Guomin Technology has posted losses exceeding 800 million yuan over three years; with no greenshoe option to provide a safety net, can it survive on southbound capital alone?

ZC Asia has learnt that 18 March marks the final day of the Hong Kong IPO subscription period for Guomin Technology (02701.HK). Founded in 2000, this platform-based integrated circuit design company is dedicated to providing control chips and system solutions for various smart devices. Its products are applied across multiple key sectors, including consumer electronics, industrial control, digital energy, smart home, automotive electronics and medical electronics, forming a diversified product portfolio.

According to the prospectus, the upper limit for the issue price of National Semiconductor’s H-shares is HK$10.80 per share. The global offering comprises 95 million shares, with a maximum fundraising target of approximately HK$1.03 billion. The company is expected to set the final price on 19 March and commence trading on 23 March.

Financial data shows that from 2022 to 2024, the company’s revenue stood at RMB 1.20 billion, RMB 1.04 billion and RMB 1.17 billion respectively. In 2023, revenue declined significantly due to oversupply in the MCU and anode material sectors; whilst there was some recovery in 2024, revenue has yet to return to 2022 levels. In the first three quarters of 2025, revenue reached RMB 960 million, representing a year-on-year increase of 16.7%, though the quality of this growth remains to be seen.

Regarding net profit attributable to shareholders, the company recorded losses of RMB 30 million, RMB 570 million and RMB 240 million in 2022, 2023 and 2024 respectively, marking three consecutive years of losses. The substantial loss in 2023 was primarily driven by inventory write-downs and falling product prices. Net profit for the first three quarters of 2025 stood at a loss of 70 million yuan; although the loss narrowed year-on-year, the company has yet to return to profitability. It is worth noting that since its listing on the A-share market in 2010, the company has only achieved a net profit attributable to shareholders (excluding non-recurring items) in five financial years, with losses recorded in all other years, clearly demonstrating the instability of its profitability.

The overall gross margin plummeted from 35.6% in 2022 to 1.7% in 2023, before rebounding to 19.1% in the first three quarters of 2025, indicating a recovery trend but remaining at a low level. By business segment, the gross margin for chip products stood at 30.3% in the first three quarters of 2025, slightly below the industry average; meanwhile, the gross margin for lithium battery anode materials has remained persistently low, at just 4.8% over the same period. Against the backdrop of overcapacity in the anode materials sector, the company lacks a competitive advantage in terms of scale, making it difficult to catch up with leading firms in the short term.

Insufficient cash flow generation from operations may be an even more alarming signal. From 2022 to 2024, net cash flow from operating activities remained negative, amounting to RMB 640 million, RMB 120 million and RMB 120 million respectively. In the first three quarters of 2025, there was still a net outflow of RMB 49.67 million. As of the end of the third quarter of 2025, the company held only approximately RMB 188 million in cash, whilst total current liabilities stood at approximately RMB 1.62 billion, indicating significant short-term debt repayment pressure.

Offering Structure: No Green Shoe + Low Cornerstone Investment; Southbound Capital Becomes Key Variable

Guomin Technology’s current offering also features unique structural arrangements: no over-allotment option (green shoe) or right to adjust the offering volume has been established. This arrangement aligns with the recent market trend where some A-to-H companies have proactively waived the green shoe to seek inclusion in the Stock Connect scheme on their first day of listing. The core rationale is that A-H shares without a greenshoe option qualify for purchase by southbound capital on the first day of listing, with the resulting incremental liquidity viewed as a substitute for the market-stabilising effect traditionally provided by the greenshoe.

Recent examples, such as Meige Intelligent, Zhaowei Electromechanical and Walnuclear Materials—all A-H projects without a greenshoe—saw their share prices rise on the first day of listing without breaking the issue price, providing a useful market reference for Guomin Technology. However, this also implies that should the company face selling pressure post-listing, it will lack the buffer of market-stabilising funds, with share price stability entirely dependent on market support, particularly the buying capacity of southbound capital.

The relatively weak line-up of cornerstone investors further reflects the attitude of institutional investors. A total of five entities participated in the cornerstone investment, subscribing to approximately HK$140 million, accounting for just 13.6% of the base offering size – one of the lowest proportions of cornerstone investment among recent projects.

Specifically, the Chinese insurance institution Guohua Life invested HK$50 million, making it the sole financial investor; however, given its limited history of participation in Hong Kong stock market projects, its market influence is restricted. Harvest International Investment contributed HK$40 million; it should be noted that this entity has no direct equity ties to the well-known Harvest Fund or Harvest International Asset Management, and operates as an independent third-party institution. Market sources indicate that it frequently assists in facilitating investments from friends and relatives in such projects.

Ms Dai and Sunwoda have invested HK$30 million and HK$10 million respectively as industrial partners. According to the prospectus, Ms Dai is the Chief Executive Officer of Ningbo Gangde Innovation Electronics Co., Ltd., and Ningbo Gangde became a distributor of Guomin Technology’s chip products in September 2025, indicating a business relationship between the two entities. Additionally, Mr An, an individual investor, has invested HK$10 million. Although there are no regulatory restrictions on individual investors participating in cornerstone investments for Hong Kong-listed companies, this investor mix also reflects that the company had not yet gained full recognition from mainstream institutional investors during its initial market roadshow.

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.