Core Viewpoint - Tongyu New Materials (Guangdong) Co., Ltd. has faced significant challenges in its IPO process, with declining performance metrics raising questions about its market viability and the sustainability of its "domestic substitution" claims [2][3][5]. Financial Performance - The company's revenue for the years 2022, 2023, and 2024 was reported at 1.193 billion, 880 million, and 952 million respectively, with net profits declining from 188 million to 143 million during the same period [3][4]. - The direct material costs as a percentage of main business costs were 91.44%, 87.76%, and 85.59% for the years 2022 to 2024, indicating a high sensitivity to raw material price fluctuations [3]. IPO and Regulatory Challenges - The company submitted its IPO registration in April 2025, aiming to raise 1.3 billion for expansion and working capital, but its revenue growth rate falls below the required 25% for the past three years as per the revised regulations [4]. - Despite meeting certain exemption criteria, the company must still demonstrate sufficient evidence of technological barriers and market potential to pass substantive profitability reviews [4]. Market Position and Client Base - Key clients include major players in the copper-clad laminate industry, with claims of increasing domestic market share and reducing reliance on imported materials [5]. - However, there are concerns regarding the lack of data supporting the company's claims of "domestic substitution," as the prospectus does not provide benchmark data for industry localization rates [5][6]. Industry Trends and Client Performance - The financial struggles of major clients like Nanya Technology and Kingboard Chemical have been evident, with significant revenue declines reported in 2022 and 2023 [6][7]. - In 2024, while some clients showed signs of recovery, the overall market remains volatile, with ongoing challenges in profitability for many key customers [7]. R&D and Innovation - The company's R&D expense ratio was notably low, at 1.25%, 2.17%, and 2.27% from 2022 to 2024, significantly below the industry average [8]. - The prospectus did not disclose the number of core technology patents, raising questions about the robustness of its claimed technological advancements [8]. Expansion Plans - The company plans to use 1.2 billion of the 1.3 billion raised for expanding its production capacity to 200,000 tons, despite only selling 37,000 tons in 2022 [9]. - The management has indicated a phased approach to capacity expansion to mitigate the risk of overproduction, although no quantitative evidence of market demand growth was provided [10].