Yongli Precision's IPO at Beijing Stock Exchange passes review; operational performance sustainability questioned

AI Question · What potential risks does a family-controlled holding structure pose to the independence of corporate governance?

On March 30, Zhejiang Yongli Precision Manufacturing Co., Ltd. (abbreviated as “Yongli Precision”) officially entered the review process of the Beijing Stock Exchange (abbreviated as “BSE”) for submission and review. The results of the examination meeting showed that Yongli Precision met the issuance requirements, listing requirements, and information disclosure requirements, and successfully passed the review.

At the on-site deliberation meeting of the Listing Committee on the same day, questions were raised about the continuity of operating performance. The Listing Committee required Yongli Precision to explain whether the company’s performance faces downside risk, taking into account the industry status quo, competitive landscape, market space, in-hand orders, technological advantages, and other factors.

Since March, the BSE’s trend of accelerating IPO review has become increasingly evident. In the same month, the BSE scheduled 17 IPO companies for review meetings.

Performance growth momentum is weakening, and the company is highly dependent on major customers

Yongli Precision is a national high-tech enterprise mainly engaged in the R&D, production, and sales of precision steel pipes and pipe-type components for automobiles. It is one of the earlier companies in China to enter the precision steel pipe industry for automobiles and form large-scale production. Yongli Precision was accepted for review by the BSE in May last year, and in October last year and February this year it responded to the BSE’s first-round and second-round inquiries, respectively.

Performance stability and sustainability are key focuses of the BSE Listing Committee’s inquiry, and also the focal points of market attention. In the past two years, the profit levels of companies applying for listing on the BSE have increased significantly.

In terms of operating performance, from 2022 to 2024, Yongli Precision’s operating revenue and net profit both showed a growth trend. However, in the last two years there have been signs that the momentum for performance growth has weakened. In 2025, Yongli Precision’s operating revenue fell year over year by nearly 5%, while the net profit attributable to the parent increased by 14.98%. In 2026, the company expects first-quarter operating revenue to decline year over year by 7.56% to 11.56%, and net profit attributable to the parent to decline year over year by 8.8% to 17.13%.

In the second-round inquiry letter, the BSE required the company to explain the reasons for the decline in the company’s revenue in the first half of 2025 and the increase in net profit. Yongli Precision explained that, due to the downward trend in raw material prices and the impact of market competition, the extent of its product price reductions was greater than the extent of increases in product sales volume, leading to a year-over-year decline in operating revenue. In addition, the downward trend in raw material prices and the decline in outsourcing costs reduced main business costs, thereby improving gross margin and operating profit.

“The risk of reliance on major customers” is also one of the issues that the BSE frequently focuses on and asks about during IPO review.

According to public information, from 2022 to 2024, the revenue contributed by Yongli Precision’s top five customers increased year by year from 63% to 77%. In the first half of 2025, it further rose to 79%. The company’s high customer concentration exposes it to risks such as weakening bargaining power and profits being compressed.

This IPO plans to raise RMB 380 million. After the projects reach full production, the company will add 15 million sets of pipes for chassis system supporting applications and 3.6 million sets of pipes for the automotive steering column system. However, based on the company’s current capacity utilization rate, utilization fluctuates significantly and the demand for expansion is not strong. The company has pointed out that the新增 capacity may face risks of not being absorbed in a timely manner.

Family control hides corporate governance risks; the BSE’s strict IPO review standards have not been relaxed

Yongli Precision’s ownership structure has always been highly concentrated among family members. According to the prospectus, as of March 2026, the six family members of the actual controller directly hold 90% of the company’s shares. By controlling 5% indirectly through employee shareholding platforms, they together control 95% of the voting rights, forming a typical absolute family-controlled ownership pattern, with key positions all held by family members.

In addition, the six actual controllers signed an “Agreement on Acting in Concert,” stipulating that if the parties fail to reach a consensus, decisions will be based on the actual controller’s views. This means that the actual controller, who serves as both chairman and legal representative, has absolute say in corporate governance. In the absence of external major shareholder checks and balances, whether the rights-protection mechanisms for minority shareholders can operate effectively involves some degree of uncertainty.

The BSE specifically inquired about this in its review, requiring the company to explain the impact of family control on the independence of corporate governance and the effectiveness of mechanisms protecting the interests of minority shareholders.

There are not a few precedents of proposed IPO companies whose review was deferred by the BSE Listing Committee due to concerns about corporate governance independence and minority shareholder interest protection. In January this year, at the BSE Listing Committee’s 5th review meeting in 2026, the initial public offering application of Zhejiang Xinsheng Technology Co., Ltd. (abbreviated as “Xinsheng Technology”) was deferred, becoming the first IPO company whose review was deferred on the BSE this year.

In the deliberation opinions issued by the BSE Listing Committee on the same day, Xinsheng Technology was required to additionally disclose measures related to Xinsheng Technology and its subsidiaries’ effective management and control of the use of募集 funds, prevention of related-party interest transfers, and protection of the interests of the issuer and minority investors.

According to disclosures in Xinsheng Technology’s prospectus, the couple Wang Haijiang and Yao Xiaoyan directly hold 46.67% of the company’s shares. Through Xinsheng Holding and Haichuang Investment, they control 52.38% of the company’s shares, for a total control of more than 99% of the voting rights corresponding to the shares, making them the company’s actual controller.

Judging from the main issues in the BSE’s inquiry to IPO companies at the first-quarter review stage, the authenticity of the company’s performance, its ability for continued operation, related-party transactions and independence, the accuracy of R&D allocation, and the completeness of information disclosure are still key areas of focus. Although the BSE’s review progress for IPOs has accelerated somewhat, the strict review standards have not been lowered. If a company’s finances have doubts or if internal control systems have defects, the proposed IPO company still faces risks of having its review deferred or even rejected.

Beijing News Shell Finance reporter Zhang Xiaochong Editor Chen Li Proofreader Jia Ning