IPO Radar | Tengli Transmission Makes Second Attempt, Hidden Concerns Behind Impressive Performance

Questioning AI · How Will Tengli Transmission Break Through Its High Accounts Receivable and IPO Challenges?

Hangzhou Tengli Transmission Technology Co., Ltd. (hereinafter “Tengli Transmission”) has once again updated its prospectus, launching a second push into the capital market.

As a company specializing in automotive transmission system components, Tengli Transmission reports seemingly steady growth in revenue and net profit during the reporting period. However, issues such as high accounts receivable, conflicts between dividends and fundraising, internal control failures, and reliance on major clients pose multiple risks. These not only serve as “stumbling blocks” on its IPO journey but also raise doubts about the rationality of its listing.

Declining Accounts Receivable Turnover Rate and Extended Payment Terms Raise Sales Concerns

Tengli Transmission’s core business focuses on R&D, production, and sales of key parts and assemblies for automotive transmission systems, including bearing cages, intermediate shafts, and constant velocity (CV) drive shafts, among others. Its products are now supplied to well-known automakers such as Tesla, BYD, and Xpeng Motors.

On the surface, the company’s profitability appears stable: revenue for 2022-2024 and the first half of 2025 was 510 million, 606 million, 619 million, and 378 million yuan, respectively; net profits attributable to shareholders were approximately 65.91 million, 83.16 million, 83.92 million, and 48.32 million yuan. However, a deeper analysis reveals underlying concerns.

The most prominent issue is the continuous decline in accounts receivable turnover rate. Data shows that during the reporting periods, the turnover rates were 7.11, 6.58, 4.92, and 4.36 times per year, respectively, showing a clear downward trend. This indicates decreasing efficiency in capital utilization and a slowdown in receivables collection.

Source: Company announcements, Jiemian News Research Department

Tengli Transmission explained that it has been strengthening receivables management and optimizing customer structure. The decline in turnover rate is attributed to industry factors, and the company’s current asset turnover is higher than the industry average, indicating overall good asset utilization.

However, this explanation is hard to be convincing. Firstly, the company has not disclosed changes in average customer payment periods across periods, making it impossible to verify whether credit policies have been eased. Secondly, during the reporting period, the book value of notes receivable, accounts receivable, and receivables financing totaled 160 million, 304 million, 274 million, and 376 million yuan, accounting for 20.53%, 33.92%, 28.87%, and 36.17% of total assets, respectively. The scale has been expanding and the proportion rising, further intensifying liquidity pressure.

Industry analyst Li Zhengbin, who has been tracking the automotive sector, told Jiemian News that while receivables management is a common challenge in auto parts industry, Tengli Transmission’s worsening receivables indicators significantly increase the risk of bad debts. If downstream customers face operational difficulties or liquidity issues in the future, the company may struggle to recover receivables timely, adversely affecting cash flow and operational performance, thus becoming a major uncertainty in its IPO prospects.

Toyota’s Dual Role Sparks Controversy; Related-Party Transaction Pricing Under Scrutiny

The overlapping client and supplier relationships of Tengli Transmission are particularly notable, especially with Toyota-affiliated companies that are both major customers and key suppliers. This dual relationship has triggered strong market doubts about the fairness of related-party transaction pricing.

In 2024, Tengli Transmission’s procurement from Toyota Tsusho reached 44.157 million yuan, making it the third-largest supplier. Meanwhile, sales to Toyota Motor’s subsidiary, Toyo Transmissions, amounted to 71.561 million yuan, making it the second-largest customer.

Source: Company announcements, Jiemian News Research Department

Public information shows that during the reporting periods, procurement and sales to Toyota-related entities remained high. Purchases from Toyota Tsusho were 57.387 million, 48.931 million, 44.157 million, and 19.603 million yuan, mainly for raw materials like steel.

Source: Company announcements, Jiemian News Research Department

At the same time, sales to Toyota-related entities remained stable. In 2023 and 2024, sales to Toyota Tsusho were 31.132 million and 27.990 million yuan, respectively. Coupled with large sales to Toyo Transmissions, Toyota-affiliated companies have become indispensable partners.

It is worth noting that Tengli Transmission has not fully disclosed the pricing basis for these related-party transactions, and the fairness of pricing remains unsupported by clear evidence. CPA Lü Ming told Jiemian News that such a dual procurement and sales relationship could involve potential benefits transfer. In the auto parts industry, prices between suppliers and customers are usually benchmarked against fair market prices, but Tengli Transmission has not disclosed specific pricing standards, comparable market prices, or whether transaction prices are consistent with non-related customers and suppliers. The lack of sufficient disclosure makes it difficult to verify the fairness of these related-party transactions.

Heavy Client Concentration and High Business Risk

During the reporting period, Tengli Transmission exhibited a high customer concentration, especially with its largest client, Nanjing Iron & Steel Co., Ltd. (Nanjing Iron & Steel), which poses a significant operational risk. Data shows that from 2022 to 2024, sales to Nanjing Iron & Steel were 227 million, 259 million, and 277 million yuan, accounting for 44.52%, 42.74%, and 44.7% of revenue, respectively—consistently over 42%.

Source: Company announcements, Jiemian News Research Department

Furthermore, the overall customer concentration remains high. During the same period, sales to the top five customers were 425 million, 460 million, 466 million, and 259 million yuan, always representing over 75% of revenue, peaking at 83.23% in 2022 and still at 76.52% in the first half of 2025.

Tengli Transmission explained that as a manufacturer of CV drive shaft components, it mainly supplies Tier 1 suppliers, and the high industry concentration in China’s CV drive shaft sector—with Nanjing Iron & Steel holding over 30% market share and few large manufacturers—makes high customer concentration reasonable. However, this explanation cannot fully mask the operational risks posed by reliance on a few major clients. In the automotive supply chain, supplier-customer relationships tend to be sticky, but excessive dependence on a single core customer means the company’s performance is highly tied to Nanjing Iron & Steel’s operations and procurement needs.

Dividends and Fundraising Coexist

Tengli Transmission’s large-scale dividends alongside plans to raise funds through IPO have also attracted market criticism. From 2023 to the first half of 2025, the company paid out a total cash dividend of 88.42 million yuan, including 33.68 million in 2023, 35.37 million in 2024, and 19.36 million in the first half of 2025.

What is perplexing is that while distributing large dividends, Tengli Transmission plans to raise 80 million yuan via IPO to supplement working capital. The total proposed IPO funds amount to 684 million yuan, allocated to projects such as the production base for CV drive shafts and parts, and upgrades of automotive parts manufacturing facilities. Nearly 12% of the proceeds are intended for working capital.

Source: Company announcements, Jiemian News Research Department

Tengli Transmission states that the IPO proceeds will mainly support business development, mitigate raw material price fluctuations, and meet daily operational needs.

However, CPA Zhang Yimei commented that this explanation is hard to be convincing. If the company truly faces a cash flow shortage, it should reduce dividends and retain funds for operations. Such an approach would contradict the purpose of capital market fundraising and could harm small investors—where the controlling shareholder benefits from large dividends, while the liquidity gap is borne by investors.

Additionally, in 2024, Tengli Transmission was penalized for exceeding the legal limit on labor dispatch workers, exposing internal control weaknesses and raising concerns about its internal management and compliance.

Lawyer Wang Yi told Jiemian News that exceeding labor dispatch limits is not accidental but reflects gaps in the company’s labor management and compliance review processes.