Autel(SH:688208) Xin Lang Zheng Quan·2025-12-23 15:14Core Viewpoint - Daotong Technology has initiated its listing process on the Hong Kong Stock Exchange, raising numerous questions regarding its frequent fundraising since its listing on the Sci-Tech Innovation Board, the frequent changes in its CFO, and the implications of its high gross margin coupled with low turnover rates, which may indicate potential internal trading issues and risks related to transfer pricing or tax audits [1][2][3]. Fundraising Activities - Since its listing on the Sci-Tech Innovation Board in 2020, Daotong Technology has continuously raised funds, with a significant portion used for liquidity support. The company has shown a solid growth trajectory, with revenue growth exceeding 20% in most fiscal years, peaking at over 40% [2][4]. - The company raised over 1.2 billion CNY in its IPO, with approximately half of the funds allocated for liquidity support [4][5]. - In July 2022, Daotong Technology issued 1.28 billion CNY in convertible bonds, with nearly 30% of the funds also directed towards liquidity support [6][7]. - In March 2023, the company proposed a private placement plan to raise up to 806 million CNY, with nearly 30% of the funds intended for liquidity support, although this plan was ultimately withdrawn [8][10]. Business Model and Financial Performance - Daotong Technology operates primarily in the automotive electronics sector, focusing on comprehensive diagnostic and testing services, with a significant portion of its revenue generated from overseas markets [10][12]. - The company relies heavily on a distributor model, with over 80% of its revenue coming from distributors, leading to high levels of inventory and accounts receivable [12][13]. - As of the latest quarterly report, the combined total of inventory and accounts receivable reached 2.87 billion CNY, accounting for 42% of total assets [13]. Gross Margin and Turnover Rates - Daotong Technology's gross margin significantly exceeds that of its peers, with a gross margin of 55.31% compared to industry averages around 35.72% [15][16]. - Despite high gross margins, the company exhibits low inventory turnover rates, consistently maintaining levels between 1 and 1.5, while competitors often exceed 2 [15][18]. - The company attributes its low turnover rates to its export-oriented business model, which involves longer shipping times and the need to maintain higher inventory levels to meet customer demand [18]. Internal Trading Concerns - There are concerns regarding potential internal trading practices, as Daotong Technology utilizes overseas sales platforms that may lead to non-standard pricing and potential tax risks [19][20]. - The company has seen a significant increase in deferred tax assets, rising from 133 million CNY in 2020 to 364 million CNY by the third quarter of 2025, raising questions about the legitimacy of its financial practices [21][24]. Management and Governance Issues - Daotong Technology has experienced frequent changes in its CFO over the past four years, which may raise concerns about governance and operational stability [28]. - The company has faced regulatory scrutiny for failing to disclose related party transactions and other compliance issues, resulting in warnings issued to key personnel [28]. Employee Compensation Trends - The company has shown a continuous increase in revenue per employee, while cash payments to employees have fluctuated, indicating potential inconsistencies in compensation practices [29].