Hao Te Energy Efficiency frequently changes sponsor institutions: Gross margin declines, cash on hand significantly decreases

$Guangzhou Haote Energy Saving Technology Co., Ltd. (810972.HK)$

Recently, Guangzhou Hao Te Energy Conservation and Environmental Protection Technology Co., Ltd. (hereinafter referred to as Hao Te Energy Efficiency) submitted an application to the Hong Kong Stock Exchange, with joint sponsors being GF Securities and Shenwan Hongyuan Hong Kong.

Shortly after submitting the application, on December 26, the CSRC issued a 'Supplementary Material Requirement for Overseas Issuance and Listing Record Filing.' The regulatory authorities requested that the company provide further clarification on five major aspects: equity changes; business operations and compliance management; auditor's opinion type; details of previous A-share coaching, among others.

Gross margin decline, top five customers account for over 98%

According to Tianyancha, Hao Te Energy Efficiency was founded in 2006. The company is a leading energy management solutions provider in China, specializing in the data center niche market. Through a technology-driven + deep-scenario strategy, it provides full lifecycle energy management solution services, including consulting services, solution design, equipment selection and procurement, project integration and implementation, and system maintenance.

The company’s solutions are widely used in data centers (including AI computing power data centers and edge data centers), smart industrial parks, intelligent factories, and multi-purpose commercial complexes, covering a wide range of scenarios across various fields.

According to Frost & Sullivan data, based on revenue in 2024, Hao Te Energy Efficiency is the fifth-largest operator-neutral data center energy management solutions provider in China and the ninth-largest data center energy management solutions provider in China.

During the performance record period, Huatot Energy Saving mainly engaged in providing energy management solutions and selling air conditioning products and ICT equipment. Among these, energy management solutions primarily include data center energy management solutions, followed by industrial and commercial building energy management solutions.

From 2022 to 2024 and January-June 2025 (hereinafter referred to as the reporting period), data center energy management solutions contributed revenues of RMB 676 million, RMB 799 million, RMB 985 million, and RMB 746 million respectively, accounting for 85.3%, 93.1%, 96.7%, and 99.0% of the corresponding period's revenue, making it the company's primary source of income.

In each period, industrial and commercial building energy management solutions generated revenues of RMB 29.052 million, RMB 4.160 million, RMB 0.951 million, and RMB 0.109 million, representing 3.7%, 0.5%, 0.1%, and 0.1% of the corresponding period's revenue, with both revenue and proportion declining year by year.

During the reporting period, Huatot Energy Saving achieved revenues of RMB 793 million, RMB 858 million, RMB 1.018 billion, and RMB 754 million, with net profits of RMB 39.132 million, RMB 70.183 million, RMB 75.869 million, and RMB 50.496 million respectively.

In 2023, 2024, and the first half of 2025, the company’s revenue increased by 8.3%, 18.6%, and 28.4% year-over-year respectively; net profit increased by 79.35%, 8.1%, and 46.94% year-over-year respectively.

Huate Energy Saving stated that the growth in net profit in 2023 was mainly due to increased revenue and the reversal of impairment losses under the expected credit loss model. The profit growth in 2024 was primarily driven by increased revenue and gross profit, offset by higher impairment losses under the expected credit loss model, increased R&D expenses, and higher financial costs. The profit growth in the first half of 2025 was mainly due to increased revenue, partially offset by higher income tax expenses.

Affected by the decline in gross margin of data center energy management solutions, Huate Energy Saving's gross margin also showed a fluctuating trend of first declining, then rising, and declining again. During the reporting period, the company’s gross margins were 18.8%, 14.9%, 17.9%, and 11.9%, respectively, representing a total decrease of 6.9 percentage points.

It should be noted that Huate Energy Saving has a relatively high concentration of upstream and downstream players. Any movement or change among major suppliers or customers could have a significant adverse impact on the company's performance.

Huate Energy Saving's customers mainly include telecom operators, data center operators, and EPC contractors. At the end of each reporting period, the company's revenue from its top five customers was 680 million yuan, 698 million yuan, 966 million yuan, and 746 million yuan, accounting for approximately 85.8%, 81.4%, 94.9%, and 98.9% of total revenue during the same periods, respectively.

During the same period, the company's revenue from its largest customer was 476 million yuan, 335 million yuan, 843 million yuan, and 297 million yuan, accounting for approximately 60.0%, 39.0%, 82.8%, and 39.4% of total revenue, respectively.

On the other hand, Huate Energy Saving's suppliers mainly include equipment providers and distributors, installation service providers, cable suppliers, and data center integration service providers.

At the end of each reporting period, the company’s procurement from its top five suppliers was 299 million yuan, 519 million yuan, 875 million yuan, and 389 million yuan, accounting for approximately 42.6%, 56.7%, 74.4%, and 61.8% of total procurement during the same periods, respectively.

During the same period, the company’s procurement from its largest supplier was 118 million yuan, 258 million yuan, 509 million yuan, and 234 million yuan, accounting for approximately 16.8%, 28.2%, 43.3%, and 37.2% of total procurement, respectively.

Surging accounts receivable, continuous cash outflows for three years

It is understood that Huate Energy Saving’s business is mainly carried out on a project-by-project basis.

As of the end of each reporting period, the number of projects for which the company recognized revenue during the period were 22, 20, 17, 13, and 13 respectively. During the same periods, the total original contract values of the projects for which the company recognized revenue were RMB 1.679 billion, RMB 1.144 billion, RMB 1.483 billion, and RMB 1.502 billion respectively.

As of the latest practicable date, the company has completed over 200 projects and is executing another seven projects. The total original contract value of the projects for which revenue was recognized was RMB 779 million.

Due to the increase in revenue scale, Hote Energy Saving's receivables from downstream customers have also significantly surged, while the days sales outstanding (DSO) of trade receivables continue to extend, indicating a potential risk of accounts receivable recovery that warrants caution.

At the end of each reporting period, Hote Energy Saving’s trade and other receivables amounted to RMB 360 million, RMB 280 million, RMB 607 million, and RMB 747 million respectively, with trade receivables turnover days being 67 days, 64 days, 73 days, and 83 days respectively during the respective periods.

Hote Energy Saving's inventory mainly includes construction materials and consumables used in energy management projects, as well as finished goods (i.e., temperature control and computing power equipment). Within the period, the company’s inventory growth was notably rapid. At the end of each reporting period, Hote Energy Saving's inventories amounted to RMB 33.427 million, RMB 21.550 million, RMB 160 million, and RMB 103 million respectively, with average inventory turnover days being 19 days, 14 days, 39 days, and 36 days respectively.

Due to high levels of accounts receivable and rising inventory, operational risks such as cash flow issues are prominent for Hote Energy Saving, leading to negative operating cash flow for three consecutive full years. At the end of each reporting period, net cash flows generated from operating activities were -RMB 107 million, -RMB 2.553 million, -RMB 190 million, and RMB 37.602 million respectively, with a total outflow amounting to RMB 260 million.

More critically, as of the end of each reporting period, the company’s cash and cash equivalents at the end of the period were RMB 215 million, RMB 229 million, RMB 56.565 million, and RMB 74.117 million respectively, reflecting a significant decline in cash on hand compared to the initial level in 2024.

In terms of current liabilities, at the end of each reporting period, the company’s trade and other payables amounted to RMB 220 million, RMB 260 million, RMB 492 million, and RMB 498 million respectively; contract liabilities were RMB 106 million, RMB 41.504 million, RMB 129 million, and RMB 185 million respectively; borrowings were RMB 145 million, RMB 217 million, RMB 243 million, and RMB 229 million respectively.

Behind the frequent changes of sponsors

Public information shows that in October 2015, Hote Energy Saving was restructured into a joint-stock company. In April 2016, the company was listed on the New Third Board. In May 2021, the company delisted from the New Third Board.

In November 2019, Haote Energy Saving initiated its A-share IPO tutoring for the first time. The company signed a tutoring agreement with Dongguan Securities and filed for IPO tutoring registration with the China Securities Regulatory Commission (CSRC). In October 2020, the company ended its IPO tutoring with Dongguan Securities, marking the termination of the first tutoring process.

In December 2020, the company restarted its A-share IPO tutoring and partnered with Guotai Junan Securities for tutoring registration. In December 2023, the company terminated its IPO tutoring agreement with Guotai Junan Securities, ending its A-share listing plan.

In November 2025, Haote Energy Saving chose to file for a listing on the Hong Kong Stock Exchange, with GF Securities and Shenwan Hongyuan Hong Kong acting as joint sponsors.

Song Xiangqing, Vice President of the China Business Economics Society, believes that continuously changing sponsor institutions can cause systemic harm to IPO companies, not only increasing time and financial costs but also attracting regulatory scrutiny, weakening market confidence, and even causing the listing plan to fail. The case of Haote Energy Saving serves as a warning that going public is a long-term strategy. Companies need to choose suitable sponsor partners and maintain long-term commitments, avoiding paying a heavy price due to short-term disagreements or strategic wavering. For companies planning to go public, stable sponsorship cooperation, a clear listing path, and robust internal control systems are key to successfully accessing the capital markets.

As of the latest practicable date, Chen Zhenming and Li Lingyun collectively hold 53.82% of Haote Energy Saving's shares, making them the controlling shareholders and actual controllers of the company.

In this IPO, the company plans to use the proceeds mainly for establishing smart manufacturing capabilities and expanding production capacity; achieving international business expansion and developing overseas service infrastructure; enhancing technological innovation and advancing product development initiatives; selectively pursuing supply chain integration, strategic acquisitions, and equity investments in China; as well as for working capital and general corporate purposes. (Produced by Harbor Finance)

"Harbor Business Observation" by Shi Zifu

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