The critical period for breaking through is expected to see a decline in net profit; what are Kangrui New Materials' chances of success in hitting A-shares?

Source: Beijing Business Today

Jiangsu Kangrui New Materials Technology Co., Ltd. (hereinafter referred to as “Kangrui New Materials”) has new updates regarding its IPO. Recently, the Shenzhen Stock Exchange official website showed that the company’s main board IPO has disclosed the first round of inquiry responses. Behind the IPO attempt, Kangrui New Materials has experienced significant performance fluctuations, with net profit in 2023 seeing a substantial increase. However, the company warns that net profit is expected to decline by over 50% in 2025. Additionally, regarding control rights, the actual controllers, a married couple, hold over 70% of the control.

Net profit expected to halve in 2025

According to the Shenzhen Stock Exchange official website, Kangrui New Materials’ main board IPO was accepted on June 26, 2025, and entered the inquiry stage on July 15 of the same year. In July 2025, the company was also selected for on-site inspection.

It is understood that Kangrui New Materials focuses on the research, production, and sales of high-precision, high-performance, and specially structured precision metal materials. It has established a full-process technical system centered on titanium alloy smelting, precision rolling, composite rolling, drawing, and heat treatment, and has also developed metal powder, powder metallurgy, and metal 3D printing technologies.

It is worth noting that, behind the IPO challenge, Kangrui New Materials has a high revenue proportion from the X company’s industrial chain. Specifically, in the first half of 2025, the revenue from X company’s industrial chain was about 690 million yuan, accounting for 65.87% of the main business revenue during that period.

From a fundamental perspective, Kangrui New Materials’ revenue and net profit have maintained growth from 2022 to 2024. However, the company warns that net profit is expected to decline in 2025.

Specifically, in 2022–2024 and the first half of 2025, Kangrui New Materials achieved operating revenues of approximately 1.053 billion yuan, 2.486 billion yuan, 2.998 billion yuan, and 1.07 billion yuan, respectively; and attributable net profits of about 47.56 million yuan, 229 million yuan, 411 million yuan, and 161 million yuan, respectively.

According to the prospectus, Kangrui New Materials’ titanium-aluminum composite products are mainly used for manufacturing high-end smartphone titanium alloy frames. During each reporting period, sales revenue of titanium-aluminum composites was approximately 11.33 million yuan, 1.587 billion yuan, 1.931 billion yuan, and 562 million yuan. Due to factors such as end customers adjusting the use of titanium alloy frames, the revenue scale of titanium-aluminum composites in 2025 is expected to see a temporary decline, with net profit in 2025 projected to fall by over 50%.

Yuan Shuai, Deputy Secretary-General of the Zhongguancun Internet of Things Industry Alliance, mentioned that from a regulatory perspective, the stability of a listed company’s performance and its sustainable profitability are key review points. On one hand, a short-term surge in performance often prompts regulators to scrutinize the authenticity of growth and profitability sustainability; on the other hand, significant performance declines may lead regulators to question whether the company has overdrawn market demand, recognized revenue too aggressively, or is overly dependent on a single customer or product.

Majority Control by the Actual Controllers

In terms of equity structure, Kangrui New Materials’ controlling shareholder is Jiangyin Kangde Enterprise Management Co., Ltd. (“Jiangyin Kangde”); the actual controllers are married couple Zhu Wei and Li Li, who together control 41,076,489 shares, accounting for 72.52% of the total share capital.

Their backgrounds show Zhu Wei, born in 1970, currently serves as the chairman of the company, and is an executive director and general manager of Jiangyin Kangde; Li Li, born in 1975, is a director of Kangrui’s wholly owned subsidiary in Singapore.

For this IPO attempt, Kangrui New Materials plans to raise about 1.105 billion yuan. After deducting issuance costs, the funds will be prioritized for investment in a 5,000-ton titanium alloy material project, a 4,000-ton metal layered composite parts and materials project, a R&D center construction project, and working capital. The company also plans to use 200 million yuan of the raised funds for supplementary liquidity.

It is noteworthy that, behind the planned capital increase, Kangrui New Materials has conducted cash dividends during the reporting period. In 2022 and 2024, the company paid cash dividends of 40 million yuan and 50 million yuan, respectively.

Additionally, the book value of Kangrui New Materials’ inventory has been rising. At the end of each reporting period, the book value of inventory was approximately 1.46 billion yuan, 3.58 billion yuan, 3.99 billion yuan, and 3.86 billion yuan, accounting for 25.64%, 18.18%, 27.39%, and 30% of current assets, respectively.

Regarding inventory composition, at the end of each period, raw materials, entrusted processing materials, and work-in-progress accounted for 69.15%, 71.66%, 74.5%, and 67.46% of inventory book value; finished goods and goods in transit accounted for 30.85%, 28.34%, 25.49%, and 32.54%, respectively.

Kangrui New Materials warns that if market demand declines, industry competition intensifies, or contracts are changed or canceled, inventory may become obsolete or unsellable, increasing inventory write-down losses and adversely affecting operating performance.

The Beijing Business Today reporter sent interview inquiries to Kangrui New Materials but had not received a response as of press time.

Beijing Business Today Reporter: Ma Huanchuan, Li Jiaxue