Huaming Equipment Optimizes Asset Package Before IPO, Xiao Yi Family Receives 7.7 Billion Yuan Dividend

Written by: Zeng Shujia | Produced by: Rui Finance

In public appearances, Xiao Yi often appears with short white hair and wearing rimless glasses.

He is already 58 years old, but even nearing his sixties, he still aims to take his subsidiary Huaming Equipment (SZ002270) further, achieving an “A H” capital layout to better seize development opportunities.

Recently, Huaming Equipment submitted its prospectus to the Hong Kong Stock Exchange. This 491-page document discloses the company’s performance background before IPO, dividend history, and internal roles within the controlling family.

Xiao Yi, his brother Xiao Shen, and father Xiao Riming jointly hold 43.54% of Huaming Equipment, but currently only Xiao Yi is in the spotlight, while the other two have stepped back from the front stage.

Over the past three years, the three of them have received a total of 770 million yuan in dividends from the company’s payouts.

01

Xiao Family Holds 43.54% of Shares

Brother Xiao Shen and Father Xiao Riming as Advisors

The history of Huaming Equipment dates back to 1995. At that time, Shanghai Huaming Electric Power Equipment Manufacturing Co., Ltd. (referred to as “Huaming Manufacturing”) was established as the operating entity.

Twenty years later, Huaming Manufacturing experienced a series of equity changes. The Shanghai Huaming Electric Power Equipment Group Co., Ltd. (“Huaming Group”), controlled jointly by Xiao Yi, his brother Xiao Shen, and father Xiao Riming, ultimately held 60.11% of Huaming Manufacturing.

In December of the same year, 2015, Huaming Manufacturing underwent a “backdoor listing” operation.

Shandong Fayin CNC issued approximately 279 million shares at 9.31 yuan per share, totaling 2.6 billion yuan to acquire 100% of Huaming Manufacturing. Simultaneously, it issued non-public shares at 9.66 yuan per share to specific investors, raising up to 350 million yuan for project construction.

Shortly after, Fayin CNC officially renamed itself “Huaming Electric Power Equipment Co., Ltd.,” now known as Huaming Equipment.

In June 2018, Huaming Equipment issued 253 million shares to all shareholders via capital reserve conversion, with a ratio of 10 shares to 5 shares. After this capitalization, the company’s total shares increased to 759 million.

In March 2022, Huaming Equipment conducted a private placement of 137 million A-shares at 3.65 yuan per share, raising about 500 million yuan, through its wholly owned subsidiary Huaming Development.

Before this filing, Xiao Yi, Xiao Shen, and Xiao Riming, through Huaming Group, held a total of 390 million shares of Huaming Equipment (including 137 million A-shares held by Huaming Development), accounting for approximately 43.54% of voting rights.

Xiao Yi, aged 58, serves as Chairman of Huaming Equipment. The prospectus highly praises him as the “cornerstone of the company’s steady and sustainable growth.”

Huaming Equipment’s board currently consists of 10 directors, including 5 executive directors, 1 non-executive director, and 4 independent non-executive directors. Notably, the names of Xiao Shen and Xiao Riming are not on the list.

Rui Finance’s review of the company’s A-share annual report shows that 57-year-old Xiao Shen and 90-year-old Xiao Riming are only titled as company advisors, seemingly playing behind-the-scenes roles.

Historical information indicates that years ago, they also served as directors of the company. However, shortly after the backdoor listing, Xiao Shen resigned as director in June 2016, and Xiao Riming stepped down in March 2017, withdrawing from management.

In earlier years, Xiao Shen’s mother, Shen Qiongxian, also appeared in related companies of Huaming Equipment. She held 10% and 90% stakes in Shanghai Huaming Industrial Electrical Appliances Technology Co., Ltd. alongside Xiao Shen. Now, her name no longer appears on the company’s shareholding list.

02

Over 80% of Revenue Comes from Power Equipment Business

Overall Gross Margin Reaches 53.9%

Huaming Equipment’s core business is power equipment, mainly involving the research, production, sales, and full lifecycle maintenance of transformer tap changers.

According to Frost & Sullivan data, by revenue, the top three global transformer tap changer manufacturers in 2024 will hold approximately 82.5% of the global market share, reflecting high industry concentration. Huaming Equipment holds 17.9%, ranking second worldwide.

In addition, the company also operates CNC machine tools and power engineering businesses.

Its CNC equipment is widely used for manufacturing steel structures and large panels for transmission towers, communication towers, and urban infrastructure.

The power engineering segment, which Huaming Equipment has been expanding since 2015, mainly provides EPC services for photovoltaic power plants, including engineering, procurement, and construction—essentially contracting, designing, and building renewable energy stations.

Current projects include the 50MW ground集中式项目 in Golmud, Qinghai, and the 24MW rooftop distributed project in Ningde, Fujian.

From 2023 to 2025, Huaming Equipment’s total revenue is projected at 1.946 billion yuan, 2.309 billion yuan, and 2.412 billion yuan, respectively.

The company not only operates domestically but also sees overseas markets as a key growth driver. Its overseas sales revenue increased from 274 million yuan in 2023 to 479 million yuan in 2025, with a compound annual growth rate of 32.1%. Meanwhile, overseas revenue proportion rose from 14.1% to 19.9%.

In terms of business segments, over these three years, revenue from power equipment accounts for approximately 82.8%, 77.9%, and 86.6%; CNC equipment accounts for 8.3%, 7.6%, and 10.1%; power engineering accounts for 6.0%, 12.4%, and 1.2%.

Power equipment remains Huaming’s main revenue source, accounting for 80-90%. The CNC equipment segment’s contribution increased last year, while the power engineering segment’s share declined significantly—from 12.4% in 2023 to 1.2% in 2025.

Revenue growth in 2024 and 2025 was driven mainly by continuous increases in power equipment and CNC equipment sales.

Additionally, the power engineering segment has been a factor in lowering overall gross margin.

During the reporting periods, gross margins were 51.5%, 48.3%, and 53.9%.

In 2024, gross margin dropped from 51.5% to 48.3%, mainly due to recognizing revenue from a large project, which caused the power engineering segment’s revenue to be high that year but with a relatively low profit margin of only 9.7%.

Last year, Huaming Equipment decided to restructure, focusing on core businesses with higher gross margins.

As a result, gross profit increased from 1.116 billion yuan in 2024 by 16.6% to 1.3 billion yuan in 2025, and gross margin rose from 48.3% to 53.9%.

03

Pre-IPO Asset Optimization

Sales and Marketing Expenses Three Times R&D Spending

Before listing in Hong Kong, Huaming Equipment optimized its assets.

On April 30, 2025, Huaming Equipment entered into a share transfer agreement with an independent third party to sell 100% of Guizhou Changzheng Electric Co., Ltd. (“Changzheng Electric”) for 1 million yuan, a “floor price” sale.

Changzheng Electric mainly manufactures and sells tap changers. In September 2018, Huaming Equipment acquired Changzheng Electric for 398 million yuan.

Selling it for only 1 million yuan, a huge loss, reflects Huaming’s attempt to cut losses timely.

The reason is that in 2024, Changzheng Electric was involved in a lawsuit claiming about 277 million yuan. In 2017, it provided guarantee for a 200 million yuan loan from its original shareholders. Now, due to the borrower defaulting, Changzheng Electric, as guarantor, is liable for joint guarantee.

Given the complexity and uncertainty of the lawsuit, Huaming Equipment decided to sell Changzheng Electric despite the loss.

The company emphasized in its prospectus that after the sale, Changzheng Electric would no longer be part of the group and would not be responsible for its debts.

It also stated that other expenses related to the sale amounted to about 15.1 million yuan, which would not significantly impact its overall financial condition.

Besides selling Changzheng Electric, Huaming Equipment also divested from an associated company.

Profits and losses of its joint ventures and associates decreased from 16.9 million yuan in 2024 to 2.2 million yuan in 2025, mainly due to the sale of its stake in Jinkai Kaiyu.

Unlike Changzheng Electric, Jinkai Kaiyu’s performance improved in 2024 due to good foundational investments in the photovoltaic industry. Huaming’s sudden exit from this investment may be driven by other considerations.

Post-asset adjustments, its profitability is noteworthy.

From 2023 to 2025, Huaming Equipment reported profits of 551 million yuan, 620 million yuan, and 720 million yuan; net profit margins of 28.3%, 26.8%, and 29.8%.

Last year, sales and marketing expenses were 252 million yuan, a 20% increase.

Meanwhile, R&D expenses rose 8.7% to 88.5 million yuan, mainly due to increased material costs of 8.4 million yuan for high-voltage product collaborations.

Calculating these, the company’s sales and marketing expenses are 2.84 times its R&D expenses.

04

Dividends Consumed 93.5% of Profits

80 Million Yuan Flows to Xiao Yi Family

In its disclosed 2025 annual report, Huaming Equipment stated that it is building a “H A” dual-capital platform to expand overseas sales channels, deepen global localization, and accelerate globalization.

It also aims to leverage international capital to identify high-quality manufacturing M&A opportunities and integrate industry resources.

This outward expansion relies heavily on cash flow.

Over the past three years, net cash flow from operating activities was 622 million yuan, 888.9 million yuan, and 604 million yuan, respectively. Last year, cash generation slowed, decreasing by 32.06%.

At the same time, the company’s cash and cash equivalents were 991.7 million yuan, 1.1039 billion yuan, and 1.1656 billion yuan, including bank and cash on hand.

These funds are mainly used for building manufacturing bases, working capital, and dividend payments.

During these periods, Huaming Equipment paid dividends of 735 million yuan (including 242 million yuan interim and 493 million yuan final), 487 million yuan (including 242 million yuan interim, 50.18 million yuan third quarter, and 195 million yuan final), and 546 million yuan (including 179 million yuan interim and third quarter, and 188 million yuan final), totaling 1.768 billion yuan over three years, representing 93.5% of the three-year net profit of 1.891 billion yuan.

Based on Xiao Yi and his family’s 43.54% stake, about 770 million yuan in dividends flowed to the family over this period.

The prospectus disclosed that the company’s board has approved a conditional shareholder return plan (2026-2028), which stipulates that Huaming Equipment will distribute at least 60% of distributable profits as cash dividends over the next three years.

In addition to dividends, last year, all five executive directors received salary increases.

Excluding share-based payments, Chairman Xiao Yi’s salary increased by 282,000 yuan to 1.432 million yuan; General Manager Yang Jianqin’s salary rose by 140,000 yuan to 1.087 million yuan; Lu Weili received a 48,000 yuan increase; Zhang Xin’s salary increased by 102,000 yuan; and Xie Jing’s salary increased by 97,000 yuan.

05

Accounts Receivable Accounted for 52.07% of Revenue

Asset-Liability Ratio Rose to 39.1%

At the end of each reporting period, Huaming Equipment’s trade receivables and notes receivable were 1.233 billion yuan, 1.125 billion yuan, and 1.256 billion yuan.

Last year, this increase was mainly due to higher business volume, with more customers choosing bank acceptance bills for settlement, leading to higher notes receivable.

In terms of aging, most trade receivables and notes are within one year, accounting for 93%. However, last year, a new receivable aged over five years appeared, amounting to 4.069 million yuan.

Overall, the 1.256 billion yuan in trade receivables and notes accounted for 52.07% of the 2.412 billion yuan revenue in that year. This indicates that over half of the revenue is outstanding on the books.

Huaming Equipment’s finished products are mostly customized per customer requirements, but it maintains a certain level of inventory, mainly raw materials and work-in-progress.

At year-end, inventory was 324.2 million yuan, 352.2 million yuan, and 386.8 million yuan, respectively, continuing to rise.

The expansion of business scale correlates with an increase in debt ratio. Over the past three years, the asset-liability ratio was 25.6%, 28.6%, and 39.1%. In short-term liquidity, the current ratio decreased from 4.0 in 2023 to 3.0 in 2025, and the quick ratio from 3.6 to 2.7.

Appendix: List of intermediaries involved in Huaming Equipment’s IPO:

Joint Sponsors: J.P. Morgan Securities (Far East) Limited; Haitong International Capital Limited

Legal Advisors: Sullivan & Cromwell LLP (Hong Kong); Guohao Law Firm (Shanghai)

Auditors and Independent Accountants: Ernst & Young

Related Company: Huaming Equipment SZ002270