Sichuan Yingfa Ruineng Technology Co., Ltd. (referred to as Yingfa Ruineng) has recently submitted its IPO application to the Hong Kong Stock Exchange, with CITIC Construction Investment International and Huatai International serving as joint sponsors.

Yingfa Ruineng, a manufacturer of photovoltaic cells, recorded a staggering loss exceeding 800 million last year. However, by the end of April this year, it turned this situation around, achieving a profit of 350 million. Despite this positive turnaround, the sustainability of profits remains uncertain given the extreme volatility in the photovoltaic industry. As of the end of June this year, the company’s accounts receivable and inventory had soared to 1 billion.

In addition, although Yingfa Ruineng has been seeking new growth opportunities in overseas markets such as Southeast Asia, it is noteworthy that the family controlling the company has cashed out nearly 200 million prior to the IPO.

1. Yibin Gaotou Adds 1 Billion Investment Before IPO According to the prospectus and Tianyancha, Yingfa Ruineng was established in 2016 and was originally known as Anhui Yingfa Ruineng Technology Co., Ltd. The firm was renamed Sichuan Yingfa Ruineng Technology Co., Ltd. after relocating its headquarters to Yibin, Sichuan, in May this year. The company stated that it has proactively set up a significant capacity for advanced cell production in the photovoltaic industry hub of Yibin, aiming to take advantage of regional benefits and capitalize on the global energy transition.

Moreover, the strong support from the Yibin State-owned Assets Supervision and Administration Commission (SASAC) indicates that the relocation to Yibin was not unexpected. On July 29, just before the IPO application, Yibin Gaotou, controlled by the Yibin SASAC, added an emergency investment of 1.053 billion in a C-round financing, bringing the total investment from Yibin Gaotou in earlier A and B rounds to approximately 2.053 billion.

Public information shows that from 2022 until now, the company has undergone four rounds of financing, with key investors including the National Green Fund, Donghe Venture Capital, and Yuna Capital among others. Following the completion of the C-round financing in August, Yingfa Ruineng's post-investment valuation reached 8.594 billion.

In terms of ownership structure, the actual controller of Yingfa Ruineng is Zhang Fayou, who, along with his spouse Luo Baoying and their two children, Zhang Min and Zhang Jie, controls a total of 49.1% of the company's shares via Nanjing Yingfa and Yingfa Qinhhe.

Along with the additional investment of 1 billion prior to the IPO, it is equally crucial to note that Zhang Fayou's family had previously cashed out nearly 200 million through equity transfers.

During the A-round financing in August 2022, Nanjing Yingfa and Zhang Fayou transferred 1.7 million shares and 3.5403 million shares to Qichen Investment, Chen Zhaohua, and eight A-round investors for a total consideration of 141 million. In December 2022, during the A+ round financing, Zhang Fayou transferred 1.67 million shares to Yibin Gaotou for a consideration of 50.1 million. The total cash-out amounted to approximately 192 million.

2. Notable Performance Fluctuations and Business Restructuring Since its inception, Yingfa Ruineng has focused on the R&D, production, and sales of photovoltaic cells, covering both P-type and N-type cells. Among its products, the N-type TOPCon cells are a leading presence in the industry, positioning Yingfa Ruineng as the third-largest specialized manufacturer of N-type TOPCon cells globally, with a market share of 14.7% based on 2024 shipping volume.

According to Frost & Sullivan, the global market for photovoltaic cells is projected to grow from 693.0GW in 2025 to 1171.2GW by 2030. In 2024, the shipment volume of N-type TOPCon cells is expected to reach 410.8GW, ranking first, with an estimated market share exceeding 80% by 2025.

Despite the significant scale of the global photovoltaic cell market, Yingfa Ruineng's operations are still largely concentrated in mainland China. The company's revenue from the domestic market accounted for 96.8%, 96.7%, 89.3%, and 75.5% during the periods of 2022 to 2024, with overseas revenue comprising only 3.2%, 3.3%, 10.7%, and 24.5%.

Between 2022 and 2024, the company’s revenue took a rollercoaster ride of 5.643 billion, 10.494 billion, and 4.359 billion respectively, with corresponding profits of 350 million, 410 million, and a staggering loss of 864 million. In 2024, the company faced a significant downturn, with profits plummeting to an 864 million deficit.

The company stated that the decline in revenue for 2024 was mainly due to decreased sales from P-type PERC cells, offset by the revenue rise from N-type TOPCon cells. In other words, the increase in revenue from the core N-type TOPCon product could not compensate for the decline in P-type PERC cell sales.

The financial conditions improved in the first four months of this year, with a revenue of 2.408 billion, marking a 111.2% year-on-year increase, and the profit turning around to 355 million. This revenue increase was predominantly attributed to a boost in N-type TOPCon cell sales.

A detailed examination of the revenue shares of main products during this period shows a stark transformation. The revenue share of N-type TOPCon cells surged from 7.1% in 2023 to 81.2% in 2024, reaching 95.5% in the first four months of this year, while P-type PERC's revenue share plummeted from 96.9% in 2022 to 13.8% in 2024, clearing entirely in the first four months of this year.

The company stated that the decline in P-type PERC income was chiefly due to the discontinuation of the P-type PERC cell production line at its Tianchang facility, as it cleared all existing inventory last year.

This indicates that N-type TOPCon cells have virtually become Yingfa Ruineng’s sole source of revenue. However, it is noteworthy that the gross margins for N-type TOPCon products in 2023 and 2024 were both negative at -21.3% and -7.3%, respectively. In the first four months of this year, the gross margin did shift to positive at 24.5%, yet the negative gross margin in 2024 significantly contributed to the loss of over 800 million that year.

At the same time, the gross margin for P-type PERC has also been negative since 2024, with margins of 11.5% and 11% in 2022 and 2023, plunging to -17.3% in 2024.

The company indicated that the gross margin for N-type TOPCon increased to 24.5% in the first four months of this year mainly due to reduced upstream material costs and economies of scale, which lowered manufacturing and labor costs. Additionally, the higher proportion of sales in overseas markets also contributed.

Yingfa Ruineng attributed the sharp drop in the gross margin for P-type PERC in 2024 to fierce market competition leading to a decline in average selling prices.

Despite shifting its focus towards N-type TOPCon cells, the average selling price for these products has been consistently declining, recorded at 0.44 yuan/Watt, 0.28 yuan/Watt in 2023 and 2024 respectively, with a further year-on-year decrease of 0.07 yuan/Watt to 0.32 yuan/Watt in the first four months of this year.

The fluctuations in individual product gross margins and the rapid restructuring of the business are reflected in the overall gross margin, which has shown extreme instability, recorded at 11.9%, 8.8%, -7.4% from 2022 to 2024, improving to 23.8% in the first four months of this year due to the improved margins of N-type TOPCon.

Yuan Shuai, co-founder of New Smart Production Force, pointed out that from the perspectives of technological iteration and market acceptance, N-type cells, as a next-generation technology product, should ideally occupy a favorable position in the market due to superior conversion efficiency. However, the declining selling price indicates intensified market competition as numerous companies enter the N-type battery space, leading to potential overcapacity and inevitable price wars. If the company cannot lower costs through economies of scale or enhance the value-added aspect of its products, a market share increase may severely compress profitability.

Yuan Shuai also emphasized that the company’s current profitability largely depends on N-type TOPCon products, resulting in an extremely singular product structure. The negative gross margins for N-type products in both 2023 and 2024 were among the direct reasons for the staggering loss of over 800 million last year. Although the gross margin turned positive to 24.5% in the first four months of this year, there remains uncertainty regarding the sustainability of this improvement. Fluctuations in raw material prices, cost control challenges during production, and price pressures from market competition could all contribute to a potential decline in gross margins again. Persistent low profitability or a return to negative margins could plunge the company back into a loss situation, while also tightening its cash flow, adversely impacting its R&D and production expansion strategy.

3. Exclusive Cooperation with Client A In addition to significant performance fluctuations, Yingfa Ruineng seems to maintain numerous "subtle" relationships with key customers and suppliers.

During the reporting period, the revenue share from the company’s top five customers was 49.7%, 56.5%, 54.7%, and 39.6%, with all top five customers anonymized. Among these, Client A consistently ranked as the primary customer, contributing revenue shares of 19.7%, 24.4%, 20.5%, and 12.2%. Meanwhile, Client A is also the company’s largest supplier, with purchasing shares from Client A comprising 17.7%, 24.8%, 13.1%, and 8.4% over the same periods.

Aside from Client A, there are overlaps among other customers as well. Yingfa Ruineng disclosed in its prospectus that among the top five customers in each period, six also served as suppliers, and similarly, six out of the top five suppliers functioned as customers. The company noted that the photovoltaic cell industry's extended supply chain and high concentration makes it common for industry players to sell silicon wafers and manufacture photovoltaic modules, which require purchasing photovoltaic cells.

According to the prospectus, Client A, established in 2000 and headquartered in Xi'an, Shaanxi, is a global leader in silicon wafer and photovoltaic module manufacturing, currently listed on the Shanghai Stock Exchange.

Importantly, the company has reached an "exclusive cooperation" agreement with Client A. Under a 16GW HPBC solar cell production project cooperation agreement signed in 2024 with the Yibin High-tech Industrial Development Zone Administrative Committee and Client A, Client A is obligated to procure no less than 70% of the 6GW xBC production line capacity by contract terms by 2026. The remaining 30% of capacity must also be pre-approved by Client A before selling to other clients.

Reportedly, the xBC project is a new generation N-type xBC cell technology based on the existing N-type TOPCon, with initial trial production of 6.0GW N-type xBC cells commencing this May.

4. Inventory and Accounts Receivable Exceed 1 Billion, Bank Borrowings Surge However, even with the exclusive cooperation agreement on the new N-type xBC project with Client A, the urgency to manage the old product inventory is pressing.

By the end of 2024, the company's inventory surged from 277 million to 1.153 billion, and by the end of June 2025, inventory had reached 1.35 billion. The inventory turnover days escalated from 15 days in 2022 to 63 days by the end of April 2025.

On the downstream side, the pressure from accounts receivable is equally significant. From 2022 to 2024, Yingfa Ruineng's receivables and notes receivable were 875 million, 1.47 billion, and 1.264 billion respectively, and by the end of June this year, it stood at 1.389 billion. By the end of June, 58.6% of receivables and notes prior to April had been settled.

Of particular concern is the rapid increase in payables and contract liabilities; from 2022 to 2024, trade payables and notes payable grew swiftly to 1.04 billion, 1.234 billion, and 2.545 billion, which had increased to 3.098 billion by the end of June this year. The company noted that this was primarily to mitigate the impact of fluctuations in raw material prices by increasing raw material procurement.

Amid high payables, Yingfa Ruineng's contract liabilities from 2022 to 2024 were only 225 million, 162 million, 293 million, and 179 million by the end of June. Contract liabilities represent prepayments received from customers for purchased photovoltaic cells.

For the Hong Kong IPO, approximately 60.6% of the raised funds will be allocated to establishing and upgrading the Indonesian base, around 15.2% for research and development of advanced technologies applicable to photovoltaic cell products, about 15.2% for improving and optimizing sales channels domestically and overseas, and about 9.1% for working capital and general corporate purposes.

It is essential to note that Yingfa Ruineng's cash flow from investing activities has been negative for years, recording -1.6 billion, -1.15 billion, -1.516 billion, and -760 million. The company stated that the cash used for investment activities primarily relates to acquiring properties, factories, equipment, and purchasing financial products.

As of the end of June this year, Yingfa Ruineng's interest-bearing bank borrowings had surged from 75.1 million in 2022 to 522 million, mainly for procuring raw materials and purchasing equipment.

According to Tianyancha, as of October 15, the company had three movable property pledges, with a guaranteed debt amounting to 210 million. In terms of litigation, Yingfa Ruineng has been involved in 27 judicial cases, with 77.78% being as defendants, 18.52% as plaintiffs, 44.44% involving sales contract disputes, and 77.78% classified as civil cases.