Yongli Precision (永励精密) faces IPO test as earnings reverse, family control tightens and BYD (比亚迪) becomes a 'sweet shackle'

Performance "U‑turn"

Yongli Precision (永励精密), a leading Chinese maker of precision automotive tubing, has seen years of steady growth suddenly stall just as it pushes for a Beijing Stock Exchange (北交所) IPO to raise ¥380 million for capacity expansion. Revenues rose from ¥416m in 2022 to ¥568m in 2024 and net profit climbed in step, but 2025 revenue slid to ¥540m (down ~4.9%) and the company warned of a softer Q1 2026, with top‑line guidance down 7.6%–11.6% year‑on‑year and core net profit likewise weakening. Management attributes the turn to shifting NEV purchase‑tax policy and temporary production dips at key customers, but market observers note the 2025 profit uptick was driven by cost and price anomalies rather than durable demand.

BYD: growth driver or strategic constraint?

A deeper risk is client concentration. Sales to the top five customers rose from 63% of revenue in 2022 to 78.7% in H1 2025, and BYD (比亚迪) has become a primary buyer — its contribution jumped from 3.5% in 2022 to 27.2% in H1 2025. That surge helped sales of certain shock‑absorber tubes nearly sevenfold in three years, but reportedly came with price concessions and much longer payment terms: Yongli gives BYD a 2‑month invoice term plus a 6‑month acceptance period, driving receivables from ¥15.1m at end‑2022 to ¥118.9m by mid‑2025 and pushing receivables-to-revenue to 83.3%. Cash conversion is slowing (turnover 2.43 in 2024, 1.08 in H1 2025). So is BYD a growth lifeline or a “sweet shackle” that both props up and strains the business?

Governance, capacity and IPO risk

Compounding commercial risk are governance and project‑feasibility concerns. Yongli is a tightly held family business: the Wang family and close relatives control 95% of voting rights, occupying key board and executive seats, raising questions about checks and balances — an issue regulators probed in two rounds of inquiry. The planned use of proceeds — ¥250m to add annual chassis tubing capacity and ¥130m for steering‑column tubes — sits uneasily against evidence of uneven capacity utilisation (weld‑pipe lines 83%–96% historically; heat treatment fell to 61.6% in H1 2025). If downstream demand softens or new customers do not materialise, higher depreciation and idle capacity could compress margins further. Can the IPO shore up balance‑sheet stress without solving client‑concentration and governance weaknesses? Investors and regulators will be watching closely as China’s EV supply‑chain dynamics and shifting policy backdrop add another layer of geopolitical and market uncertainty.