Linglong Tyre(SH:601966) Xin Lang Zheng Quan·2025-07-09 09:32Core Viewpoint - Shandong Linglong Tire Co., Ltd. is seeking to raise funds through an IPO in the Hong Kong market due to deteriorating financial conditions, including rising debt levels and declining profitability, despite some revenue growth in recent years [1][10]. Financial Performance - The company's net profit has significantly declined since 2020, with a drop of 64.48% in 2021 and 63.03% in 2022, and while there is revenue growth in 2023 and 2024, net profit has not returned to 2020 levels [1][10]. - In Q1 2025, revenue increased by 12.92% to 5.697 billion yuan, but net profit fell by 22.78% to 341 million yuan due to pricing pressures and raw material cost fluctuations [1][3]. Cost Structure - The cost of key raw materials, including natural rubber and synthetic rubber, has increased by 14% year-on-year in Q1 2025, contributing to profit volatility [3]. - The company's inventory has been rising, reaching 5.916 billion yuan by Q1 2025, up from 4.472 billion yuan in 2022 [3]. Debt and Liquidity - The asset-liability ratio has been increasing, recorded at 48.51% in 2022 and projected to reach 53.94% in 2024 [5]. - As of Q1 2025, the company faces a short-term debt and cash gap of approximately 10.139 billion yuan, with short-term debts totaling 14.661 billion yuan against cash reserves of only 4.522 billion yuan [7]. Previous Financing Efforts - Since its A-share listing in 2016, the company has raised a total of 6.4 billion yuan through multiple financing rounds, including a 2.5 billion yuan initial public offering and subsequent fundraising efforts [7][8]. Market Conditions - The company's stock price has dropped over 70% from its peak of 55.2 yuan per share in April 2021, leading to a market capitalization decline from over 750 billion yuan to around 200 billion yuan [9][10]. - The IPO in Hong Kong is seen as a potential solution to the company's financial struggles, but there are concerns about market reception and valuation risks due to the company's current operational challenges [10][15]. Strategic Initiatives - The funds raised from the Hong Kong IPO are intended for various purposes, including financing a new factory in Brazil, enhancing R&D capabilities, and improving global marketing strategies [12]. - The company plans to invest 8.71 billion yuan in the Brazilian factory, which is expected to generate annual revenues of 7.758 billion yuan and net profits of 1.213 billion yuan upon completion [13]. Operational Efficiency - The utilization rate of the company's production facilities is below 60%, with only 6 out of 17 major projects achieving over 70% utilization [13][14].