IPO Radar | Tengli Transmission Makes Second Attempt, Hidden Concerns Behind Impressive Performance

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Hangzhou Tengli Transmission Technology Co., Ltd. (hereinafter referred to as “Tengli Transmission”) has once again updated its prospectus, launching a second push into the capital market.

As a company specializing in automotive transmission system components, Tengli Transmission’s revenue and net profit appear to be steadily increasing during the reporting period. However, multiple hidden risks such as high accounts receivable, conflicts between dividends and fundraising, internal control failures, and reliance on major customers not only hinder its IPO process but also raise doubts about the rationality of its listing.

Continuous decline in accounts receivable turnover rate, extended credit periods raise suspicions of sales boosting

Tengli Transmission’s core business focuses on the research, development, production, and sales of key automotive transmission system parts and assemblies. Main products include bearing cages, intermediate shafts, and other components, as well as constant velocity drive shafts and transmission shaft assemblies. The company has entered the supply chains of well-known automakers such as Tesla, BYD, and Xpeng Motors.

On the surface, Tengli Transmission’s profitability appears solid: from 2022 to 2024 and the first half of 2025, its operating revenues were 510 million yuan, 606 million yuan, 619 million yuan, and 378 million yuan; net profits attributable to shareholders were 65.91 million yuan, 83.16 million yuan, 83.92 million yuan, and 48.32 million yuan. However, a deeper analysis of operational data reveals underlying concerns behind this “glamorous” picture.

The most prominent issue is the continuous decline in accounts receivable turnover rate. Data shows that during the reporting period, Tengli Transmission’s accounts receivable turnover rates were 7.11 times/year, 6.58 times/year, 4.92 times/year, and 4.36 times/year, showing a clear downward trend. This indicates decreasing efficiency in capital utilization and a slowing in accounts receivable collection.

In response, Tengli Transmission explained that the company has been strengthening receivables management, optimizing customer structure. The decline in accounts receivable turnover is influenced by industry factors, and the company’s current asset turnover rate is higher than the industry average, indicating overall good asset utilization.

However, this explanation is difficult to be convincing. On one hand, Tengli Transmission has not disclosed changes in the average customer credit period for each period, making it impossible to verify whether credit policies have been loosened. On the other hand, during the reporting period, the book value of the company’s notes receivable, accounts receivable, and receivables financing totaled 160 million yuan, 304 million yuan, 274 million yuan, and 376 million yuan, respectively, accounting for 20.53%, 33.92%, 28.87%, and 36.17% of total assets. The scale has been expanding and the proportion rising, further intensifying liquidity pressure.

Long-term automotive industry analyst Li Zhengbin told JiJie News that while receivables management is a common challenge in the auto parts industry, Tengli Transmission’s continuously worsening receivables indicators undoubtedly increase the risk of bad debts. If downstream customers mismanage their operations or face liquidity issues in the future, the company may struggle to recover receivables in a timely manner, which could significantly impact cash flow and operational performance, becoming a major uncertainty on its IPO path.

Toyota’s dual identity sparks controversy; related-party transaction pricing questionable

Tengli Transmission’s overlapping client and supplier relationships are particularly prominent, with Toyota-affiliated companies being both major customers and core suppliers. This dual relationship has sparked strong doubts about the fairness of related-party transaction pricing.

In 2024, Tengli Transmission’s procurement from Toyota Tsusho reached 44.157 million yuan, making it the company’s third-largest supplier. Meanwhile, sales to Toyota Motor’s subsidiary Toyotsu Transmission amounted to 71.561 million yuan, making Toyotsu its second-largest customer.

Source: Company announcements, JiJie News Research Department

Public information shows that during the reporting period, Tengli Transmission maintained high levels of procurement and sales with Toyota-affiliated companies. Purchases from Toyota Tsusho were 57.387 million yuan, 48.931 million yuan, 44.157 million yuan, and 19.603 million yuan, mainly for raw materials like steel.

Source: Company announcements, JiJie News Research Department

At the same time, sales to Toyota-affiliated entities remained stable. In 2023 and 2024, sales to Toyota Tsusho reached 31.132 million yuan and 27.990 million yuan. Coupled with large sales to Toyotsu, Toyota-affiliated companies have become indispensable partners.

It is worth noting that Tengli Transmission has not fully disclosed the pricing basis for these related-party transactions, and the fairness of pricing remains unsupported by clear evidence. Accountant Lü Ming told JiJie News that such a procurement-and-sales relationship with related parties could have potential benefits transfer issues. In the auto parts industry, prices between suppliers and customers are usually benchmarked against fair market prices, but Tengli Transmission has not disclosed specific pricing standards, comparable market prices, or whether transaction prices are consistent with non-related customers and suppliers. The lack of sufficient disclosure makes it difficult to verify the fairness of these related-party transactions.

High customer concentration, operational risks highly centralized

During the reporting period, Tengli Transmission’s customer concentration was extremely high, especially its reliance on its largest customer, Nanjing Iron and Steel Co., Ltd. (Nanjing Iron). Data shows that from 2022 to 2024, sales to Nanjing Iron were 227 million yuan, 259 million yuan, and 277 million yuan, accounting for 44.52%, 42.74%, and 44.7% of revenue, respectively, always above 42%, long-term maintaining over 40% of total revenue.

Source: Company announcements, JiJie News Research Department

Moreover, the overall customer concentration remains high. During the period, sales to the top five customers were 425 million yuan, 460 million yuan, 466 million yuan, and 259 million yuan, accounting for over 75% of revenue, reaching as high as 83.23% in 2022 and still 76.52% in the first half of 2025, indicating extremely concentrated customer structure.

Tengli Transmission explained that as a manufacturer of constant velocity drive shaft components, it mainly supplies first-tier suppliers. The high industry concentration in China’s constant velocity drive shaft sector, with Nanjing Iron holding over 30% market share and few large manufacturers, makes high customer concentration reasonable. However, this explanation cannot hide the operational risks posed by reliance on major clients. In the automotive supply chain, supplier-customer relationships tend to be sticky, but over-reliance on a single core customer means the company’s performance is highly tied to Nanjing Iron’s operations and procurement needs.

Dividends and fundraising run in parallel

Tengli Transmission’s large dividend payouts and plans to raise funds through IPO have also become a focus of market criticism. From 2023 to the first half of 2025, the company paid a total cash dividend of 88.42 million yuan, including 33.68 million yuan in 2023, 35.37 million yuan in 2024, and 19.37 million yuan in the first half of 2025.

It is puzzling that while continuing to pay large dividends, Tengli Transmission plans to raise 80 million yuan via IPO to supplement working capital. The IPO intends to raise a total of 684 million yuan, which will be used for projects such as the production base for constant velocity drive shafts and components, and upgrades to automotive parts manufacturing facilities. Nearly 12% of the funds will go toward working capital.

Source: Company announcements, JiJie News Research Department

Tengli Transmission stated that the IPO proceeds will mainly support business development, cope with raw material price fluctuations, and meet daily operational needs.

However, accountant Zhang Yimei believes this explanation is unconvincing. If the company truly faces a liquidity shortage, it should reduce dividends and retain funds for operations. Such actions not only contradict the original purpose of fundraising in the capital market but also risk harming small and medium investors—where the actual controller benefits from large dividends, while the company’s liquidity gap is borne by investors.

Additionally, in 2024, Tengli Transmission was penalized for exceeding the legal limit on labor dispatch workers. This incident exposed significant internal control weaknesses, raising widespread doubts about its internal management. According to the “Interim Regulations on Labor Dispatch,” the number of dispatched workers should not exceed 10% of total employment, but Tengli Transmission’s dispatched workforce exceeded this limit at the end of 2024, violating relevant regulations.

In response, Tengli Transmission said it has made corrections, converting dispatched workers to formal employees with labor contracts, and increasing recruitment of regular staff. Since January 2025, the proportion of dispatched workers has been reduced to below 10%.

Lawyer Wang Yi told JiJie News that exceeding the labor dispatch ratio is not accidental, but reflects gaps in the company’s employment management and compliance review processes. Whether its internal control systems are sound remains a key concern.