Core Viewpoint - The company Jiangsu Kangrui New Materials Technology Co., Ltd. (Kangrui New Materials) is facing challenges as it prepares for its IPO, with significant reliance on a single major customer and various internal control issues that raise concerns about its financial health and governance structure [3][4][9][10]. Financial Performance - Kangrui New Materials has seen a dramatic increase in net profit, rising 7.64 times over three years, with net profit reaching 411 million yuan in 2024 from 47.56 million yuan in 2022 [3]. - Revenue from a single major customer (Company X) accounted for 88.41% of total operating income in 2024, indicating a high dependency on this client [3][4]. - The company plans to raise 1.105 billion yuan through its IPO, with 814 million yuan allocated for expanding titanium alloy and composite material production capacity [4]. Revenue and Client Dependency - The revenue from Company X is projected to decline in 2025, posing a risk to the company's operations if it fails to pass the supplier qualification review [4]. - The top five customers accounted for 84.77% of sales in 2024, with BYD alone contributing 28.42% of revenue [4]. Inventory and Receivables - The company faces pressure from accounts receivable and inventory, with inventory values increasing from 146 million yuan in 2022 to 399 million yuan in 2024, and a significant rise in inventory impairment provisions [5]. - Accounts receivable also increased significantly, reaching 645 million yuan in 2024, which constituted 44.35% of current assets [5]. Internal Control Issues - Kangrui New Materials has reported significant internal control issues, including 777 million yuan in related-party loans from 2020 to 2023, with 519 million yuan in 2023 alone [9]. - The company has faced administrative penalties for tax and environmental violations, indicating a lack of compliance awareness [9][10]. Governance Structure - The company's governance is heavily influenced by its controlling shareholders, who hold 72.52% of the equity, raising concerns about transparency and potential conflicts of interest [10]. - The controlling shareholders have cashed out over 65 million yuan in dividends, and there are allegations of questionable transactions with major clients [10]. Research and Development - Kangrui New Materials has a low R&D expenditure relative to its revenue, with R&D expenses as a percentage of revenue decreasing from 3.48% in 2022 to 2.71% in 2024 [11][13]. - The company has only 109 patents, with a mere 4 being authorized invention patents, indicating a potential lack of core technological capabilities [12]. Market Position and Future Outlook - The company is heavily reliant on titanium alloy products, which accounted for over 60% of its revenue in 2024, but faces risks from emerging materials and technologies in the consumer electronics sector [12]. - Kangrui New Materials plans to invest in a new R&D center, but the declining number of R&D personnel raises concerns about its ability to innovate and compete effectively [13].