IPO Observation: Five New Technology, a Company with High Dependence on Large Clients, Faces Major Risks
Five New Technology Co., Ltd. (hereinafter referred to as Five New Technology) has recently received an inquiry from the Shanghai Stock Exchange after submitting its application for listing. As a solutions provider specializing in transportation infrastructure construction, Five New Technology's revenue growth is largely dependent on its large clients, with five major clients accounting for 81.53%, 77.35%, 76.17%, 74.58%, and 73.42% of total revenue respectively.
According to the company's financial report, Five New Technology has a high dependence on large clients, which poses significant risks to its business operations. As of June 30, 2022, the company had five major clients that accounted for more than 70% of its total revenue. This concentration of risk may lead to significant financial losses if any one or more of these clients were to experience a decline in their businesses or default on their payments.
In addition to this high dependence on large clients, Five New Technology also faces other risks, including bad debt and environmental pollution. As of June 30, 2022, the company had non-performing assets totaling RMB 34.8 million, which represents a significant risk to its financial stability.
Furthermore, Five New Technology has been subject to administrative penalties for violating environmental regulations. According to the company's annual report, Five New Technology was fined RMB 13.45 million by the Changsha City Administrative Law Enforcement Bureau in 2023 for failing to implement environmental protection measures and for not conducting regular inspections on its production lines.
In light of these risks and challenges, it is essential for Five New Technology to develop a comprehensive risk management strategy to mitigate these risks and ensure the long-term sustainability of its business operations.