The Beijing Stock Exchange listing review for Zhengdao Technology is scheduled for August 21. The company, which brands itself as a "specialized, refined, distinctive, and innovative little giant," traces its roots to a collective enterprise established in 1997.

During the 2000 restructuring, then-factory director Zhong Hua personally contributed 45.6% of the capital, far exceeding the collective shareholders' 18.9% stake. Over the following two decades, through a series of maneuvers including the 2003 cancellation of Huzhou Cable Factory and the assumption of its debts and claims, Zhong Hua secured control with a 51% stake, gradually transforming the "mixed ownership" entity into a typical family-controlled private enterprise.

Ahead of its 2022 National Equities Exchange and Quotations listing, former controlling shareholder Zhengdao Optoelectronics transferred its entire 100% equity to nine natural persons, including Zhong Hua and his daughter Lu Hang, then immediately ceased operations—an affiliated company in the same industry with overlapping customers exiting the scene right before the IPO.

By the time of filing, the Zhong family controlled 66.85% of voting rights, with daughter Lu Hang holding 16.05% while employed full-time at a public institution with no connection to the wire and cable industry.

On the compliance front, a USD 6.5 million Canadian cross-border lawsuit, representing 44.11% of net assets and thus a mandatory disclosure item, was concealed for five years until a supplementary disclosure in March 2024, prompting the Zhejiang Securities Regulatory Bureau to issue warning letters to the company and Zhong Hua. Additional issues include 42 million yuan in round-tripping loans, 18.93 million yuan in bill financing without genuine underlying transactions, and tax penalties for bonuses paid via personal cards.

Financially, from 2022 to 2024, operating cash flow saw a cumulative net outflow exceeding 500 million yuan, diverging sharply from sustained profit growth. The debt-to-asset ratio stood at 70.45% versus competitor Zhaolong Interconnect's approximate 18%; debts due totaled 720 million yuan while monetary funds were under 100 million yuan with 70% restricted.

Overseas confirmation letter response consistency was only 28%, leaving over 70% of international revenue unverifiable. Related-party procurement pricing ran nearly 30% higher than third-party rates without market benchmarks. Annual report and prospectus supplier procurement data differed by 78.1 million yuan, with the prospectus's consolidated figures even lower than individual entity amounts. The parent company's R&D expense ratio remained below 2.2% for three years, far under the 3% threshold for high-tech enterprise certification.

From Collective Enterprise to Family Dynasty, Five-Year Litigation Concealment

Zhengdao Technology's predecessor, Zhejiang Zhengdao Cable Co., Ltd., was established in 1997 as a subordinate entity of Huzhou Wire and Cable Factory with clear collective ownership characteristics. Current actual controller Zhong Hua served as factory director of this collective enterprise since 1992.

In 2000, Lianshi Town Government certified collective net assets at 6.129 million yuan through a property rights determination document, initiating the restructuring. Zhong Hua's personal capital contribution reached 45.6%, well above the collective shareholders' 18.9%.

In January 2003, following the cancellation of Huzhou Cable Factory, all its debts and claims were assumed by Zhejiang Huzhou Zhengdao Wire and Cable Co., Ltd., controlled by Zhong Hua. That July, Zhong Hua first directly acquired equity in Zhengdao Limited, gaining control with a 51% stake.

Over the following decade-plus, the company evolved from "mixed ownership" into a quintessential family enterprise. In February 2022, on the eve of its National Equities Exchange and Quotations listing preparations, former controlling shareholder Zhengdao Optoelectronics transferred its entire 100% stake in Zhengdao Limited to nine natural persons including Zhong Hua and Lu Hang, with the company citing "satisfying shareholding requirements for a joint-stock company." Post-transfer, Zhengdao Optoelectronics immediately ceased operations.

This affiliated company, operating in the same industry with multiple shared customers and suppliers, abruptly exited and transferred all equity just before the IPO. By filing time, Zhong Hua directly held 50.80%, with daughter Lu Hang as a concert party holding 16.05%, together controlling 66.85% of voting rights. Lu Hang, employed at Shanghai Port Pilot Station since graduating in 2013, has no connection to the wire and cable sector.

Public records reveal that Hangzhou Zhengxiang Lifting Machinery Manufacturing Co., Ltd., with Zhong Hua as legal representative, was designated a restricted-consumption entity by courts and listed for tax arrears; equity in Zhejiang Zhengdao Optoelectronics under his representation was frozen; and Jiangsu Zhengquan Investment Management Co., Ltd. faced compulsory liquidation applications.

The USD 6.5 million cross-border lawsuit represents a notable disclosure compliance failure. Starting December 2017, Canadian customer HSC owed approximately USD 1.9 million. After filing a claim with Sinosure in November 2018 and receiving USD 1.7129 million, Zhengdao Technology sued HSC in the Ontario Superior Court in April 2019 for recovery. HSC promptly filed a USD 6.5 million counterclaim.

Critically, this counterclaim amount represented 44.11% of the company's net assets at end-2021, constituting a material matter requiring mandatory disclosure. However, it was omitted from the public transfer statement, 2022 annual report, and 2023 interim report—only disclosed on March 28, 2024. In September 2024, the Zhejiang Securities Regulatory Bureau issued warning letters to the company, Zhong Hua, and then-board secretary Yu Jianwei, recording the matter in their integrity files.

Additionally, in 2021, the company channeled 42.0933 million yuan in bank loans through supplier Jiuli Electric, issued 85.7279 million yuan in bank acceptance bills, with "round-tripping loans" and "bill financing without genuine transaction background" totaling 18.9349 million yuan—violations under the Loan General Rules and Negotiable Instruments Law.

From 2021 to 2023, the company distributed overtime pay, high-temperature allowances, and other benefits through a cashier's personal card, disbursing 1.2792 million yuan in bonuses as "business expenses." In October 2022, subsidiary Jiangxi Zhengdao received a tax handling decision letter.

Data Discrepancies and Invalid Confirmation Letters

Zhengdao Technology primarily designs, manufactures, and sells low-voltage wire and cable and precision conductors, covering data cables, communication cables, control cables, and specialty cables for 5G communications, IoT, and security applications.

Performance-wise, the company achieved 1.29 billion yuan in revenue and 52.49 million yuan in non-GAAP net profit in 2024. Non-GAAP net profit growth hit 100% in 2022 and 106% in 2023—doubling two consecutive years. 2025 revenue reached 1.354 billion yuan with attributable net profit of 56.4348 million yuan.

While peers Baosheng, Wanma, Zhaolong Interconnect, and Hengfeng Special Conductor saw declining net profits in 2022-2023, Zhengdao Technology achieved consecutive profit doubling. The Beijing Stock Exchange repeatedly questioned this divergence across three rounds of inquiries, with the company attributing it to "emerging scale effects and diluted fixed costs."

From 2022 to 2024, operating cash flow net amounts were -199 million, -233 million, and -72.64 million yuan respectively, cumulatively exceeding 500 million yuan in outflows, while net profits remained positive and growing. The company explained customers predominantly settled via commercial acceptance bills, with discounting-related cash flows reported under financing activities.

By end-2024, the debt-to-asset ratio was 70.45%, versus Zhaolong Interconnect's approximate 18%—the closest product overlap. Total debts due reached 720 million yuan, while monetary funds were only 94.55 million yuan, with 67.65 million restricted. Pledged and mortgaged assets totaled 226 million yuan.

Notably, overseas confirmation letter consistency was merely 28%, with auditors unable to verify over 70% of international transaction amounts. Supplier confirmation consistency was approximately 50%. The company cited "cross-border shipping time differences," yet overseas revenue without shipping acceptance documents rose from 13.74 million yuan in 2023 to 33.73 million yuan in 2025, growing from 5.36% to 8.08% of export revenue.

In 2021, Zhengdao Technology purchased PVC raw materials worth 51.0782 million yuan from former controlling shareholder Zhengdao Optoelectronics, representing 7.27% of operating costs. Zhengdao Optoelectronics' insulation material price of 10.22 yuan/kg exceeded purchases from Hongqi Cable by 1.48 yuan and Wanma Group by 3.05 yuan. More critically, Zhengdao Optoelectronics "essentially had no third-party sales," leaving pricing without market benchmarks.

At start-2021, funds lent to Zhengdao Optoelectronics had an opening balance of 66.9411 million yuan, with an additional 91.4182 million yuan lent that year. Against a high-debt backdrop, lending substantial sums to a related party—which also had fund flows with the issuer's suppliers—raises governance concerns.

Data inconsistencies plague the filings. Comparing the 2022 annual report with the prospectus: top-five supplier lists largely overlap, yet procurement amounts differ by nearly 78.1 million yuan. Yida Copper shows 354 million yuan in the annual report versus 312 million in the prospectus—a 41.27 million discrepancy.

More glaringly, the prospectus contradicts itself internally: the "supplier procurement details" section shows consolidated purchases from Jiuli Group of 96.3596 million yuan for 2021, while the "round-tripping loan explanation" lists individual entity purchases from Jiuli Electric of 108.8863 million yuan for the same period—consolidated figures lower than individual entity amounts.

The parent company's R&D expense ratios for 2021-2023 were 2.05%, 1.81%, and 2.10% respectively. The high-tech enterprise certification hard requirement mandates that companies with revenue above 200 million yuan maintain R&D expenses of no less than 3% of revenue over the preceding three years.