capacity expansion again, how the newly added capacity will be absorbed will naturally become the most realistic question the company faces.