Hong Kong's first listed fishing equipment company nears IPO, with questions surrounding Lexin Outdoor's family governance and related-party transactions yet to be resolved.

ZC Asia has learnt that Leixin Outdoor, the world's largest fishing equipment manufacturer, has recently finalised its listing pricing on the Hong Kong Stock Exchange, entering the final countdown to its public debut. The company plans to commence trading on 10 February under the stock code ‘02720.HK’. This successful listing hearing marks the company's third attempt to gain admission to the Hong Kong exchange.

The driving force behind this endeavour is founder and Chairman Yang Baoqing, who controls approximately 94.77% of the company's shares through a complex ownership structure. His spouse and daughter both hold positions within the company or possess shareholdings, establishing a quintessential family governance framework.

The company's origins trace back to the Hangzhou Kangda Leather and Plastic Products Factory, established by Yang Baoqing in 1993. After over three decades of development, it has evolved into a global leader within the fishing equipment manufacturing sector.

Proceeds from this IPO are earmarked for brand development and promotion, establishing a product R&D innovation centre, upgrading production facilities, and bolstering working capital. This signals the company's strategic intent to transition from pure manufacturing towards brand-driven operations.

In its prospectus, Lexin Outdoor claims to be the ‘world's largest fishing equipment manufacturer,’ holding a 23.1% global market share and 28.4% of the Chinese market in 2024.

However, this market leadership has not translated into substantial profit margins. The company's gross profit margin ranges between 23% and 28%, standing at 26.6% in 2024, while its net profit margin is even lower at 10.4%.

A critical underlying issue is the company's severe underinvestment in research and development. Between 2022 and 2024, its R&D expenditure ratio remained below 1%, exposing its core business as low-value-added, highly competitive contract manufacturing rather than operations underpinned by robust brand moats.

While the company asserts it operates dual OEM/ODM and OBM models, positioning OBM expansion as a future strategy, the data reveals a different reality.

Lexin Outdoor acquired the British brand Solar as early as 2017 to initiate its own-brand strategy, yet the transition has progressed extremely slowly.

From 2022 to 2024, the proportion of revenue from OBM operations rose only marginally from 4.1% to 7.2%, and in the first eight months of 2025, it fell back to 6.6%. This stands in stark contrast to OEM/ODM revenue, which consistently maintained over 90% share, reaching 93.1% in the first eight months of 2025.

The company attempts to secure higher valuations through a ‘brand company’ narrative, yet the market may only grant it a ‘manufacturing company’ valuation anchor. This is because the core of brand premium lies not in ‘having a brand,’ but in ‘whether the brand can alter revenue and cash flow structures.’

Lexin Outdoor's related-party transaction issues are particularly pronounced. Tepsun Group, controlled by the same controlling shareholder Yang Baoqing, simultaneously serves as both the company's top five customers and top five suppliers, forming a classic ‘left-hand-to-right-hand’ transaction structure.

In 2024, Lexin Outdoor's gross margin on sales to Tepsun Group stood at 20.7%, below the company's overall gross margin (26.6%). This pricing discrepancy may indicate that the transactions were not entirely fair, raising suspicions of profit transfers to related parties.

More notably, the payment terms in these related-party transactions exhibit a ‘short collection, long payment’ pattern: Lexin Outdoor's sales payment terms to Tepsun Group were only 30 days, the shortest among its top five customers; conversely, its purchase payment terms were as long as 90 days, the longest among its top five suppliers.

Regarding financial data, the company approved a cash dividend of RMB 65 million in July 2024, paid in September, with Zhejiang Taipson Industrial as the beneficiary.

During the same period, the company's net current assets shifted from a positive RMB 82.7 million at the end of 2023 to a negative RMB 95.2 million by the end of 2024. The current ratio plummeted from 1.8 to 0.8, while the quick ratio fell to 0.4 – significantly below safety thresholds.

By the end of 2024, Lexin Outdoor recorded its first instance of ‘net debt’, with net assets standing at negative RMB 45 million, compared to net assets of RMB 137 million at the end of 2023.

This shift primarily stemmed from ‘distributions deemed to arise from restructuring’ and dividend payments, which resulted in substantial capital flows to the controlling shareholder.

Lexin Outdoor's performance exhibits pronounced volatility, reflecting the typical characteristics of an OEM enterprise. In 2022, buoyed by the popularity of fishing as a ‘low-social’ activity, the company's revenue surged to a peak of RMB 818 million.

However, with the recovery of global supply chains and the cooling of the outdoor boom, revenue plummeted to RMB 463 million in 2023, a year-on-year decline of 43.4%; net profit also fell from RMB 114 million to RMB 49.001 million.

Although signs of recovery emerged in the latter half of 2024, this rollercoaster pattern of performance fluctuations has raised investor concerns regarding the stability of the company's future growth.

Lexin Outdoor exhibits significant dependence on specific markets, with its reliance on Europe deepening notably. From 2022 to 2024, the European market's share of its revenue rose from 65.7% to 73.3%, further reaching 75.5% in the first eight months of 2025, cementing its position as the absolute core market.

Concurrently, the North American market has persisted in underperformance, with revenue plummeting from RMB 154 million in 2022 to approximately RMB 50 million in 2024 – a decline exceeding 67%.

This market concentration risk renders the company more vulnerable to economic fluctuations and trade policy shifts in specific regions.

For investors, the company's appeal lies not only in its status as the global market leader but also in its ability to balance contract manufacturing with branded operations – successfully ascending the value chain while maintaining its manufacturing strengths.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.