Surge in Performance. As 2026 unfolds, the momentum in the military-industrial sector's initial public offering (IPO) market continues to intensify, with a wave of defense enterprises possessing batch production capabilities queuing for listings. Among them, Jiangsu Yongkang Intelligent Defense Technology Co., Ltd. (hereinafter referred to as "Yongkang Defense" or "the Company") has submitted its prospectus, planning to list on the ChiNext board of the Shenzhen Stock Exchange.
Yongkang Defense aims to raise 1.46 billion yuan through this IPO, allocated for its Project A, an industrialization initiative for unmanned systems and core structural components, a research and development center construction project, and supplementary working capital. As of the end of 2025, the company's monetary funds and trading financial assets collectively exceeded 1.4 billion yuan. Given its robust cash position, the necessity of raising funds to supplement working capital raises questions. Currently, Yongkang Defense's IPO has entered the "under inquiry" stage.
Introduction of 14 Shareholders Prior to IPO. Public records indicate that Yongkang Defense's history dates back to Jiangsu Yongkang Machinery Factory, established in 1981. In December 1998, the factory was restructured into a wholly state-owned company, renamed Jiangsu Yongkang Machinery Co., Ltd., wholly owned by the Jiangsu provincial government. By September 2023, after completing its shareholding reform, Sheng Cailiang and Ji Yingchun held 58.4% and 41.6% respectively, totalling 100% ownership. According to the prospectus, Sheng Cailiang and Ji Yingchun are spouses.
The prospectus notes that of the 100% equity held by Sheng Cailiang and Ji Yingchun, 95% was acquired through public auctions, while the remaining 5% was transferred to Sheng Cailiang by Yixing Assets Operating Company. Additionally, there were numerous instances of entrusted shareholding arrangements, all of which have been fully resolved prior to this IPO with no disputes or potential claims. Sheng Cailiang, a graduate of Nanjing Institute of Technology, joined Yongkang Defense in July 1983, holding various positions including technician, designer, production section chief, and general manager, and has served as Chairman since September 2023. Ji Yingchun joined the company in June 1985, initially working as an accountant and, from March 2013, as a general office manager.
It was also in September 2023 that Sheng Cailiang and Ji Yingchun first sold shares, transferring 0.93% of Yongkang Defense's equity to Shengsheng Partnership, an employee stock ownership platform comprising 17 staff members. In June 2025, to optimize its ownership structure, Yongkang Defense introduced 14 external investors, including Guoding Jiacheng, through a capital increase and the transfer of existing shares from the actual controllers. The company stated that this external financing round took into account its industry position, growth prospects, and other factors, agreeing with investors on a pre-investment valuation of 5 billion yuan.
Prior to this IPO, Sheng Cailiang directly holds 51.45% of Yongkang Defense, making him the controlling shareholder; together with Ji Yingchun, they collectively control 89.99% of the company's equity, acting as the actual controllers. Furthermore, Zhang Jianqiang, the husband of Sheng Cailiang's sister, serves as the company's General Manager, while Wang Wenwei, Sheng Cailiang's nephew, holds the position of employee representative director.
Performance Surges Post-2024. Yongkang Defense has established a mature military product system, with primary products including smart munitions. From 2023 to 2025 (the reporting period), revenue contribution from Series A products increased from 74.75% to 82.05%. In 2025, the combined revenue share from Series B, Series C, development business, and special vehicles was less than 20%.
Driven by concentrated deliveries to downstream customers, Yongkang Defense's recent two-year growth has been explosive. During the reporting period, the company's revenue was 194 million yuan, 652 million yuan, and 648 million yuan, respectively, with non-GAAP net profits of 49 million yuan, 215 million yuan, and 210 million yuan. In 2024, revenue and non-GAAP net profit surged by 236% and 339% year-on-year, respectively. This growth spurt stands out prominently among defense companies filing for IPOs during the same period.
However, in terms of business scale, Yongkang Defense still lags behind some listed peers. For instance, in 2025, both Guoke Military Industry (688543.SH) and Great Wall Military Industry (601606.SH) reported revenues exceeding 1.4 billion yuan, more than double that of Yongkang Defense. Yongkang Defense's 2025 revenue only exceeded Xinyu Guoke's (300722.SZ) 447 million yuan. Regarding customer structure, Yongkang Defense's downstream clients are primarily military units, large military-industrial groups, and their subordinate research and production entities. During the reporting period, revenue concentration from its top five customers increased from 93% to 100%, highlighting a high customer concentration risk.
The company acknowledged that if major customers delay, reduce, or terminate their procurement plans, it could lead to a decline in order volume, adversely affecting its main business revenue and profitability. Additionally, some investment bankers have noted that due to factors such as the pace of equipment procurement orders, varying prosperity across sub-sectors, and corporate qualifications, defense companies are prone to cyclical performance fluctuations between "peak and trough" years. The sustainability of the company's future performance stability could be a key concern for regulators.
Questioning the Need for Supplementary Working Capital. Contrasting its impressive performance curve, Yongkang Defense's substantial cash dividends before the IPO filing have sparked market debate. According to the prospectus, in August 2023, just before the company initiated its shareholding reform, its board approved a cash dividend plan of nearly 140 million yuan, which was 1.8 times its net profit for that year. At that time, the company's sole shareholders were the couple, Sheng Cailiang and Ji Yingchun, meaning the funds went directly to the actual controllers.
The fundraising plan shows that of the 1.46 billion yuan intended to be raised, 200 million yuan is designated for supplementary working capital. However, the company is effectively "not short of cash." By the end of 2025, Yongkang Defense's trading financial assets reached 1.378 billion yuan, primarily consisting of bank structured deposits and other wealth management products; adding 23 million yuan in monetary funds, the company's book cash exceeded 1.4 billion yuan. Concurrently, its short-term borrowings and long-term borrowings were both zero, non-current liabilities due within one year were under one million yuan, and its debt-to-asset ratio stood at 30.49%. Under these circumstances, the necessity of raising funds for "supplementary liquidity" is doubtful.
Recent cases show that several IPO candidates have been asked to justify the rationale for using raised funds to supplement working capital. Influenced by this, many companies have proactively cancelled such fundraising components to improve their chances of IPO approval. Whether Yongkang Defense will ultimately choose to reduce or remove the "supplementary working capital" item remains to be seen.
Notably, despite non-GAAP net profits exceeding 200 million yuan in the past two years, Yongkang Defense has experienced net cash outflows from operating activities. During the reporting period, net cash flows from operating activities were 343 million yuan, 176 million yuan, and -35 million yuan, respectively. In 2025, there was a significant divergence between its non-GAAP net profit and operating cash flow. This net cash outflow may be linked to high accounts receivable. Yongkang Defense stated that by the end of 2025, the accounts receivable balance from a particular downstream customer stood at 285 million yuan, representing over 65% of the total ending accounts receivable balance.
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