Is Wolong Electric Group Co.,Ltd.'s (600580) Hong Kong IPO driven by technology or concept speculation? Recently, Wolong Electric Group surged due to robotics concept speculation, only for the company to quickly clarify that robotics business accounts for merely 2.7% of revenue.
This "dampen then boost" rhetoric both avoids misleading statement risks while preserving market imagination space. As a globally recognized electric drive supplier, Wolong Electric Group once stood out with high cost-performance products. Simultaneously, the company is advancing Hong Kong listing plans. Is this truly for global strategic needs, or another capital-raising scheme?
**01 Wolong Electric's Three Main Businesses Show Significant Growth Deceleration, First Half Net Profit Growth Driven by Reduced Financial Expenses**
The explosion-proof, industrial, and HVAC electric drive system solution businesses comprise Wolong Electric's core business segments, contributing nearly 90% of company revenue. During the reporting period, these three business segments accounted for 87.1%, 84.2%, 82.2%, and 89.1% of revenue respectively.
In recent years, these three businesses have shown lackluster growth with significantly slowing revenue growth rates. In 2023 and 2024, explosion-proof business revenue growth rates were 13.15% and 0.19% respectively; industrial business growth rates were 11.78% and 0.07% respectively; HVAC electric business even showed negative growth in 2023.
In the first half of 2025, Wolong Electric Group achieved revenue of 8.031 billion yuan, up 0.66% year-on-year; achieved attributable net profit of 537 million yuan, up 36.76% year-on-year. For the years ended December 31, 2022, 2023, 2024, and six-month periods ended June 30, 2024 and 2025, gross profit margins were 23.9%, 23.9%, 23.2%, 24.6%, and 24.6% respectively.
In both last year's first half and this year's first half, Wolong Electric Group's gross profit margin was 24.6%.
In the first half of this year, Wolong Electric Group's financial expenses were 42.96 million yuan compared to 117 million yuan in the same period last year, a decrease of approximately 74.52 million yuan. Regarding the decline in financial expenses, Wolong Electric Group attributed it mainly to foreign exchange rate impacts, reduced financing interest, and increased deposit interest.
Additionally, in the first half of this year, Wolong Electric Group's selling expenses were 373 million yuan compared to 412 million yuan in the same period last year, down approximately 38.96 million yuan; R&D expenses were 316 million yuan compared to 342 million yuan in the same period last year, down approximately 26.28 million yuan.
In summary, Wolong Electric Group's selling expenses, financial expenses, and R&D expenses decreased by approximately 140 million yuan in the first half of this year compared to the same period last year. Meanwhile, Wolong Electric Group's attributable net profit was 537 million yuan in the first half of this year compared to 393 million yuan in the same period last year, an increase of approximately 144 million yuan. These figures essentially match.
**02 Financial Data Clouds of Doubt, Frequent Accounting Errors**
In June 2024, the company issued a prior period accounting error adjustment announcement. The announcement showed that this prior period accounting error correction would simultaneously reduce both operating revenue and operating costs in the company's 2023 third quarter report, 2023 semi-annual report, 2022 annual report, and 2021 annual report.
These accounting error adjustments mainly involved revenue originally recognized on a net basis, which the company adopted gross basis recognition for. In other words, the company "inflated" actual revenue through accounting methods.
More concerning is that divested companies of Wolong Electric Group had shown revenue recognition inaccuracies long ago, yet the company failed to adjust related matters promptly. In January 2022, the company sold Wolong Mining (Shanghai) Co., Ltd. to Wolong Real Estate, which also involved trading business divestiture. According to administrative regulatory measure decision letters received by Wolong Real Estate, Shanghai Mining's 2022 partial rare earth trading business gross revenue recognition lacked sufficient basis.
**03 "Self-Selling" Trading Business, Related Party Transactions Suspected of Inflating Performance**
The company's other business revenue accounts for a relatively high proportion. From 2022 to 2024, other business revenue was 840 million yuan, 1.442 billion yuan, and 2.052 billion yuan respectively, corresponding to revenue proportions of 5.9%, 9.3%, and 12.6%.
What exactly are these other businesses? According to announcement materials, in 2021 the company mainly conducted copper concentrate, textiles, and electrolytic copper trading business; in 2022 mainly silicon steel and electrolytic copper trading business; in 2023 mainly aluminum ingots, silicon steel, enameled wire, and electrolytic copper trading business.
More questionably, the company's trading business major clients include controlling shareholder subsidiaries. In 2023, among the company's top ten trading business clients, Wolong Electric Yantai Dongyuan Transformer Co., Ltd. was the sixth largest trading business client. This company is under controlling shareholder Wolong Holdings, meaning Wolong Holdings holds 100% of Wolong Electric Yantai Dongyuan Transformer Co., Ltd.
This raises suspicions about potential related party transactions inflating performance. Among 2022 trading business major clients, Zhejiang Jufa International Trading Co., Ltd. was established in 2022 and immediately transacted nearly 30 million yuan with the company. Notably, this client has zero insured employees.
**04 Divested Company Previously Committed Financial Fraud**
In September 2024, the company received an administrative regulatory measure decision letter "Decision on Issuing Warning Letters to Wolong Electric Drive Group Co., Ltd. and Related Personnel." The reason was that on April 3, 2024, Red Phase Co., Ltd. received "Administrative Penalty Decision" and "Market Ban Decision" from China Securities Regulatory Commission Xiamen Bureau, determining that Wolong Electric Yinchuan Transformer Co., Ltd. failed to meet restructuring agreement committed performance from 2017 to 2019.
Yinchuan Wolong, as Wolong Electric Drive's former subsidiary, relied on performance fraud to meet performance targets after being sold. From 2017 to 2019, Yinchuan Wolong inflated net profits by 48.69 million yuan, 70.62 million yuan, and 56.95 million yuan respectively, totaling 176 million yuan in inflated profits.
Ultimately, the company's actual cumulative performance was 130 million yuan, with actual performance completion rate of only 41.12%. This indicates the underlying assets themselves may have been artificially inflated.
**05 Hong Kong Listing Plan: Development Need or Capital-Raising Behavior?**
On June 18, 2025, Wolong Electric Drive announced plans to issue overseas listing shares (H shares) and apply for main board listing on Hong Kong Stock Exchange. Raised funds are planned for capacity expansion, enhancing global R&D capabilities, developing sales networks, and supplementing working capital.
However, questions arise whether the company truly needs so much capital. According to the 2025 semi-annual report, the company achieved total operating revenue of 8.031 billion yuan in the first half, up 0.66% year-on-year, with attributable net profit of 537 million yuan, up 36.76% year-on-year.
Meanwhile, the company has substantial cash on hand. As of the reporting period end, short-term borrowings were 2.316 billion yuan, current portion of non-current liabilities was 2.263 billion yuan, and long-term borrowings were 1.622 billion yuan.
**06 Hot Concept Speculation, Stock Price Soars**
Wolong Electric Drive excels at concept speculation. Recently, the company's stock price surged consecutively due to robotics concepts. From February 5-7, 2025, the company's stock price surged 20% over three days due to robotics concepts, triggering abnormal movement announcements.
The company quickly clarified: robotics business accounts for only 2.7% of revenue, and P/E ratios (static 65x, rolling 141x) far exceed industry averages. This "dampen then boost" rhetoric both avoids misleading statement risks while preserving market imagination space.
Additionally, the company began telling "low-altitude economy" stories. To hedge traditional business pressures, the company promoted aviation motor layouts (cooperating with COMAC, EHang, etc.) and emphasized low-altitude aircraft batch application prospects. However, this field has high technical barriers and long certification cycles, making short-term gains unlikely - more like a "future promissory note."
From historical performance, the company's median ROIC over the past 10 years was 6.84%, showing relatively weak investment returns. The worst year was 2016 with ROIC of 4.17%, indicating generally modest investment returns.
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