Major Customer, Shareholder, and the Valuation Adjustment Mechanism

By Cai Jun, Investor Network

Danyang, Jiangsu, renowned as China's eyewear wholesale hub, is now also home to an auto parts company aiming for a listing on the Growth Enterprise Market (GEM).

Recently, Jiangsu Chaoli Electric Co., Ltd. (hereinafter referred to as "Chaoli Electric" or "the Company") publicly released its prospectus. Furthermore, according to the list of IPO companies selected for on-site inspections published by the China Securities Association in July, the company stands out prominently.

Since 2024, the company's performance and financing have been deeply intertwined with SAIC. However, the capital outflows that occurred before and after, including two dividend distributions, may become a focal point of regulatory scrutiny.

Performance Driven by a Major Customer

In the late 1980s, Shen Liuqing joined a motor factory in Danyang as deputy factory manager. At that time, various township factories dotted southern Jiangsu. The Shen family started with ventilator motors, accumulating original technology and capital. In 2001, Chaoli Electric was officially established. The company capitalized on the market transition, focusing on fuel vehicle components such as automotive air conditioning blowers and radiator motors, gradually integrating into the automotive supply chain.

However, during that period, private auto parts companies in southern Jiangsu were proliferating. Around 2019, the company reached a qualitative turning point, with its main products, such as high-voltage PTC heaters and battery cooling modules, being supplied in bulk to XPENG, GAC Aion, and others. In essence, new energy vehicles became a shortcut for overtaking competitors, ultimately boosting the company's performance.

From 2023 to 2025 (hereinafter referred to as the "reporting period"), the company's revenues were 1.488 billion yuan, 1.871 billion yuan, and 2.311 billion yuan, respectively. Among them, SAIC was the main driver of performance.

In 2023, the company's top five customers were Chery, FAW, Great Wall, Yinlun Shares, and JAC, with combined sales of 412 million yuan, accounting for 27.68% of revenue.

In 2024, SAIC became the company's second-largest customer, with sales of 122 million yuan. During the same period, the combined sales of the top five customers were 651 million yuan, accounting for 34.78% of revenue.

In 2025, SAIC surged to become the company's largest customer, with sales of 269 million yuan. During the same period, the combined sales of the top five customers were 797 million yuan, accounting for 34.49% of revenue.

It is evident that the proportion of the top five customers increased significantly after SAIC's large-scale purchases, with 2024 being a critical juncture. During the same period, there were adjustments in the upper echelons of SAIC Group, with Jia Jianxu taking over as the new president and IM Motors being directly integrated into the new group leadership. According to the prospectus, the company's cooperation with SAIC began in 2020, initially with SAIC MAXUS. Subsequently, the company secured a series of orders from subsidiaries under SAIC's IM Motors, providing components for the "IM" new energy vehicles.

However, on the flip side of the performance flywheel, the company's gross profit margin for its main business during the reporting period was 18.18%, 17.7%, and 16.82%, respectively. The company stated that since 2025, domestic automakers have imposed more significant price reduction demands on auto parts suppliers, exerting widespread pressure on industry gross profit margins.

In fact, new energy vehicle components currently fall into three tiers. The first tier, represented by Sanhua Intelligent, possesses a competitive edge in system integration. The second tier, exemplified by Yinlun Shares, relies on high-margin components to lock in upstream prices. The company, in the third tier, lacks the capability for full thermal management system integration and can only supply individual motor components.

In short, the company's position and resources in the supply chain result in relatively weak bargaining power. During the reporting period, the company's accounts receivable turnover ratios were 2.84, 2.58, and 2.64 times, respectively. During the same period, Sanhua Intelligent and Yinlun Shares achieved over 4 times and over 3 times, respectively.

Two Significant Capital Outflows

Despite being established for over two decades, Chaoli Electric only began financing in the past three years. From 2023 to 2024, the company established three employee stock ownership platforms and completed subsequent capital contributions and share acquisitions.

After internal alignment, the company initiated its Series A financing at the end of 2024, with SAIC Chuangyuan, Huafu Growth, Zhixin Jianyuan, and others investing in the company's equity. Among them, SAIC Chuangyuan is an industrial fund of SAIC Group. During the same period, the institution also acquired equity from the company's controlling shareholder, Mingquan Technology.

In 2025, the company launched its Series B financing, introducing investment platforms under GAC Group. During this period, the company signed a valuation adjustment mechanism (VAM) agreement with external institutions. In April of this year, multiple parties reached a new agreement, clearing clauses related to the company. However, restoration clauses were still agreed upon for the company's controlling shareholder, stipulating that if triggered, SAIC Chuangyuan has the right to request Mingquan Technology to fulfill repurchase obligations.

In other words, the company's relationship with SAIC extends beyond upstream and downstream cooperation to deep-level equity binding. More interestingly, before external financing, the company's controlling family proceeded with cash dividends. In 2023 and 2024, the company implemented two dividend distributions, amounting to 27.63 million yuan and 25 million yuan, respectively. The dividends were mainly directed towards the investment platforms of the controlling Shen family, with external institutional shareholders not participating.

The controlling family received the dividends at a time when the company was under financial strain. In 2023 and 2024, the company's asset-liability ratios were 94.22% and 91.66%, respectively, only showing a significant decline after two rounds of external financing. Moreover, before initiating external financing, the company experienced another notable capital outflow.

In 2023, the net cash flow generated from the company's operating activities was -24 million yuan. During this period, cash inflows and outflows for this indicator were 938 million yuan and 961 million yuan, respectively. Among them, the cash paid for purchasing goods and accepting labor services was 652 million yuan, exceeding the 506 million yuan and 626 million yuan in 2024 and 2025, respectively.

The details of this significant outflow may become a key focus of on-site inspections. In 2024 and 2025, the net cash flows generated from the company's operating activities were 25 million yuan and 153 million yuan, respectively. The significant improvement was due to the normalization of cash inflows and outflows.

Another potential focus of on-site inspections is the company's related-party disputes. According to Tianyancha, since 2023, Shanghai Chaoli Chenglong Electric Co., Ltd. has been involved in multiple lawsuits with the Shanghai Songjiang government, stemming from disputes over a construction land parcel acquired locally earlier. This enterprise, established in 2005, is held by members of the Shen family.

(Source: Tianyancha)

Ultimately, 2024 marked a critical turning point for the company's performance and capital. That same year, SAIC not only entered the company's top five customers but also invested in its equity. Correspondingly, the company's controlling platform signed a VAM agreement with SAIC's platform. However, interestingly, despite the company's high debt, the controlling Shen family proceeded with two dividend distributions, with the preceding capital outflows potentially becoming a key focus of on-site inspections.

Are you optimistic about the company's listing prospects? Feel free to leave a comment and discuss in the comment section. (Produced by Thinker Finance)

Source: Investor Network