Reconova Technologies Co., Ltd. has filed for a Hong Kong IPO under Chapter 18C for Specialised Technology Companies, with Huatai International, CCB International, and ABC International acting as joint sponsors. Proceeds will fund R&D enhancement, production facility establishment, strategic acquisitions, overseas expansion, and working capital.

The company's financial metrics reveal significant operational vulnerabilities. Despite revenue surging from RMB78 million in 2022 to RMB395 million in 2024 with a 124% CAGR, and a nominal net profit of RMB8.29 million in 2024 following two years of losses, fundamental weaknesses threaten sustainability. Accounts receivable ballooned to RMB307 million in 2024—nine times the 2022 figure—representing 77.7% of annual revenue. Collection efficiency deteriorated sharply, with trade receivable days soaring to 262 days in 2024, indicating nearly nine months of interest-free financing for clients. Alarmingly, 17% of receivables aged 1-2 years (RMB61.03 million) and 5% exceeded three years (RMB17.83 million), creating substantial bad debt risks.

Cash reserves plummeted 85% within four months, dwindling from RMB54.68 million at 2024 year-end to RMB7.34 million by April 2025. The company admits current liquidity suffices for merely eleven months of operations at 2024 consumption rates.

Client concentration intensified dramatically, with top-five customers contributing 73.6% of 2024 revenue—including one exceeding 30%—without long-term purchase agreements. Supplier dependency remains critical, as top-five vendors constituted 68.7% of procurement. Despite maintaining 39.8% gross margin in 2024, supply chain disruptions could rapidly erode profitability.

A pre-IPO equity transfer raises compliance concerns: transaction documents show payment completion on July 9, 2024, preceding the April 10, 2025 agreement date—contradicting standard commercial protocols. This transfer occurred merely three months before IPO filing at approximately 10% discount to 2022 Series D valuation, despite improved financial performance, triggering questions about insider confidence.

Regulatory risks persist from a 2021 CCTV 3·15 exposure regarding unauthorized facial data collection through the company's cameras installed at Kohler showrooms and auto dealerships. Potential violations of China's Personal Information Protection Law could incur penalties up to RMB50 million or 5% of annual revenue—catastrophic for a cash-strapped firm.

Without material improvement in receivables management and client diversification, IPO proceeds would merely postpone rather than resolve Reconova's existential liquidity crisis.