Xin Zhan Jiangbei Exchange IPO: Various anomalies under extremely high net profit margins and excessively low asset-liability ratios await explanation

Trading stocks? Just look at the Golden Kylin Analyst Research Reports—authoritative, professional, timely, comprehensive—helping you uncover potential thematic opportunities!

Polyester fiber, as the world’s largest and most widely used synthetic fiber, has advantages such as high modulus, high strength, high elasticity, good shape retention, and heat resistance. It accounts for over 60% of global synthetic fiber production and is extensively used in apparel, industrial spinning, and other fields. However, because polyester fibers melt, decompose, burn, and can drip when heated, they pose secondary hazards, greatly limiting their use. As a result, countries worldwide are increasingly researching and developing applications for polyester fibers, with new varieties constantly emerging. The polyester fiber manufacturing industry is highly market-oriented and competitive. Industry optimization, green products, differentiation, and functionalization are the new directions for development.

Jiangsu XinZhan Jiang Fiber Technology Co., Ltd. (hereinafter referred to as “XinZhan Jiang” or “Issuer”) mainly engages in the R&D, production, and sales of differentiated polyester filaments and masterbatches. Its main products are colored polyester filaments (POY, DTY, FDY, ATY, etc.) produced using liquid dyeing technology, and fiber masterbatches. These products are mainly used in high-quality fields such as automotive interiors and outdoor products, which benefit downstream users by saving energy, reducing emissions, streamlining processes, and promoting clean production.

XinZhan Jiang plans to publicly issue no more than 18.95 million shares (including this amount, excluding over-allotment options) on the Beijing Stock Exchange, raising 346.1644 million yuan. The funds will be used for an annual production of 20,000 tons of liquid-dyed ultra-high-performance fibers and for R&D of high-weatherability, differentiated, functional fibers. Guotai Haitong is the sponsor, and Lixin Certified Public Accountants is the auditor.

By analyzing XinZhan Jiang’s prospectus and inquiry responses from the Beijing Stock Exchange, we find that despite high profitability, there are disproportionate phenomena, such as an extremely low debt ratio and large regular fluctuations in financial data, indicating that some abnormal accounting information may require further explanation and disclosure.

1. Abnormal phenomena under high profitability

The foundation of operational profit is operating revenue. The prospectus discloses the main composition of the issuer’s revenue during the reporting period as follows:

(Unit: ten thousand yuan)

From the table, the issuer achieved main business revenues of 288.3495 million, 298.1251 million, and 367.0014 million yuan, respectively, showing a steady upward trend. Although the growth rate in 2023 is modest, it still indicates growth, and the revenue in 2024 shows a more significant increase with a tailing effect, aligning with market expectations.

Revenue is composed of sales price multiplied by sales volume. The prospectus compares the product sales prices with those of comparable companies in the industry, as shown below:

(Unit: ten thousand yuan/ton)

The data shows that the issuer’s product sales prices are 21,200, 21,300, and 20,800 yuan/ton, the highest among comparable companies, and 1.65, 1.75, and 2.08 times higher than the industry average of 12,850, 12,175, and 12,000 yuan/ton, especially twice that of Huilong New Materials in 2024. Since sales price directly affects revenue and gross profit margin, the high sales prices may directly drive the high gross margins, net profits, and net profit margins described later.

Contrasting with the high sales prices is the issuer’s very low accounts receivable turnover rate. The prospectus compares the issuer’s accounts receivable turnover with that of comparable companies, as follows:

(Unit: times/year)

The data shows the issuer’s turnover rates are 5.00, 4.11, and 4.15, nearly the lowest among comparable companies, only slightly better than Montai High-tech in 2024, which itself reported a net profit of -64.546 million yuan, the only unprofitable company among comparables. Overall, the issuer’s accounts receivable turnover is roughly half of the comparable average of 11.70, 10.02, and 8.63.

The issuer explains: “The company’s accounts receivable turnover remains stable and is below the industry average, close to Montai High-tech, mainly because the company’s downstream automotive interior customers account for a large proportion, and the automotive supply chain generally has longer payment terms, leading to lower accounts receivable turnover.”

However, the comparison with Montai High-tech, which also has profitability issues, may be flawed. Montai’s main product is polypropylene filament, used in luggage straps, hoses, door and window trims, and clothing, with applications not very similar to the issuer’s. The explanation that longer payment terms in the automotive industry cause lower turnover may lack rigor. For example, Tianfu Long (603406.SH), located in Yangzhou (Yizheng) Auto Industrial Park, also mainly develops, produces, and sells differentiated polyester short fibers. Its prospectus shows that “compared to other recycled polyester short fiber companies, the company mainly serves automotive interior applications,” and its accounts receivable turnover rates are:

These are 14.02, 16.48, and 16.63, 2.8, 4.0, and 4.0 times higher than the issuer’s rates. The calculation formula for accounts receivable turnover is revenue divided by average accounts receivable. The significantly lower turnover rate of the issuer may imply two issues: first, revenue is comparatively low; second, accounts receivable balances are high.

Using the disclosed revenue and employee data, we can compare per capita annual output:

(Unit: ten thousand yuan/person)

The data shows the issuer’s per capita annual output is about 97.77, 96.91, and 96.91, averaging 90.68, while Tianfu Long’s are 133.81, 158.42, and 172.18, averaging 155.76. The issuer’s per capita output is roughly 58% of Tianfu Long’s, indicating potentially lower efficiency.

Similarly, comparing the end-of-period accounts receivable as a proportion of revenue:

(Unit: ten thousand yuan)

The issuer’s ratio is 21.06%, 28.31%, and 25.24%, averaging 24.94%, while Tianfu Long’s are 7.03%, 6.09%, and 6.12%, averaging 6.35%. The issuer’s ratios are about 3 to 4 times higher, suggesting relatively high receivables.

From profitability perspective, the issuer achieved net profits of 70.07 million, 57.89 million, and 68.03 million yuan over three years, totaling nearly 196 million yuan, with an average of 65.33 million, well above the 41.62 million average for listed companies in 2024. Yet, the high profitability and some related anomalies may coexist.

For example, some profit data before the reporting period:

(Unit: ten thousand yuan)

In 2020, net profit was -2.506 million yuan; in 2021, it turned positive to 68.82 million yuan, nearly 30 times higher. The contrast with the three-year total net profit of nearly 196 million yuan is significant.

Meanwhile, despite high profits, the issuer’s share capital decreased unusually during the period. The 2024 share capital change is:

(Unit: ten thousand yuan)

The total share capital decreased by 3.15 million yuan. As of June 2025, the issuer’s total assets are 624.2872 million yuan, with liabilities of 45.5724 million yuan. If the issuer raises 346.1644 million yuan, the debt ratio at the end of March 2025 would be only 4.7%, approaching a debt-free operation.

Basic financial principles suggest that moderate leverage can enhance shareholder value through tax benefits. For non-financial, non-real estate companies, a debt ratio of 30-60% is healthy. The issuer’s asset-liability ratio below 10% indicates underutilization of leverage, possibly limiting growth.

The issuer’s disclosed comparable data shows that the industry average debt ratio is about 36.56%, with the lowest at 13.97% and the highest at 52.91%. The issuer’s ratio of around 8.6% is far below, even before dilution from public offering, indicating an abnormally low leverage.

Why such a low debt ratio? The issuer’s polyester filament production is in the chemical fiber manufacturing sector, a high-molecular-weight chemical industry, generally characterized by heavy assets and low gross margins. Yet, the issuer’s gross margin is high, suggesting possible anomalies. The gross profit margins are:

The issuer’s gross margins are 35.39%, 32.04%, and 31.61%, roughly twice the industry averages of 16.91%, 17.17%, and 13.97%. Such high margins are unusual for chemical industries, which are typically low-margin.

Similarly, net profit margins are:

The issuer’s net margins are 24.21%, 19.31%, and 18.42%, again the highest among comparables and several times the industry average of around 5%. This discrepancy suggests potential overstatement of profitability.

Regarding listing standards, the issuer chooses the Beijing Stock Exchange Rule 2.1.3, which requires a market value of at least 200 million yuan, net profits of at least 15 million in the last two years with an average return on net assets of at least 8%, or net profits of at least 25 million in the last year with similar ROE. The absolute profit thresholds are easier to meet; the relative ROE is more complex.

The issuer’s average net profit margin of 20.65% implies a net asset return rate of about 8% if the asset turnover is around 2.5. To meet the ROE threshold, the issuer would need to reduce its asset turnover to about 0.5, which is unlikely given its current assets and operations. Using DuPont analysis, the issuer’s high gross margin and low asset turnover suggest that increasing leverage to boost ROE is unnecessary, consistent with its very low debt ratio.

In a high-asset industry like chemicals, low total asset turnover is typical, but the issuer’s high gross margin and net profit margins are inconsistent with industry norms, indicating possible data anomalies.

2. Extremely low debt ratio

The issuer’s asset-liability ratio is surprisingly low: 8.07%, 8.34%, and 9.43%, averaging only 8.61%. If excluding certain items, it could be even lower. With total assets of about 624 million yuan and liabilities of only 45.6 million yuan, the debt ratio is near zero, suggesting almost no leverage.

This is inconsistent with typical chemical industry practices, which are usually asset-heavy. The low ratio may be due to overly optimistic profit assumptions or other factors. It also raises questions about the company’s capital structure and growth strategy.

3. Large regular fluctuations in financial data

The financial statements show many data points with regular patterns, such as:

• Profit and loss items like sales expenses, R&D expenses, and income tax expenses showing systematic increases or decreases.
• Balance sheet items like inventory, accounts payable, and undistributed profits exhibiting regular patterns.
• Cash flow items like employee payments and taxes also display regular fluctuations.

In total, 20 key data items show these regular patterns, which may indicate data manipulation or at least require further explanation. The patterns include consistent incremental or decremental changes, as well as some less obvious but recurring patterns.

Given these irregularities, the issuer may need to provide further clarification to dispel regulatory and investor concerns.

4. Conclusion

In summary: XinZhan Jiang operates in a highly competitive polyester fiber industry, mainly producing differentiated colored polyester filaments via the filament spinning process. Its high sales prices, high energy consumption, high manufacturing costs, low receivables turnover, and other anomalies, combined with an extremely low asset-liability ratio and regular data fluctuations, suggest that the company’s financial data may contain irregularities. The abnormally low asset-liability ratio, inconsistent with industry norms, may be a result of overly optimistic profit assumptions or deliberate data adjustments. The regular patterns in financial data further raise questions about data integrity. The company may need to provide further explanations and disclosures to address regulatory and investor doubts.