Senhe High-Tech persists despite repeated IPO failures: questionable rise in gross margin, over 90% of revenue reliant on ore-dressing agents

Amid the ongoing strength of the gold industry, Guangxi Senhe High-Tech Co., Ltd. (hereinafter referred to as Senhe High-Tech), a supplier of environmentally friendly mineral processing agents as a 'supporting player,' is accelerating its listing process on the Beijing Stock Exchange.

In fact, Senhe High-Tech's path to capital has not been smooth. The company switched tracks three times and attempted twice to enter the ChiNext Board of the Shenzhen Stock Exchange — it was accepted on July 3, 2020, with Guohai Securities as the sponsor both times; in May 2022, it shifted to apply for the main board of the Shenzhen Stock Exchange, changing its sponsor to Essence Securities, but neither attempt succeeded.

On June 5, 2025, Senhe High-Tech submitted its prospectus to the Beijing Stock Exchange and was accepted. The sponsor institution is SDIC Securities (formerly Anxin Securities). It went to the listing committee on April 13.

Despite exponential growth in book profits, a deeper analysis of its prospectus reveals that this prosperity is intertwined with 'unexpected dividends' from raw material cycles, as well as complex details in R&D output, channel structure, and related-party transactions that need clarification.

Ore dressing agent revenue accounts for over 90%, with doubts about the rise in gross margin

According to the prospectus and Tianyancha, Senhe High-Tech was established in 2011 and specializes in the research, production, and sales of environmentally friendly precious metal ore-dressing agents. Addressing industry pain points such as 'high pollution, high energy consumption' and low resource utilization rates associated with traditional sodium cyanide ore-dressing chemicals, the company independently developed product formulations and production processes for low-toxicity, environmentally friendly leaching agents containing cyano groups. These products are mainly used in the leaching process of ore dressing operations by precious metal producers. According to a statement issued by the China Gold Association, Senhe High-Tech holds the top market share among domestic producers of environmentally friendly gold leaching agents.

Financial data shows that in 2023, 2024, and 2025 (hereinafter referred to as the reporting period), Senhe High-Tech achieved revenues of 346 million yuan, 623 million yuan, and 840 million yuan respectively, showing rapid growth. In the first quarter of 2026, the company expects revenue between 187 million yuan and 210 million yuan, representing year-over-year growth of 0.12% to 12.44%.

In terms of revenue structure, more than 90% of the company’s income relies on a single product. During the reporting period, revenue from environmentally friendly precious metal ore-dressing agents accounted for 97.09%, 95.32%, and 94.26% of the main business income respectively. Ammonium sulfate, as a by-product, accounted for 2.91%, 4.68%, and 5.74% of revenue respectively, and has yet to form an effective revenue support.

The prospectus shows that the sales growth of the company’s environmentally friendly precious metal ore-dressing agents is closely related to the replacement progress of sodium cyanide. Although this product has significant advantages in environmental protection, safety, and economic efficiency, and the current replacement progress meets expectations, if there are breakthroughs in cyanide-free technology, relaxation of environmental regulations, or a sharp decline in gold prices in the future, the replacement speed of sodium cyanide may fall short of expectations, adversely affecting the company’s product sales.

In terms of net profit, during the reporting period, the company achieved net profits attributable to parent company shareholders of 56 million yuan, 150 million yuan, and 272 million yuan respectively. In the first quarter of 2026, the estimated net profit attributable to parent company shareholders is between 60 million yuan and 70 million yuan, representing year-over-year growth of 6.60% to 24.37%.

Meanwhile, the company's gross margin continued to increase during the reporting period, reaching 31.15%, 36.80%, and 46.35% respectively, increasing by more than 15 percentage points over three years.

Regarding the continuous rise in gross margin, Senhe High-Tech explained that it is mainly due to the decrease in the unit cost of producing environmentally friendly precious metal ore-dressing agents, while the selling price has remained relatively stable, leading to an increase in gross margin. The company's main raw materials, urea and soda ash, belong to basic bulk chemical raw materials whose prices are easily influenced by various factors including environmental policies, energy policies, international trade environments, macroeconomic cycles, and supply-demand conditions. The current frequent occurrence of global geopolitical conflicts, sharp fluctuations in international energy prices, and reduced stability of global supply chains further increase the risk of commodity price volatility, significantly raising uncertainty regarding the company's raw material prices.

During the same period, direct material costs accounted for 78.08%, 77.01%, and 73.31% of the main business costs respectively. Although showing a declining trend, they remained above 70%.

In this regard, independent economist Wang Chikun believes thatSenhe High-Tech has concealed expenditures that should have been classified as selling expenses, such as on-site service and logistics, by means of bundled pricing or incorporating them into operating costs. Through 'invisible service costs,' misallocation of accounting items was achieved, creating the financial illusion of 'low expense ratio' and 'high gross margin.' Combined with the cyclical benefits of raw materials, this created an illusion of 'efficient operations,' which is highly deceptive. Once audits or regulators conduct in-depth investigations and require the company to expense costs like on-site services and logistics support, and if raw materials enter an upward price cycle, its high gross margin and profitability will face a 'double whammy' – namely, a reduction in gross margin coupled with an increase in the expense ratio.

Investment and financing expert Xu Xiaoheng stated that in 2025, material costs accounted for 73.31%. The high gross margin relied solely on upstream raw material price reductions, weak downstream pricing power, and poor cost pass-through. In a raw material price increase cycle, a 40%-plus gross margin cannot be maintained and will quickly decline.

R&D expense ratio below industry average, outsourced development expenses surge

R&D investment is a key indicator of the core competitiveness of technology companies. During the reporting period, Senhe High-Tech's R&D expenses were 10.9024 million yuan, 21.0425 million yuan, and 29.0313 million yuan, respectively, with R&D expense ratios of 3.15%, 3.38%, and 3.46%, respectively. Although showing an upward trend, these figures remain at relatively low levels compared to comparable companies in the same industry. In 2024 and 2025, the R&D expense ratios of comparable companies in the same industry were 3.77% and 4.48%, respectively.

The prospectus shows that during the reporting period, the company’s R&D expense ratio was slightly lower than the average of comparable companies overall, with the core difference being the scale of direct material input. Senhe High-Tech focuses its product categories on a single track of eco-friendly precious metal mineral processing agents, with R&D efforts mainly concentrated on process optimization and early-stage collaborative testing, resulting in relatively limited material usage. In contrast, comparable companies have more diversified product portfolios and correspondingly higher material consumption. The 2025 annual reports of comparable companies have not yet been disclosed, so related data cannot be updated for comparison.

More critically, the structure of the company’s R&D expenses has changed significantly, with outsourced development expenses showing explosive growth. During the reporting period, the company’s outsourced development expenses were 1.2945 million yuan, 9.1191 million yuan, and 10.4355 million yuan, accounting for 11.87%, 43.34%, and 35.95% of R&D expenses during the same period, respectively.

Senhe High-Tech admitted that during the reporting period, outsourced development expenses primarily flowed to Central South University, Shandong University, and other domestic research institutions, involving research on precious metal mining materials, process optimization, environmentally friendly production, and high-value utilization of tailings from mineral processing. The significant increase in outsourced development expenses in 2024 was mainly due to collaboration with the Tianjin Institute of Seawater Desalination and Comprehensive Utilization under the Ministry of Natural Resources and its subordinate units on microbial treatment technology for cyanide-containing high-ammonia-nitrogen wastewater, along with other process optimization projects driving the increase.

In 2025, the company initiated new cooperation with Guangxi University to conduct research on low-temperature oxidative roasting of arsenic-containing sulfide gold ores, the inhibitory behavior of Golden Cicada inhibitors on nonferrous metal sulfide ores, and the application of enzyme-free purified whole-cell catalysts in treating cyanide-like substances in gold mine wastewater. As a result, outsourced R&D expenses further increased.

Xu Xiaoheng pointed out that Senhe High-Tech’s R&D expense ratio is below industry standards, and its heavy reliance on outsourced R&D suggests a weak self-developed core competitive edge. The company leans more towards the commercialization of institutional technologies rather than being a pioneer in original technology research. This flaw in its innovative profile will impact how the Beijing Stock Exchange evaluates its valuation – growth premiums will likely be stripped away, and tech valuations suppressed. Ultimately, it may receive a relatively low valuation as a niche player within the cyclical chemical sector.

Traders account for over 40%, while controlling shareholders hold more than 50%.

Senhe High-Tech's sales model includes both direct sales and distribution, with direct sales being the primary channel during the reporting period, supplemented by distribution. In the direct sales model, customers are divided into direct (end-user) clients and trading clients. During the reporting period, revenue from trading clients accounted for 41.86%, 42.16%, and 41.69% of the main business income respectively. In other words, nearly half of the company’s revenue was achieved through trader channels.

The company's trading clients are intermediaries specializing in mining supplies trade. After purchasing the company’s products, they resell them to earn a markup. Since gold producers are mostly located in remote mining areas with poor transportation and information infrastructure, and are scattered, on-site reagent testing and promotion are challenging. The company finds it difficult to achieve broad coverage relying solely on its internal sales force. Therefore, aside from promoting through independent channels like exhibitions, publications, and new media, the company also leverages local traders to promote its products regionally.

Notably, the company has not established any special cooperative relationships with trading clients; all transactions are conducted under a buyout sales model. The rights, obligations, and risk transfer timing between the parties do not differ substantially from those of general direct (end-user) clients.

More critically, related-party transaction issues persist. During the reporting period, the company’s related-party sales amounted to 7.43 million, 23.99 million, and 30.04 million yuan, accounting for 2.24%, 4.06%, and 3.80% of similar transactions respectively.

Among these, Inner Mongolia Jinchan Metallurgical Services Co., Ltd. (referred to as Jinchan Metallurgy) is a key related-party client of the company. Transaction amounts during the reporting period were 7.08 million, 22.91 million, and 25.09 million yuan respectively. Gong Dewen, the actual controller of Jinchan Metallurgy, directly holds 1.88% of Senhe High-Tech's shares, creating a related-party relationship.

Related-party transactions also exist among suppliers. Baotou Hengying Trading Co., Ltd. is a related party of the company. In 2023, the company purchased raw materials such as urea worth 341,400 yuan from them, and in 2024 and 2025, sold products worth 1.09 million yuan and 1.22 million yuan respectively. Additionally, Guangxi Tingrui Agricultural Materials Co., Ltd. supplies the issuer with urea and soda ash while also purchasing ammonium sulfate, forming a two-way transaction.

While related-party transactions cluster across the upstream and downstream supply chain, the concentration risk posed by Senhe High-Tech’s controlling shareholders cannot be ignored. Que Shandong and Liu Xin each directly hold 28.08% of the company’s shares, making them the joint actual controllers. Together, Que Shandong and Liu Xin hold 56.17% of the company’s total equity prior to this issuance. On September 4, 2024, Liu Yihua (the sibling of Que Shandong’s spouse, Liu Yuzhen) signed the 'Commitment Letter on Acting in Concert.' As of the signing date of the prospectus, Que Shandong, Liu Xin, and their concerted action group collectively control 56.31% of the shares.

Additionally, according to the prospectus, Senhe High-Tech experienced one general safety production accident during the reporting period. On September 25, 2023, a machinery-related accident occurred at the company’s Mingyang plant, resulting in the death of one employee.

Subsequently, the relevant regulatory authorities imposed administrative penalties on both the company and the individual: On December 12, 2023, the Nanning Economic and Technological Development Zone Management Committee issued an 'Administrative Penalty Decision (Individual)' (Nan Jing Guan Emergency Penalty Decision [2023] No. 26) to Xia Guochun, the company's vice general manager, classifying the incident as a 'general accident' and fining Xia Guochun 18,000 yuan.

On February 1, 2024, the Jiangnan District Emergency Management Bureau of Nanning City issued an 'Administrative Penalty Decision' (Jiang Emergency Penalty [2024] No. 3) to the company, also recognizing it as a 'general accident,' and imposing a fine of 310,000 yuan on the company in accordance with the law. Both Senhe High-Tech and Xia Guochun have paid the fines on time. (Reported by Harbor Finance)

"Harbor Business Observation" Xu Huijing

12K Views