Shida Shenghua rushes toward Hong Kong stock IPO: accumulated loss of 1.41B yuan in three years, core product prices plummeted 63%, customer concentration increased to 31.9%

Global Leader in Electrolyte Solvent Industry Faces Full Supply Chain Challenges

Shida Shenghua, as a leading global supplier of lithium-ion battery electrolyte solvents, has maintained the top position in global electrolyte solvent shipments for six consecutive years since 2020, with a market share reaching 22.2% in 2025. The company has built a comprehensive supply chain covering electrolyte solvents, lithium hexafluorophosphate (LiPF₆), electrolyte additives, and electrolytes, with products widely used in new energy vehicles, energy storage systems, and consumer electronics.

However, the company’s business model faces significant risks: on one hand, the price of core products—electrolyte solvents—has continued to decline, from 5,832 yuan/ton in 2023 to 4,891 yuan/ton in 2025, a cumulative drop of 16.1%; on the other hand, revenue from sales through chemical trading companies, though decreasing from 51.3% in 2023 to 22.4% in 2025, still involves irregular operations such as third-party payment arrangements, with settlement amounts of 21.4 million yuan through third-party accounts of 20 related clients in 2025, accounting for 0.3% of total revenue.

22.7% Revenue Growth Cannot Mask 1.41B Yuan Loss Over Three Years

The company’s revenue grew by 22.7% in 2025, from 5.55B yuan in 2024 to 6.81B yuan, but net profit remains worrisome: from 2023 to 2025, cumulative net losses totaled 1.41B yuan. Although the loss was narrowed to 58.79 million yuan in 2025, non-recurring net profit remained negative. Shareholders’ profits attributable to the company’s equity holders over three years were only 14.14 million, 20.32 million, and 28.49 million yuan, far below the financial costs of 96.53 million yuan during the same period.

Gross Margin Only 7.1%, Fine Chemicals Gross Margin Plummets 4.3 Percentage Points

The company’s gross margin has been persistently low, at 6.3%, 5.3%, and 7.1% from 2023 to 2025, significantly below industry averages. By product, lithium-ion battery-related materials’ gross margin fluctuated between 6.4% and 8.2%, fine chemicals’ gross margin dropped from 7.4% to 3.1%, and other chemicals’ gross margin increased from 2.1% to 4.1%. Notably, the gross margin of fine chemicals sharply declined to 3.1% in 2025, down 4.3 percentage points from 2023, indicating deteriorating profitability of the company’s secondary growth curve.

Operating Cash Flow Three-Year Net Outflow of 2.13 Billion Yuan; Asset-Liability Ratio at 53.4%

The company’s cash flow situation continues to worsen, with net cash outflows from operating activities of 392 million yuan, 1.04B yuan, and 702 million yuan in 2023-2025, totaling 2.13 billion yuan over three years. Cash and cash equivalents at year-end dropped from 595 million yuan in 2023 to 160 million yuan in 2024, then rebounded to 400 million yuan in 2025, mainly relying on financing activities. As of the end of 2025, the asset-liability ratio reached 53.4%, with interest-bearing liabilities of 4.03B yuan and financial costs of 96.53 million yuan.

Customer Concentration Increased by 10.6 Percentage Points Over Three Years; Largest Customer Revenue Surged 154.5%

Customer concentration has continued to rise, with the top five customers’ revenue share increasing from 21.3% in 2023 to 31.9% in 2025, up 10.6 percentage points over three years. The share of the largest single customer increased from 6.4% to 13.0%, with sales reaching 886 million yuan in 2025, a 154.5% increase over 2024, significantly heightening customer concentration risk. Dependence on a leading battery manufacturer and a leading NEV manufacturer has been increasing, posing order volatility risks.

Raw Material Costs Over 84% of Sales Cost; Lithium Carbonate Price Plummeted 63.5%

Although supplier concentration has decreased, with procurement from the top five suppliers dropping from 35.4% to 23.3%, the company’s reliance on state-owned enterprises such as Shandong Energy Group and China National Petroleum & Chemical Corporation remains high. Fluctuations in prices of main raw materials like propylene and methanol significantly impact costs. From 2023 to 2025, raw material costs accounted for over 84% of sales costs, with lithium carbonate prices dropping from 142.7k yuan/ton in 2023 to 52.1k yuan/ton in 2025, a 63.5% decrease.

Related Party Transactions Surged 300% Over Three Years, Constituting 14.2% of Revenue

The scale of related-party transactions increased by 300% over three years, from 233 million yuan in 2023 to 964 million yuan in 2025, accounting for 14.2% of revenue, highlighting high dependence on related parties. Although the company claims that transaction prices are “market-based,” the specific pricing mechanisms lack transparency. For example, in 2025, methanol purchased from Yankuang Guohong Chemical was priced 8.7% below third-party market prices, while ethylene oxide from Sinochem Energy was priced 5.3% above market prices, raising questions about transaction fairness.

Single Largest Shareholder Group Controls 21.51% of Equity; Independence Questioned

The company’s largest shareholder group, comprising China Shenhua Holdings (7.24%), RONGFA Group (6.53%), KAITOU Group (6.53%), Dr. Guo (0.35%), and Shandong Weipu (0.86%), controls a total of 21.51% of shares. Through an agreement, this group can nominate four directors and vote unanimously on major matters, posing potential conflicts of interest. Notably, Chairman Dr. Guo also controls 69.44% of Shandong Weipu, which produces lithium battery electrolyte additives, creating potential industry competition. Although the company claims product differences, in 2025, there were some overlapping clients, and Dr. Guo did not inject related businesses into the listed company, raising doubts about independence.

Safety Incidents and Compliance Risks: Explosion, Unregistered Properties, and Financial Strains

The company faces multiple risks: in August 2024, an explosion occurred in a vinyl ethylene oxide container, causing one death and one injury, with a fine of 1.85 million yuan, exposing safety management issues; emerging technologies like solid-state and sodium-ion batteries could disrupt existing electrolyte systems; 35 leased properties lack registration, and eight buildings lack property certificates, risking penalties; three consecutive years of net cash outflows from operating activities; current ratio at 1.1 and quick ratio at 1.0 indicate significant short-term debt pressure; inventory turnover days increased from 28.5 to 37.1 days, with 8.33 million yuan inventory impairment in 2025.

R&D Investment Up 41% but Profitability Still Struggling; Overcapacity Risks in Expansion

In 2025, R&D expenditure reached 271 million yuan, up 41.2% from 192 million yuan in 2023, further squeezing profit margins. The company plans to raise funds via H-shares for capacity expansion and R&D, but industry overcapacity and declining prices cast doubt on profitability turnaround. Although revenue from lithium-ion battery materials grew at a CAGR of 33.6%, accounting for 70.4% of total revenue in 2025, sustained high growth amid falling core product prices and low gross margins remains uncertain.

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