MKS Energy posted cumulative losses exceeding RMB 800 million over three years: debt-to-asset ratio surpasses 190%, interest-bearing bank borrowings surge

$Makesense Energy Technology Co., Limited (811207.HK)$

On May 7, MKS Energy Technology Co., Ltd. (hereinafter referred to as 'MKS Energy') updated its prospectus, continuing its pursuit of a Hong Kong IPO. Public information shows that the company completed its shareholding reform in February 2026, with Guotai Junan Securities acting as the sponsor.

For this IPO, MKS Energy intends to allocate the proceeds toward expanding the scale and density of its asset network, enhancing R&D capabilities for its Green Power Platform and Mogu Xiaomei AI Agent Platform, advancing overseas expansion, and supplementing working capital.

Earnings have been highly volatile, with cumulative losses exceeding RMB 800 million over three years

According to Tianyancha and the company's prospectus, Meikesen Energy was founded in 2018 and is China’s leading AI-driven provider of next-generation electricity services based on distributed energy storage (DES) assets.

Per Frost & Sullivan data, as measured by operational scale of distributed energy storage assets as of December 31, 2025, the company ranks as China’s largest next-generation electricity service provider, with an operational capacity of 799.5 MWh and a market share of 7.4%. The company is dedicated to aggregating dispatchable end-user power resources in real time to maximize the value of distributed energy storage assets, reduce electricity costs, and enhance grid stability.

Financial data shows that Meikesen Energy’s performance has been notably volatile. During the reporting period—comprising fiscal years 2023, 2024, and 2025—the company reported revenues of RMB 174 million, RMB 125 million, and RMB 520 million, respectively.

Revenue declined by 28.4% year-over-year in 2024, which the company attributed primarily to its strategic focus on the emerging electricity services market—a sector still in its early stages of development. In 2025, revenue surged by 317.3% year-over-year, driven by the company’s initial foray into and subsequent acceleration of distributed energy storage asset development, alongside the establishment of an effective business model.

However, this revenue growth has not translated into improved profitability. During the reporting period, the company recorded total losses and comprehensive losses of RMB 291 million, RMB 299 million, and RMB 235 million, respectively, amounting to cumulative losses of RMB 8.25 billion over three years. Adjusted net losses under non-IFRS metrics stood at RMB 207 million, RMB 193 million, and RMB 76.9 million, respectively—showing a narrowing trend but remaining substantially high in absolute terms.

Regarding its sustained losses, Meikesen Energy states in its prospectus that these reflect a deliberate strategy aimed at validating its business model and securing a leadership position in a rapidly expanding market, rather than inefficiencies in operations. The company plans to establish a clear and sustainable path to profitability primarily by capitalizing on growth opportunities in the next-generation electricity services market, focusing on core asset investors to expand its operational scale of distributed energy storage systems, optimizing its service portfolio, broadening its range of power-related services, and enhancing operational efficiency.

Independent economist Wang Chikun commented: 'Meikesen Energy’s losses are not the result of normal, stage-specific industry investments, but rather an inevitable outcome of its self-circulating capital operation model. At its core, the distributed energy storage asset development business involves related parties within the same ecosystem simultaneously acting as both “capital providers” and “project contractors”: capital entities affiliated with the company’s actual controller inject funds as major customers, and Meikesen then channels these funds back into project companies within the same ecosystem through project investments and asset development payments, effectively creating internal fund transfers that inflate financial statements.'

The revenue decline in 2024 was an intentional contraction during a period of capital restructuring, which—combined with rigid cost structures—led to even wider losses. The explosive 317.3% revenue increase in 2025, meanwhile, stemmed from artificial scale inflation driven by circular fund flows among related parties, not genuine market-driven orders. Under this model, recurring transfer costs continuously erode profits. Although adjusted net losses have narrowed, their persistently high absolute levels indicate that the company has yet to develop genuine, independent revenue-generating capabilities outside its affiliated ecosystem, making meaningful loss reduction unlikely.

Shannon Capital Executive Director Shen Meng stated: 'Companies seeking IPOs naturally aim for higher valuations and will do their best to appear attractive. However, underlying financial structures—particularly cash flow—cannot be disguised. Investors are increasingly skeptical of corporate narratives built purely on conceptual packaging. Ultimately, the pronounced earnings volatility and data discrepancies reflect external economic pressures and internal limitations in competitive capabilities.'

Wang Chikun further stated, 'An extremely high customer concentration is a direct manifestation of its capital closed loop, not a normal phenomenon in the early stage of an industry. Most of the core large customers are affiliated investors participating in this capital cycle, and the company’s revenue is heavily dependent on a few related parties. This not only results in very poor operational stability but will also raise serious concerns about business independence during Hong Kong IPO reviews. Essentially, the company is driven by capital rather than industrial operations.'

The good news is that the company’s gross margin has generally started to rise. During the reporting periods, gross margins were 2.6%, 4.2%, and 10.0%, respectively. By business segment, gross margins for distributed energy storage and other asset development were -5.7%, 6.5%, and 10.1%; gross margins for power services were 48.9%, 38.0%, and 22.0%; and gross margins for other businesses were 34.9%, 17.7%, and 22.9%.

In 2023, distributed energy storage and other asset development incurred a gross loss of RMB 7.851 million, primarily due to market volatility affecting the company’s photovoltaic (PV) asset development at the time—its main revenue source prior to that year and the key reason for its strategic shift toward distributed energy storage assets. Most of the company’s PV assets were constructed when raw material prices were relatively high, locking in elevated costs. However, raw material prices for PV assets dropped sharply by the time these assets were sold, significantly depressing sales prices.

From the perspective of gross profit composition, although power services have a relatively high gross margin, their contribution to total revenue is limited. Revenue from power services amounted to RMB 18.506 million, RMB 35.598 million, and RMB 49.038 million in 2023, 2024, and 2025, respectively, accounting for 10.6%, 28.6%, and 9.5% of total revenue in those years. The company acknowledged that it did not generate any revenue from power trading services during the historical reporting period, mainly because the policy framework regulating power trading services has only recently begun to take shape. Specifically, the company only started entering into power trading service agreements in 2025, with performance under these agreements commencing in 2026.

Regarding operating expenses, sales and distribution expenses during the reporting periods were RMB 58.764 million, RMB 49.571 million, and RMB 47.605 million, representing 33.7%, 39.8%, and 9.2% of total revenue for the respective years. Administrative expenses were RMB 63.360 million, RMB 74.947 million, and RMB 76.006 million, accounting for 36.4%, 60.1%, and 14.6% of total revenue in the corresponding years.

Meanwhile, research and development expenses were RMB 48.264 million, RMB 42.400 million, and RMB 19.447 million, representing 27.7%, 34.0%, and 3.7% of total revenue for the respective years, showing a downward trend.

High concentration among both customers and suppliers, with rising accounts receivable and inventory

MKS Energy exhibits a highly concentrated customer structure—a risk repeatedly highlighted in its prospectus. Customers for its distributed energy storage asset development business are asset investors, while customers for its power services business include electricity consumers, project companies, and grid operators.

During the reporting periods, revenue from the top five customers accounted for 79.5%, 68.0%, and 84.3% of total revenue each year, respectively; revenue from the largest single customer accounted for 30.8%, 35.8%, and 29.0% of total revenue in those years.

The company explained that the relatively high customer concentration is primarily due to the fact that the emerging power services industry based on distributed energy storage is still in its early development stage, and current asset investors are limited to experienced and well-capitalized players within the energy sector.

Shen Meng commented:"When a company’s customer base is overly concentrated, its pricing power becomes constrained by major clients, and the stability of its financial structure is weakened. More than 80% of Maxwell Energy’s revenue comes from its top five customers, with the largest single customer accounting for nearly 30%. This means that any adjustment in investment strategy or delay in settlement by a major client would significantly disrupt the company’s revenue recognition and cash collection cycles."

As the company expands its operations, its accounts receivable have continued to rise, increasingly straining working capital.As of December 31 of the reporting period, trade receivables and bills receivable stood at RMB 152 million, RMB 106 million, and RMB 285 million, respectively. Accounts receivable at the end of 2025 increased by 168.9% compared to the end of 2024, far outpacing the growth in revenue over the same period.

During the same periods, days sales outstanding (DSO) were 279 days, 377 days, and 137 days, respectively. Collection efficiency deteriorated markedly in 2024; although it improved somewhat in 2025, the absolute number of days remained high.

The company acknowledged that it cannot guarantee maintaining trade receivables and bills receivable turnover days at a reasonable level. If customer creditworthiness, business operations, or financial conditions deteriorate, or if a large number of customers fail to settle payments on time, delays in collecting receivables may occur.

Regarding inventory, levels stood at RMB 112 million, RMB 426 million, and RMB 343 million across the respective periods. Inventory at year-end 2024 surged by 280.4% compared to year-end 2023; although it declined slightly by year-end 2025, it remained elevated. Inventory provisions amounted to RMB 42 million, RMB 176 million, and RMB 235 million, showing a consistent upward trend. Inventory turnover days were 225 days, 822 days, and 300 days, respectively—turnover days lengthened substantially in 2024, indicating a marked decline in inventory management efficiency. The company explained that inventory includes work-in-progress and finished goods, and that inventory impairment assessments are conducted each period during the historical record. If the net realizable value of inventory falls below cost, provisions are made to write down inventory to its net realizable value; however, the company cannot guarantee that significant write-downs will not occur in the future.

Additionally, purchases from the company’s top five suppliers accounted for 52.9%, 50.1%, and 53.4% of total procurement in the respective periods, while purchases from the largest single supplier represented 17.5%, 12.5%, and 15.5% of total procurement. Throughout the historical record period, all procurement was sourced from suppliers within mainland China. The company relies on third-party suppliers and business partners to deliver services to its customers; failure to effectively manage relationships with these third parties—or their inability to satisfactorily fulfill commitments and responsibilities—could adversely affect the business.

Debt-to-asset ratio exceeds 190%, signaling severe liquidity strain

Maxwell Energy’s debt position is a critical indicator of its financial health. During the reporting periods, total assets were RMB 757 million, RMB 10.82 billion, and RMB 11.02 billion, while total liabilities stood at RMB 12.71 billion, RMB 18.83 billion, and RMB 21.28 billion, resulting in debt-to-asset ratios of 167.96%, 173.99%, and 193.12%, respectively—continuously rising and far exceeding the 100% warning threshold.

From the liability structure perspective, the expansion of net current liabilities is the most direct reflection of a strained cash flow. During the reporting periods, the company's net current liabilities were RMB 567 million, RMB 820 million, and RMB 1.07 billion, respectively, showing a continuous upward trend. The current ratio remained at 0.5x across all periods, while the quick ratios were 0.4x, 0.3x, and 0.3x, respectively, indicating that short-term solvency metrics have remained persistently low.

The increase in net current liabilities was primarily driven by liabilities related to ordinary share redemptions. During the reporting periods, liabilities from ordinary share redemptions amounted to RMB 807 million, RMB 1.084 billion, and RMB 1.227 billion, respectively, representing a 51.9% increase over two years.

MKS explained that the net current liabilities position primarily stems from ordinary share redemption liabilities, partially offset by cash and cash equivalents, inventories, prepaid expenses, other receivables, and other assets. The company expects that upon reclassification of the ordinary share redemption liabilities, its position as of the date of this document will reflect net current assets and net asset status. However, it remains uncertain whether this accounting adjustment will gain market acceptance.

In addition to ordinary share redemption liabilities, interest-bearing bank borrowings and other loans have also grown rapidly. During the reporting periods, interest-bearing bank borrowings and other loans totaled RMB 867 million, RMB 3.36 billion, and RMB 4.37 billion, respectively, marking a 404.0% increase over two years.

The company acknowledged that it has historically relied heavily on borrowings to fund operations, and any additional debt, rising borrowing costs, or uncertainty regarding future financing sources could adversely affect its business operations and financial performance. High leverage may constrain operational and strategic flexibility, and restrictive covenants in future debt agreements could limit the company’s ability to raise additional debt or equity financing, potentially triggering defaults that accelerate repayment obligations and jeopardize financial stability.

Regarding operating cash flows, net cash used in operating activities during the reporting periods amounted to RMB 333 million, RMB 386 million, and RMB 181 million, respectively, consistently recording net outflows. Although the scale of net outflow narrowed somewhat in 2025, the company has still not achieved positive operating cash flow.

Meanwhile, net cash generated from investing activities amounted to RMB 166.39 million, negative RMB 67.42 million, and RMB 196.32 million, respectively, showing significant volatility. Net cash generated from financing activities totaled RMB 2.87 billion, RMB 4.26 billion, and RMB 1.20 billion, highlighting the company’s ongoing reliance on external financing. As of December 31, 2025, the company’s cash and cash equivalents stood at RMB 2.25 billion, down 15.4% from RMB 2.66 billion at the end of 2024.

In terms of ownership structure, as of the latest practicable date, the controlling shareholder group of MKS Energy comprised Ms. Wei Qiong, Shanghai Tu Xin (an entity controlled by Ms. Wei), and Dr. Yan Xiao, who collectively held approximately 40.43% of the company’s total issued shares. (Produced by Harbour Financial)

Xu Huijing, Harbour Business Observer

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