Targeting the New Energy Market: Another "Little Giant" Receives IPO Registration Approval

How can AI · Spring Light Group’s IPO fundraising help expand the new energy market?

Text | Wang Zongyao
Spring Light Group’s core products—soft magnetic ferrite magnetic powders—have ranked first domestically for three consecutive years. The company plans to expand production through fundraising to compete in the market and seek further growth.

Recently, Shandong Spring Light Technology Group Co., Ltd. (hereinafter “Spring Light Group”) successfully received registration approval from the China Securities Regulatory Commission (CSRC) and obtained the IPO approval document. Spring Light Group is a national-level specialized and innovative “Little Giant” enterprise in the soft magnetic materials field. It took less than nine months from IPO approval to registration approval.

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Regarding the purpose of this listing, Spring Light Group stated, “Through this issuance and listing, the company intends to raise funds to invest in advanced production facilities, technology, and human resources, further improving production efficiency and R&D capabilities, breaking through capacity bottlenecks, and enhancing overall performance.”

Figure 1: IPO Progress

Source: Shenzhen Stock Exchange website

Core products contribute over 80% of revenue

Spring Light Group is a national-level specialized and innovative “Little Giant” enterprise, mainly engaged in R&D, production, and sales of soft magnetic ferrite magnetic powders. Its products span four major sectors: soft magnetic ferrite powders, soft magnetic ferrite cores, electronic components, and power supplies. End applications include new energy vehicles and charging stations, smart home and appliances, communication power supplies and equipment, green lighting, photovoltaic energy storage, IoT, and medical fields.

Soft magnetic ferrite powders are the company’s core product, with sales (excluding internal sales) of 76,800 tons, 82,200 tons, and 101,600 tons from 2022 to 2024, ranking first domestically for three years in a row. With strong technical accumulation, the company and its subsidiaries have been recognized as “National Manufacturing Single Champion Enterprises” and “Leading Enterprises of Shandong Province’s Top 10 Industrial Clusters” in recent years.

Figure 2: Main Products and Application Fields

Source: Prospectus

Looking at revenue structure, from 2022 to June 2025 (reporting periods), Spring Light Group’s revenue from soft magnetic ferrite powders was RMB 836.8572 million, RMB 756.0926 million, RMB 881.5933 million, and RMB 446.2925 million, accounting for 82.44%, 81.33%, 81.89%, and 81.72% of total operating income respectively. In comparison, revenue from soft magnetic ferrite cores, electronic components, and power products accounts for a smaller proportion of total revenue in each period.

Table 1: Revenue Composition of Main Business (Unit: 10,000 RMB)

Source: Prospectus

Soft magnetic ferrite powders and cores are types of ferrite soft magnetic materials. In fact, soft magnetic materials also include amorphous, nanocrystalline soft magnetic, and metallic soft magnetic materials. Compared to some industry peers who are simultaneously developing multiple technical routes such as amorphous, nanocrystalline, and metallic soft magnetic materials, Spring Light Group’s current product structure is relatively concentrated, mainly focusing on ferrite soft magnetic materials. The prospectus states: “If future industry technology paths change significantly or customer demand shifts, the company’s product types may face limitations in adaptability and market expansion, which could adversely affect the company’s overall competitiveness and order acquisition.”

Figure 3: Classification of Magnetic Materials

Source: Prospectus

Market competition is relatively dispersed

According to industry research firm QY Research (Hengzhou Bozhi), the global soft magnetic ferrite market sales reached USD 2.676 billion in 2024, with an expected reach of USD 3.687 billion by 2031, at a CAGR of 4.8%. Among them, China is a major producer and market for soft magnetic ferrite materials worldwide.

Figure 4: Global Soft Magnetic Material Market Size and Forecast (Unit: USD billion)

Source: Prospectus

According to statistics from the Magnetic Materials Branch of the China Electronic Materials Industry Association, from 2020 to 2024, China’s soft magnetic ferrite sales were 415,000 tons, 460,000 tons, 482,000 tons, 480,000 tons, and 506,000 tons, with an average annual compound growth rate of 5.08%. The sales revenue during these years was RMB 8.28 billion, RMB 11.22 billion, RMB 10.65 billion, RMB 9.07 billion, and RMB 9.16 billion respectively.

The Chinese soft magnetic materials industry has a relatively dispersed competitive landscape. According to the same association, by December 2024, only 11.20% of soft magnetic companies had registered capital over RMB 10 million; only 0.16% of companies with over 300 employees. These firms typically operate only a few core production lines, relying on external procurement of magnetic powders, and mainly compete on price strategies.

In recent years, some industry peers engaged in soft magnetic ferrite business have announced plans to expand production. However, the prospectus notes that these companies mainly produce magnetic powders for internal core manufacturing rather than external sales. The industry has high technical barriers and long customer onboarding cycles, making it difficult for steel mills to enter the magnetic powder industry, and the likelihood of steel mills entering is low.

Spring Light Group also points out risks: “If future steel mills or other potential market competitors enter the magnetic powder market, or if industry peers expand capacity, intensifying market competition, it could impact the issuer’s market share or force significant price reductions, adversely affecting performance.”

Sustained growth questioned multiple times

Operationally, during the reporting period, Spring Light Group’s revenue was RMB 1.015 billion, RMB 930 million, RMB 1.077 billion, and RMB 546 million, with an 8.42% decline in 2023 and a 15.81% increase in 2024 year-over-year. Net profit attributable to shareholders after deducting non-recurring gains and losses was RMB 73.6235 million, RMB 85.1458 million, RMB 92.7571 million, and RMB 56 million, with growth of 15.65% and 8.94% in 2023 and 2024 respectively.

According to Shenzhen Stock Exchange inquiries, comparable companies like Guanyouda saw an 8.20% decline in magnetic powder revenue in 2024, mainly due to intensified competition and falling prices. In the first half of 2025, Spring Light Group’s revenue and net profit after non-recurring items increased by 10.19% and 32.34% respectively, while Guanyouda and Xinkangda experienced revenue growth of 10.12% and 24.68%, but net profits fell by 20.19% and 7.16%.

The exchange requested the company to analyze, considering increased competition in the magnetic powder market, declining revenues of comparable firms, falling sales prices, and capacity ramp-up cycles, how the company’s magnetic powder sales volume and revenue can continue to grow in 2024 and beyond, and to explain the reasons for the divergence between net profit trends and those of peers.

Currently, Spring Light Group’s domestic ranking in soft magnetic ferrite powder sales is first, but the company believes its growth is limited by capacity constraints. The prospectus discloses that from 2022 to 2024, capacity was 82,500 tons, 92,400 tons, and 107,100 tons, with utilization rates exceeding 99%. The company plans to raise RMB 584 million through this IPO to expand capacity, with new projects adding 75,000 tons of magnetic powder and 3.2 million power supply units.

According to the second round of inquiries, due to ongoing cost reductions in downstream sectors like photovoltaic energy storage, industry competition has intensified, and high-margin soft magnetic ferrite products’ profitability has shrunk, leading some comparable companies to report performance declines.

Therefore, the Shenzhen Stock Exchange raised further questions about the stability of Spring Light Group’s performance, including whether the new capacity faces absorption risks, the sustainability of high capacity utilization, the impact of increased competition and declining gross margins in emerging product areas, and the risks associated with demand fluctuations and cost pressures.

Additionally, during the review meeting, the listing committee asked the company to analyze whether its product technology can adapt to industry development trends, considering market competition, downstream demand changes, raw material prices, gross margin trends, technological reserves in high-performance soft magnetic materials, and capacity expansion projects, to assess the sustainability of revenue growth.

In response to multiple regulatory inquiries, Spring Light Group has highlighted related risks in the prospectus. It states that if downstream market demand growth does not meet expectations or if product performance cannot meet market upgrade requirements, sales could decline, adversely affecting operations, profitability, and reputation. During the reporting period, magnetic powder sales growth outpaced the industry, but if future industry growth slows and the company’s sales do not keep pace, profitability could suffer. If relationships with key customers change, or if intense competition leads to significant price drops, or if substitutes for soft magnetic ferrite materials increase, performance could decline. Some customers have self-supply capabilities for magnetic powders; if they increase self-supply, sales volume and revenue could be negatively impacted, affecting stability.

Accounts receivable and inventory continue to grow

The prospectus also reveals that as revenue increases, accounts receivable and inventory have grown significantly. As of 2022 to 2024, accounts receivable balances were RMB 250.4511 million, RMB 273.6202 million, and RMB 358.460 million, representing 24.67%, 29.43%, and 33.30% of revenue, respectively, showing an upward trend.

The company states: “As the business expands, accounts receivable may increase. If the company cannot effectively control receivables or if macroeconomic conditions worsen, leading to customer liquidity issues, there is a risk of bad debts, which could impact cash flow and operations.”

Table 2: Accounts receivable balances and ratios to revenue (Unit: 10,000 RMB)

Source: Prospectus

In initial inquiries, Shenzhen Stock Exchange asked for further analysis. The company responded that the increase in accounts receivable mainly results from higher sales in the fourth quarter and overdue amounts.

Reportedly, overdue receivables at each period end were RMB 45.5907 million, RMB 62.4533 million, RMB 90.7643 million, and RMB 93.193 million, increasing year by year. The company explained that this is mainly due to some customers’ tight liquidity and delayed downstream payments.

In the second round of inquiries, the exchange asked for detailed analysis of the reasons and reasonableness behind the rising accounts receivable and overdue amounts, considering revenue timing, customer credit periods, and matching of overdue receivables.

Inventory levels from 2022 to 2024 were RMB 164.1607 million, RMB 205.7038 million, and RMB 205.837 million, continuing to increase. The company warns that if raw material or inventory prices fall sharply, or if sales decline, there is a risk of inventory write-downs.

Regarding inventory composition, raw materials accounted for 55.83%, 48.20%, and 52.92%; inventory goods accounted for 31.10%, 44.45%, and 38.14%. The initial inquiry asked for reasons and reasonableness of high raw material and inventory levels, with responses indicating raw materials are stockpiled to ensure orderly production, and inventory goods to maintain safety stock.

Excessive inventory and receivables can strain liquidity, but the company’s cash flow from operating activities has shown signs of weakening, decreasing from RMB 80.1028 million, RMB 31.3694 million, RMB 28.6492 million, and turning negative (-RMB 2.4735 million) in the first half of 2025. The company attributes this mainly to changes in receivables and inventories.

The Shenzhen Stock Exchange requested a quantitative analysis of the causes, reasonableness, and potential impact of declining operating cash flow and the negative figure in the first half of 2025, comparing with peers.

As of the latest period, the company’s cash and cash equivalents were RMB 12.2561 million, RMB 32.666 million, RMB 64.9631 million, and RMB 51.4419 million. Given the company’s revenue exceeding RMB 1 billion in 2024, these cash levels are relatively modest. Moreover, as of June 2025, short-term borrowings reached RMB 211 million, with long-term borrowings at RMB 37.08 million, totaling nearly five times the cash balance. The asset-liability ratio at June 2025 was 47.15%, higher than the industry average of 37.77%, indicating higher debt pressure.

Under this high debt scenario, Spring Light Group still paid dividends before listing. The prospectus discloses that the company paid a cash dividend of RMB 14.50 per 10 shares (tax included) for 2024, totaling RMB 24.72 million. In 2022 and 2023, no cash dividends were paid.