Wuhan Jihechang New Materials Co., Ltd. (hereinafter referred to as "JHC") responded to the second round of inquiries from the Beijing Stock Exchange on April 3rd.
Established in 2005 and primarily engaged in surface and interface treatment materials, this New Third Board enterprise exhibits multiple compliance deficiencies. Subsidiary Wuhan Guomao continuously engaged in hazardous chemical trade without obtaining a business license from 2022 to 2024, resulting in illegal gains of 1.4713 million yuan and facing a maximum fine of 850,000 yuan. Furthermore, the parent company, Wuhan Tehua, and Shenzhen Jihechang all committed similar violations during the same period, indicating the issue is not isolated. More concerning is the "produce first, license later" approach for controlled chemicals - subsidiary Jingmen Jihechang's 1,3-propane sultone did not obtain the required license until January 2025, meaning it operated without a license for three years prior. Overcapacity production persists despite prohibitions; after environmental impact assessment rectifications, Hubei Jihechang still exceeded production limits for some products, and Jingmen Jihechang's SPS product once exceeded capacity by 31.23%. Just before the inquiry response, Wuhan Tehua received another 30,000 yuan fine for safety hazards in February 2026.
Regarding equity, state-owned shareholders including Gaoxintou Chuangtou, who entered in 2022, exited prematurely in 2024 before valuation adjustment mechanism (VAM) clauses were triggered. The company repurchased their shares through a capital reduction of 41.0978 million yuan. The compliance of this operation and potential harm to other shareholders' interests remain key points of regulatory inquiry. The second-largest shareholder, Oxiranchem Co., Ltd., holds a 37.71% stake but has incurred cumulative losses exceeding 470 million yuan over the past two years. Suspicions exist regarding commingling of assets and personnel between the companies.
Financially, while revenue grew 18% from 2022 to 2024, net profit excluding non-recurring items stagnated. Revenue and net profit both declined in the first half of 2025. The comprehensive gross margin is significantly higher than the industry average, but the core product, battery electrolyte additive, has operated at a negative gross margin for two consecutive years. The cash collection ratio is below 0.6, indicating poor quality of revenue. The proportion of self-produced product revenue continues to decline, while purchased products surged to 108 million yuan, with high reliance on a single external supplier. The company engages in two-way transactions (buying and selling) with 102 entities, and one of the top five customers is a micro-enterprise with registered capital of only 500,000 yuan.
JHC was established on August 25, 2005, and first listed on the New Third Board's basic tier in March 2015. It delisted in April 2021 and relisted four years later in April 2025, barely entering the innovation tier in May of the same year.
In June 2022, state-owned shareholders including Gaoxintou Chuangtou entered via a VAM agreement, stipulating share repurchase if the company failed to list by the end of 2024. However, these institutions exited prematurely in September 2024. The company's prospectus attributes this to "adjustments to the ChiNext listing plan" and "changes in capital market policies." In August 2024, the company repurchased all shares held by these institutions through a capital reduction of 41.0978 million yuan. The accounting treatment's compliance and whether it harmed other shareholders' interests are persistent focuses of the review inquiries.
As of the prospectus signing date, Song Wenchao and Dai Rongming collectively control 62.29% of voting rights through three shareholding platforms: Jihechang Investment, Jixiangdao Investment, and Hesheng Investment, forming a dual-controller structure. Song Wenchao, born in 1968, graduated from Wuhan University with a degree in organic chemistry in 1990, gained nearly a decade of experience at Wuhan Fengfan Electroplating Technology Co., Ltd., and has served as General Manager for over twenty years. Dai Rongming, also born in 1968, serves as Director and General Manager and holds U.S. permanent residency. The two have signed three acting-in-concert agreements since 2014, none of which include a final decision-making mechanism for disagreements.
The company experiences high turnover among core technical personnel. In March 2025, Technical Director Ren Fan resigned for personal reasons during the critical IPO application window. Subsequently, aside from the two actual controllers, the new Technical Director Wu Hongte only joined in 2025, with other technical staff primarily developed internally from subsidiary Wuhan Tehua.
JHC exhibits multiple compliance flaws.
Audit materials show that subsidiary Wuhan Guomao engaged in hazardous chemical trade for three full years from January 2022 to December 2024 without the required license, generating illegal income of 1.4713 million yuan. According to the "Regulations on the Safety Management of Hazardous Chemicals," this violation faces administrative penalties including confiscation of all illegal gains and a fine between 400,000 and 850,000 yuan. Notably, this is not an isolated case involving a single subsidiary—the parent company itself, Wuhan Tehua, and Shenzhen Jihechang were all involved in unlicensed hazardous chemical trade during the same period.
Controlled chemicals were produced before obtaining licenses. The 1,3-propane sultone produced by subsidiary Jingmen Jihechang is a controlled chemical, requiring a special license before production begins according to regulations. However, this license was not obtained until January 2025. This means the subsidiary essentially produced controlled chemicals without a license throughout the entire reporting period from 2022 to 2024.
Overcapacity production persists despite repeated prohibitions, rendering rectifications ineffective. Subsidiary Hubei Jihechang not only exceeded production capacity in 2022 but also produced beyond the scope approved in its environmental impact assessment. After reapplying for environmental impact assessment procedures at the end of 2022, production of some specific products continued to exceed approved capacity until the end of 2025. Due to shared production lines, Wuhan Tehua consistently exceeded environmental assessment capacity for alkyne glycol ether production. In the first half of 2025, Jingmen Jihechang's SPS product capacity was exceeded by 31.23% due to a surge in orders. The company explained this was due to "frequent product switching and strong market demand."
Just before the company responded to the second round of inquiries, Wuhan Tehua was fined 30,000 yuan by the Wuhan Emergency Management Bureau in February 2026 for possessing national standard safety accident hazards, with responsible person Liang Lichun also fined 27,000 yuan. Additionally, Wuhan Tehua was fined 15,000 yuan in 2023 for violating the "Work Safety Law."
Regarding related-party relationships, the second-largest shareholder, Oxiranchem Co., Ltd., holds a 37.71% stake in JHC. In 2017, Oxiranchem subscribed for 29.1 million new JHC shares by contributing its 60% equity stake in Wuhan Tehua, valued at 55.106 million yuan. Wuhan Tehua is now a wholly-owned subsidiary of JHC, but its plant remains adjacent to Oxiranchem's facility, and it still relies on Oxiranchem for some utilities and services like circulating water, chilled water, and cafeteria meals. More notably, some of JHC's directors, supervisors, and senior management previously worked for Oxiranchem. The Beijing Stock Exchange explicitly inquired about potential "commingling of assets and personnel" and "tunneling."
It is noteworthy that Oxiranchem's operating conditions have deteriorated continuously over the past two years: incurring losses of 309 million yuan in 2023, 159 million yuan in 2024, and continuing losses into the first quarter of 2025.
The most prominent contradiction in JHC's financial data is the severe disconnect between revenue growth and profit growth. From 2022 to 2024, company revenue increased from 427 million yuan to 517 million yuan, representing a compound annual growth rate of approximately 10%. However, net profit excluding non-recurring items attributable to parent company owners only increased slightly from 52.99 million yuan to 54.05 million yuan during the same period, showing almost no growth over three years. By the first half of 2025, revenue decreased by 7.5% year-on-year, and the decline in net profit excluding non-recurring items widened to 8.3%.
The company's return on equity has declined year by year. The weighted average return on equity decreased from 18.4% to 14.5%, and further to 12.94% during the reporting period.
The ratio of cash received from selling goods and providing services to operating revenue was only 0.58, 0.58, and 0.62 for the respective reporting periods. This indicates significantly poor "quality" of revenue, with a large portion of sales revenue remaining as accounts receivable on the books instead of being converted into actual cash inflow.
The company's net profit margin shows a downward trend, decreasing from 13.14% to 12.83%, and further to 10.89%.
During the reporting periods, JHC's comprehensive gross margin was 31.06%, 31.59%, and 27.28%, significantly higher than the average of comparable companies in the same industry, which was 26.63%, 17.42%, and 9.93% respectively.
By business segment, the gross margin for new energy battery materials plummeted from 45.49% to 36.01%, with a single-year drop of 8.69 percentage points in 2024. Within this segment, the battery electrolyte additive business operated at negative gross margins of -3.62% and -3.03% in 2023 and 2024 respectively. The gross margin for lithium battery copper foil additives also decreased from 55.96% to 46.77%, a drop of nearly 10 percentage points.
During the reporting period, the proportion of revenue from self-produced products continuously decreased from 92.82% to 79.02%, while revenue from purchased products surged from 30.5488 million yuan to 108 million yuan. The company relies solely on a single external supplier, Hubei Tian'an New Building Materials, with external procurement volume reaching 8,331.55 tons in 2023.
During the reporting period, JHC engaged in two-way transactions (both purchasing and selling) with 102 entities, accounting for approximately 20% of procurement value and 25% of sales value. Among these, transactions with 13 entities exceeded 1 million yuan each way, and the product categories involved were highly similar.
Notably, one of the top five customers, Hangzhou Nottingham Technology Co., Ltd., has a registered capital of only 500,000 yuan and only 6 employees enrolled in social insurance.