"Related Party Purchases Stand Out", Accounts Receivable Rise; Torrens IPO Submits First Round of Inquiry Responses

Why is the related-party procurement of newly established affiliates a focus of regulatory scrutiny?

Torlens Precision Manufacturing (Jiangsu) Co., Ltd. (hereinafter referred to as “Torlens”) has new developments regarding its IPO on the Growth Enterprise Market. Recently, Torlens disclosed its first-round response to the inquiry letter and updated its prospectus. Behind the IPO push, Torlens has experienced significant fluctuations in performance in recent years, with net profit declining year-over-year in 2023, but a substantial increase projected for 2024. Despite the impressive performance, the company’s accounts receivable have been rising. As of the end of the first half of 2025, accounts receivable totaled 71.9% of current operating income. Additionally, the Shenzhen Stock Exchange has paid close attention to cases where Torlens procures from companies controlled or jointly controlled by its actual controller’s close relatives.

Significant fluctuations in net profit during the reporting period

According to the Shenzhen Stock Exchange official website, Torlens’s IPO on the ChiNext board was accepted on December 23, 2025, and entered the inquiry stage on January 1, 2026.

It is reported that Torlens was established in 2017 and is a comprehensive service provider engaged in the R&D, production, and sales of precision metal components. The company is dedicated to providing high-performance key process components, process parts, structural parts, gas pipelines, and system assembly products for semiconductor equipment. Its process capabilities also cover laser equipment, offering laser cavities and cooling process components needed for high-power lasers.

Behind the IPO attempt, Torlens’s net profit has shown obvious fluctuations. Specifically, from 2022 to 2024 and the first half of 2025, the company achieved operating revenues of approximately 283 million yuan, 291 million yuan, 610 million yuan, and 373 million yuan, respectively; corresponding net profits were approximately 33.95 million yuan, 15.30 million yuan, 106 million yuan, and 60.85 million yuan.

Regarding the significant increase in performance in 2024, Torlens provided two explanations. First, externally, since the second half of 2023, the semiconductor industry has entered an upward cycle. Domestic equipment manufacturers are focusing on developing advanced process semiconductor equipment, actively promoting supply chain localization and independence to enhance resilience and competitiveness. Additionally, in 2024, driven by explosive growth in AI technology applications and accelerated global capacity expansion, industry utilization rates have significantly rebounded, boosting the semiconductor equipment market. Second, internally, the company’s leading advantages in core process technology contributed to its remarkable growth in 2024. Relying on domestically leading vacuum brazing, precision machining, special surface treatment, and complex functional testing and verification processes and manufacturing capabilities, Torlens has overcome and mass-produced several high-difficulty, high-value-added specialized key components.

For this IPO, Torlens plans to raise approximately 1.156 billion yuan. After deducting issuance costs, the funds will be invested in the Torlens precision parts manufacturing and R&D base project and used to supplement working capital.

Questions over related-party transactions

Related-party transactions are often a focus of regulatory attention. During this IPO, the Shenzhen Stock Exchange also inquired about Torlens’s related-party transactions.

In terms of equity relationships, Torlens’s controlling shareholder is Torlens Precision Machinery (Shanghai) Co., Ltd. (hereinafter “Torlens Shanghai”), which holds 43.99% of the company’s shares. The company’s actual controller is Qian Ke, who, through Torlens Shanghai and employee shareholding platforms Qidong Xin Qi and Qidong Xin Yi, controls a total voting rights of 48.2357%.

The prospectus shows that Nantong Gao Mi Precision Machinery Co., Ltd. (hereinafter “Nantong Gao Mi”) and Shanghai Gao Gao Precision Machinery Co., Ltd. (hereinafter “Shanghai Gao Gao”) are controlled by Qian Ke’s cousin, Qian Yanjuan. During each reporting period, the company’s procurement amounts from Nantong Gao Mi were 4,400 yuan, 10.04 million yuan, 23.67 million yuan, and 17.97 million yuan; from Shanghai Gao Gao, 8.87 million yuan and 0.21 million yuan in 2022 and 2023, respectively. After 2023, the company no longer procured from Shanghai Gao Gao. The total procurement from these two related parties accounted for 4.52%, 4.5%, 5.53%, and 6.89% of the company’s operating costs during the reporting periods.

In the first inquiry letter, the Shenzhen Stock Exchange asked Torlens to explain the fairness of the pricing for related-party procurement. In response, Torlens explained that the main contract terms and transaction methods with Nantong Gao Mi and Shanghai Gao Gao are not significantly different from those with other suppliers; these companies negotiate prices based on market principles considering processing requirements, market prices, costs, and profit levels.

However, Beijing Business Daily noted that Tianyancha business registration information shows that Shanghai Gao Gao and Nantong Gao Mi were established relatively recently, in July 2021 and November 2021, respectively. Both are under the same control, and within a year of their establishment, they became the fifth-largest suppliers to Torlens.

Business consultant and corporate strategy expert Huo Hongyi pointed out that the stock exchange pays particular attention to related-party transactions in IPOs, especially large procurement from newly established related parties. Such companies, with short establishment times and limited business accumulation, becoming major suppliers quickly, will attract regulatory scrutiny on whether the transaction prices are fair and whether procurement is necessary.

Accounts receivable continue to rise

The first inquiry letter also highlighted concerns about Torlens’s accounts receivable.

Financial data shows that at the end of each reporting period, the accounts receivable balances were approximately 52.19 million yuan, 144 million yuan, 197 million yuan, and 269 million yuan, accounting for 18.43%, 49.5%, 32.37%, and 71.9% of current operating income, respectively. Most of these receivables are within one year.

Torlens explained that the high proportion of accounts receivable at the end of 2023 was mainly due to a large amount of payments received through supply chain finance. As the semiconductor industry recovered in the second half of 2023, revenue in that period was relatively high, and some receivables are still within the credit period. The proportion decreased at the end of 2024 mainly because of rapid revenue growth. The significant increase in the proportion at the end of June 2025 was mainly due to some receivables still being within the credit period.

Zhi Peiyuan, Vice President of the Professional Committee for Listed Company Investment of the China Investment Association, stated that if accounts receivable continue to grow and customer repayment ability declines, it could lead to bad debt losses, directly impacting profits and causing cash flow pressures.

Additionally, it is worth noting that Torlens has experienced multiple resignations of directors and supervisors during the reporting period. Hoo Keen Cheong, who served as the company’s COO, resigned in October 2024 due to personal reasons; Xu Tingting and Liu Wenming previously served as supervisors. On January 30, the company held its first extraordinary general meeting for 2026, approving the abolition of the supervisor’s body, with the board’s audit committee exercising the functions of the supervisor’s body as stipulated by the Company Law.

Torlens stated that Xu Tingting, after the company’s share reform in July 2024, no longer served as a supervisor but remains employed, mainly handling general management; Liu Wenming left for personal career development reasons.

Additionally, Geng Chunhua, who was the financial head of Torlens Shanghai, and Liu Juxiu, a director of Torlens Shanghai, have also resigned.

The Beijing Business Daily contacted Torlens for an interview but had not received a response as of press time.

By Ma Huanchang and Li Jiaxue