Listing | Frontline of Entrepreneurship

Author | Xipo

Editor | Wang Yajing

Graphic Designer | Xing Jing

Reviewer | Song Wen

According to data from the National Energy Administration, by the end of 2025, China’s wind power installed capacity will reach 640 million kilowatts, a year-on-year increase of 22.9%. This accounts for nearly half of the world’s total wind power capacity. China’s wind power industry development not only makes a significant contribution to global carbon reduction but also drives related industry chains into a high prosperity cycle.

Standing at the industry’s forefront, Zhenhong Heavy Industry (Jiangsu) Co., Ltd. (hereinafter referred to as “Zhenhong Co.”) is rushing toward the capital market, recently successfully passing the review for an IPO on the Beijing Stock Exchange.

It is understood that Zhenhong Co. is a company focused on forging wind turbine main shafts and other large metal forgings. Benefiting from rising downstream installation volumes, the company’s performance has maintained double-digit high growth.

However, behind the performance growth, Zhenhong Co. is heavily affected by the cyclical nature of the wind power industry, with products and customers highly concentrated, and facing difficulties in covering short-term loans with cash funds.

Additionally, Zhenhong Co. has dual affiliations with Jiangyin Bank in terms of equity and personnel, and their close relationship has also attracted regulatory inquiries.

Amidst these numerous issues, can Zhenhong Co. successfully list on the Beijing Stock Exchange?

1. Family Business, Relatives of Zhao Zhenghong Widely Involved

Zhenhong Co.'s founder, Zhao Zhenghong, initially started in textile dyeing and printing.

After graduating from college, Zhao Zhenghong worked at Jiangyin Chemical Factory No. 5 and Huashi Printing Factory, gaining extensive experience. In February 1999, Zhao Zhenghong founded Zhenhong Printing and Dyeing, focusing on the textile dyeing industry.

In 2005, as environmental protection and regulatory policies tightened, coupled with a surge in demand for China’s wind power industry, Zhao Zhenghong shifted to establish Zhenhong Limited, entering the high-growth wind power forging track.

Currently, Zhenhong Co. mainly develops, produces, and sells wind turbine main shafts and other large metal forgings. Its main products include wind power forgings, chemical industry forgings, and other large metal forgings, with some involvement in sheet metal and processing of incoming materials. Its products are widely used in wind power, chemical industry, machinery, shipbuilding, nuclear power, and other fields.

It is known that wind power generation involves converting wind’s kinetic energy into mechanical energy, then into electrical energy. In this process, the main shaft, as a key component connecting the wind turbine blades hub and gearbox, plays a core role in transmitting mechanical energy.

In recent years, Zhenhong Co.'s performance has grown steadily. From 2022 to the first half of 2025 (hereinafter referred to as the “Reporting Period”), the company’s operating revenues were 827 million yuan, 1.025 billion yuan, 1.136 billion yuan, and 633 million yuan; net profits attributable to shareholders were 62.84 million yuan, 80.94 million yuan, 104 million yuan, and 59.29 million yuan.

（Figure / Zhenhong Co. IPO Prospectus）

Among these, wind power forgings are the main source of income. During the reporting period, revenue from this product was 415 million yuan, 525 million yuan, 612 million yuan, and 378 million yuan, accounting for 56.32%, 57.71%, 60.15%, and 66.96% of main business revenue, respectively.

（Figure / Zhenhong Co. IPO Prospectus）

Behind Zhenhong Co. is the Zhao Zhenghong family.

As of the signing date of the IPO prospectus, the controlling shareholder and actual controller of Zhenhong Co. is Zhao Zhenghong, who holds 59.31% of the company’s shares in total.

In addition, Zhao Zhenghong’s concerted action persons include his brother Zhao Zhenglin, brother-in-law Zhou Wei, his spouse’s brother Ji Renping, and brother-in-law Zhao Guorong, who hold 3.18%, 2.42%, 0.13%, and 0.25% of the shares, respectively. From the shareholding structure, Zhenhong Co. is a typical “family business.”

（Figure / Zhenhong Co. IPO Prospectus）

In terms of management, Zhao Zhenghong serves as Chairman; Zhao Zhenglin is a director and vice general manager; Zhou Wei is a director.

Moreover, Zhao Zhenghong has other relatives working at Zhenhong Co. The IPO prospectus shows that Zhao Zhenghong’s son Zhao Zhijie is the general manager, and his brother-in-law’s son-in-law Xu Xueming is deputy director of the production workshop. At the same time, Zhao Zhenglin’s daughter Zhao Yinhai is a clerk, and his son-in-law Hua Songyuan is deputy head of the marketing department.

（Figure / Zhenhong Co. IPO Prospectus）

Under the comprehensive control of Zhao Zhenghong’s family, the transparency and fairness of Zhenhong Co. have also become a focus of external attention.

2. Performance Growth Depends on Major Customers, Sustainability in Question

The IPO prospectus shows that Zhenhong Co. has built a complete product matrix covering onshore wind turbines from 1.5MW to 9.5MW, and has achieved mass sales of the 9.5MW model.

In addition, the independently developed forged double-ended flange wind turbine main shaft with performance exceeding conventional products has gained recognition from domestic and foreign wind turbine manufacturers such as Envision Energy, Yunda Holdings, and Siemens Energy.

In fact, Zhenhong Co.'s performance growth heavily relies on customers like Envision Energy. Data shows that in the first half of 2025, only Envision Energy, Yunda Holdings, and Shanghai Electric contributed 137 million yuan in revenue growth, accounting for 98.43% of the total revenue increase during that period.

Looking at overall customer concentration, during the reporting period, sales to the top five customers were 348 million yuan, 408 million yuan, 486 million yuan, and 305 million yuan, representing 42.12%, 39.78%, 42.79%, and 48.17% of the current operating income, respectively. Among them, Envision Energy has consistently been one of the top five customers.

（Figure / Zhenhong Co. IPO Prospectus）

The orders on hand from Zhenhong Co. also show a high proportion from Envision Energy. As of July 31, 2025, the company’s orders on hand from Envision Energy amounted to 123 million yuan, accounting for 21.74% of the total orders on hand at that time.

（Figure / First Round Inquiry Response）

Generally, over-reliance on a single major customer often leads to weakened bargaining power and concentrated operational risks.

“Frontline of Entrepreneurship” notes that there are overlaps between some customers and suppliers of Zhenhong Co., including Baoding Heavy Industry, Guangda Special Materials, and Tianma Bearings, which have recurring overlapping business relationships.

During the reporting period, Zhenhong Co. purchased steel and billets from these three companies. As of the first half of 2025, the company’s total procurement proportion from these three was 29.12%, with sales proportion at 8.2%.

From 2022 to 2024, the company’s procurement from Guangda Special Materials exceeded 100 million yuan each year, making it the company’s largest supplier, while the company also sells scrap steel to it.

（Figure / First Round Inquiry Response）

Regarding the overlap of customers and suppliers, Zhenhong Co. explains that such situations are common in the industry and align with the specialized division of labor in forging. However, in the second round of inquiries, the Beijing Stock Exchange still required the company to clarify whether this conforms to industry characteristics and to further justify the commercial reasonableness of customer-supplier overlaps.

It is worth noting that the wind power industry has experienced multiple cycles of demand surges (“rush installation”) and downturns (“retreat periods”) due to external environmental changes, causing significant demand fluctuations that impact Zhenhong Co.'s performance.

Specifically, in 2024, the wind power forging industry faced a “winter,” and Zhenhong Co.'s gross profit margin on wind power forgings decreased by 3.24 percentage points compared to 2023.

（Figure / Zhenhong Co. IPO Prospectus）

In February 2025, the National Development and Reform Commission and the Energy Administration clarified that new energy incremental projects would implement competitive bidding for grid connection, shifting the wind power industry from “parity” to “bidding,” which transmits price pressures upstream, and policy changes are compressing profit margins.

During the first half of 2025, Zhenhong Co.'s comprehensive gross profit margin was 19.74%, slightly higher than at the end of 2024, but under market price competition, the company has lowered prices for major clients. For example, the average selling price of some Siemens Energy products was reduced by 1%, and for Endurance Energy, the reduction was as high as 6.6%.

（Figure / First Round Inquiry Response）

Therefore, the Beijing Stock Exchange has questioned the sustainability of Zhenhong Co.'s performance growth, repeatedly asking in the inquiry letter. Despite the company’s explanations of industry rationality, concerns remain about its risk resistance, profitability stability, and ability to withstand industry cycles.

3. Short-term Debt Repayment Pressure and Inquiries into Jiangyin Bank Relationship

It is noteworthy that while managing Zhenhong Co., Zhao Zhenghong has also invested in Jiangyin Bank. The related-party transaction issues between Zhenhong Co. and Jiangyin Bank have also attracted the focus of the Beijing Stock Exchange.

The IPO prospectus discloses that Zhao Zhenghong, the actual controller of Zhenhong Co., is one of the founders of Jiangyin Bank through Zhenhong Printing and Dyeing. As of June 30, 2025, Zhenhong Printing and Dyeing still held 1.67% of Jiangyin Bank’s shares.

Additionally, Xu Jiandong, director and head of the finance department of Zhenhong Co., also serves as a director of Jiangyin Bank.

Furthermore, when Jiangyin Bank established Haikou Sunan Bank, Xuanhan Chengmin Bank, and Shuangliu Chengmin Bank, Zhenhong Co. also invested in these banks. As of the date of the first inquiry response, the company held 5.00%, 1.54%, and 3.46% stakes in these three banks, respectively.

（Figure / First Round Inquiry Response）

In this context, Zhenhong Co. maintains significant deposit and loan transactions with Jiangyin Bank, including guarantees. From 2022 to the first half of 2025, the company’s RMB deposits with Jiangyin Bank were 29.31 million yuan, 6.96 million yuan, 97.51 million yuan, and 20.56 million yuan.

During the same period, the company had 26 loan and guarantee transactions with Jiangyin Bank, with loan balances of 91.4 million yuan, 91.2 million yuan, 60.9 million yuan, and 60.8 million yuan.

（Figure / Zhenhong Co. IPO Prospectus）

In the first round of inquiries, the Beijing Stock Exchange asked the company to clarify whether the related-party banking deposit and loan activities are compliant and whether there are issues such as “re-lending” or illegal guarantees. In the second inquiry, further questions were raised about the fairness of the deposit and loan interest rates and whether the company’s clients and suppliers conduct supply chain loans or contract settlements through Jiangyin Bank.

Zhenhong Co. responded that the agreed deposit and loan interest rates are consistent with the bank’s standards for similar customers, and both deposit and loan rates are fair.

However, given the high scale of loans from Jiangyin Bank, Zhenhong Co. currently faces significant debt pressure.

During the reporting period, the company’s asset-liability ratio was 57.32%, 54.47%, 50.46%, and 49.47%, showing a downward trend but still far above the average of comparable industry companies at 37.46%, 34.09%, 35.35%, and 38.69%.

Additionally, in terms of debt repayment capacity, both current ratio and quick ratio remained below the industry average during the reporting period.

（Figure / Zhenhong Co. IPO Prospectus）

As of June 30, 2025, the company’s cash and cash equivalents were 58.58 million yuan, while short-term borrowings reached 161 million yuan, indicating that cash funds are insufficient to cover short-term debt, posing liquidity challenges.

（Figure / Zhenhong Co. IPO Prospectus）

It is also noteworthy that during each period of the reporting year, Zhenhong Co.'s net operating cash flow was -1.30 billion yuan, -52.97 million yuan, 124 million yuan, and -34.52 million yuan. Except for 2024, the company has been in a state of “cash outflow” for a long time, with significant liquidity issues.

（Figure / Zhenhong Co. IPO Prospectus (unit: ten thousand yuan)）

In summary, under financial pressure, Zhenhong Co.'s close relationship with Jiangyin Bank not only facilitates financing but also tightly binds its capital operations and related transactions, further raising concerns about its financial independence and internal controls.

Given the doubts about the sustainability of performance growth, heavy reliance on major clients, and repayment pressures, whether Zhenhong Co. can successfully IPO remains a focus of ongoing attention.

Note: The main illustration in the article is from Shetu.com, based on VRF protocol.