On September 29, Rayson HI-TECH(SZ) Co., Ltd. officially submitted its IPO application to the Hong Kong Stock Exchange, with China Merchants Securities International and Guotai Junan International serving as joint sponsors.

In recent years, Rayson HI-TECH has experienced explosive growth in operational performance; however, this high revenue appears to be merely "paper wealth." During the reporting period, the company's operating activities recorded a net cash outflow of 1.16 billion yuan, significantly exceeding its total net profit during the same period, raising concerns about its true profitability. As of June 30, 2025, inventory and accounts receivable accounted for 81.20% of total current assets, indicating significant capital tied up in working capital.

Due to insufficient operating cash flow, Rayson HI-TECH heavily relies on shareholder contributions and bank loans to meet its liquidity needs. As of June 30, 2025, the company's bank loans and other borrowings soared to 1.381 billion yuan, marking a staggering 747.59% increase from the end of 2022 and approximately 3.2 times its cash and cash equivalents during the same timeframe, putting it at risk of a significant funding shortfall and facing severe short-term debt repayment risks.

Moreover, Jiangbolong has filed a lawsuit against former employees Lu Hao, Zhao Ying, and Rayson HI-TECH, claiming infringement of its testing technology trade secrets, seeking damages of 132 million yuan. This case is currently under appellate review.

High Revenue Reliant on Low-Margin Products and Significant Supplier Dependency Rayson HI-TECH is a leading independent manufacturer of embedded storage products globally, primarily focusing on R&D, design, production, and sales of embedded storage products and other storage solutions. Its embedded storage offerings include DRAM-based products (DDR, LPDDR), NAND Flash-based products (eMMC, UFS), and multi-chip package embedded storage products (eMCP, uMCP, ePOP), with additional products primarily comprising solid-state drives and memory sticks.

According to a Frost & Sullivan report, Rayson HI-TECH ranks second among independent memory manufacturers in the global embedded storage market by shipment volume in 2024; it is the number one independent manufacturer of LPDDR and also leads among independent storage manufacturers using self-developed embedded master control chips in mainland China.

In December 2020, Rayson HI-TECH acquired a 94% stake in Miaocun Technology for 50.29 million yuan, with 20.87 million yuan paid in company shares. Following this acquisition, the company completed three rounds of financing, raising approximately 707 million yuan, with investors including noted institutions such as Shangqi Capital, Rongyi Capital, Hefei Construction Investment, Xingzheng Capital, and Yishan Investment, as well as publicly listed company Allwinner Technology.

As of the submission date, Rayson HI-TECH's executive director, board chairman, and general manager Wen Jianwei directly and indirectly holds 54.98% of the company’s shares through employee stock ownership platforms (Jingcun Management, Chuangjia Yongli, Jingmiao Holdings, and Jingcun No. 2), collectively serving as the company’s controlling shareholder.

Rayson HI-TECH had previously planned to list on the A-share market. On December 17, 2024, it registered with the Shenzhen Securities Regulatory Bureau to prepare for a public offering and listing, with China Merchants Securities as the advisory institution. However, in September of this year, Rayson HI-TECH officially terminated its A-share listing plans and instead submitted its application to the Hong Kong Stock Exchange.

According to the prospectus, Rayson HI-TECH reported revenues of 2.096 billion yuan, 2.402 billion yuan, and 3.714 billion yuan for the years 2022 to 2024, with net profits of 70.52 million yuan, 74.34 million yuan, and 136 million yuan, respectively. In the first half of 2025, the company achieved revenue of 2.060 billion yuan, a year-on-year increase of 19.33%, and recorded a net profit of 146 million yuan, up 1.21% year-on-year.

From a product category perspective, Rayson HI-TECH’s largest revenue source is from DRAM, with revenue share percentages of 67.0%, 69.1%, 66.6%, and 62.7% across the reporting periods, yielding gross margins of 11.5%, 9.8%, 8.7%, and 19.1%, respectively.

However, the average selling price of this product does not correspond with the direction of the gross margin changes. In 2024, its average selling price was 26 yuan per unit, marking a 23.81% year-on-year increase; however, the gross margin fell by 1.1 percentage points. In the first half of 2025, the average selling price dropped to 22 yuan per unit, a 12% year-on-year decrease, yet the gross margin rose by 4.1 percentage points.

The revenue share of NAND Flash ranks second after DRAM, with the share rising from 8.6% in 2022 to 18.1% in 2024, further climbing to 27.8% in the first half of 2025. However, its gross margin remains the lowest among the company's main products, with a gross margin of 10.3% in the first half of 2025, down significantly by 7.2 percentage points year-on-year.

At the same time, both the revenue scale and share of the highest-margin multi-chip package embedded storage products have seen a decline. In the first half of 2025, this product category’s revenue was only 48.52 million yuan, a sharp decrease of 61.70% year-on-year, with a revenue share of 2.4%, down 4.9 percentage points from the previous year.

The persistent decline in revenue from Rayson HI-TECH's high-margin products raises questions about their competitive edge. Is the high revenue growth dependent on low-margin products?

Significantly, Rayson HI-TECH is exposed to critical supplier dependency risks. The prospectus reveals that the company's suppliers mainly include raw material suppliers such as storage wafer and chip suppliers, controller wafer suppliers, and packaging service providers.

During the reporting period, the top five suppliers accounted for 75.0%, 72.5%, 76.0%, and 80.8% of total procurement, with the largest single supplier accounting for 55.9%, 46.5%, 53.3%, and 60.2% during the same periods.

The prospectus also indicates that Rayson HI-TECH has prepayment credit terms with its largest supplier. As of the first half of 2025, the company’s prepayments, deposits, and other receivables amounted to 176 million yuan, reflecting a 104.27% year-on-year surge, including raw material prepayments and expenditures of 104 million yuan, which increased by 99.46% year-on-year.

Cash Flow Contradicts Net Profit Amid Major Pending Lawsuit It is crucial to note that Rayson HI-TECH's high revenue is merely "paper wealth." During the reporting period, the net cash flow from operating activities was -179 million yuan, -230 million yuan, -491 million yuan, and -261 million yuan, culminating in a total net outflow of 1.161 billion yuan, which significantly surpassed its total net profit for the same period, highlighting concerns about its genuine earning capacity.

Rayson HI-TECH explained that the negative operating cash flow is primarily due to the expansion of its business operations and discrepancies in settlement terms with suppliers and clients, leading to increased working capital demands. In simple terms, this is mainly driven by growth in inventory and accounts receivable.

At the end of each reporting period, Rayson HI-TECH had inventory levels of 682 million yuan, 873 million yuan, 1.162 billion yuan, and 2.001 billion yuan, which represented approximately 65.6%, 58.1%, 50.0%, and 61.6% of total current assets, respectively. The relatively high inventory levels were primarily influenced by rapid business expansion and a proactive overall inventory strategy to ensure stable supply and meet customer demand.

As of June 30, 2025, Rayson HI-TECH's inventory comprised raw materials, work-in-progress, and finished goods (including embedded storage products that have completed testing and quality verification) at 390 million yuan, 677 million yuan, and 934 million yuan, respectively, marking increases of 195.74%, 206.79%, and 15.45% compared to the beginning of the period.

Rayson HI-TECH has acknowledged that it has failed to effectively manage its inventory, which could significantly and adversely impact its operational performance, financial condition, and liquidity. During the reporting period, it recorded inventory impairment provisions of 75.34 million yuan, 17.09 million yuan, 41.65 million yuan, and 36.41 million yuan, accounting for 106.84%, 22.99%, 30.66%, and 24.96% of the net profit for those periods, respectively.

At the end of each reporting period, trade receivables and notes receivable totaled 185 million yuan, 325 million yuan, 789 million yuan, and 636 million yuan, constituting 17.8%, 21.6%, 34.0%, and 19.6% of the total current assets as of the same days, respectively; with trade receivables turnover days extending to 26 days, 37 days, 54 days, and 63 days, reflecting an elongating collection cycle.

As of June 30, 2025, Rayson HI-TECH's combined inventory and accounts receivable accounted for 81.20% of total current assets, leading to significant operational capital being tied up.

Due to insufficient operating cash flows, Rayson HI-TECH heavily relies on shareholder contributions and bank loans to supplement its working capital needs. In the first half of 2025, the company raised 1.069 billion yuan through bank loans and other borrowings, marking a substantial year-on-year increase of 182.48%.

As of June 30, 2025, Rayson HI-TECH's total bank loans and other borrowings reached 1.381 billion yuan, a staggering 747.59% increase compared to the end of 2022, with cash and cash equivalents of only 437 million yuan, leading to a huge funding gap.

Compounding these issues, Rayson HI-TECH has been sued by Jiangbolong, a leading A-share listed company in the storage chip sector, with an involved amount of up to 132 million yuan.

In 2020, Jiangbolong filed a lawsuit against former employees Lu Hao, Zhao Ying, and Rayson HI-TECH in the Shenzhen Intermediate People's Court, alleging infringement of the company's testing technology trade secrets and seeking joint compensation of 132 million yuan from the defendants. On December 18, 2023, the court ruled in the first instance, ordering the defendants to compensate the plaintiff 14.18 million yuan.

However, both parties were dissatisfied with this verdict. Rayson HI-TECH requested dismissal of all related charges, while Jiangbolong sought an increase in the compensation amount. On December 22 of the same year, Jiangbolong filed an appeal which has been accepted by the court and is awaiting further hearings. Rayson HI-TECH stated that the revenue and profit generated from the allegedly infringed technology make up a very small percentage and that these accused technologies have been replaced by more advanced solutions.