Tianhe Hexing goes public in Hong Kong: acquiring new major clients with low profit margins. Trade accounts receivable turnover days reach 597 days.

Beijing Tiandi Hexing Technology Co., Ltd. (hereinafter referred to as “Tiandi Hexing”) is currently rushing to list on the Hong Kong Stock Exchange through an IPO.

According to the “Daily Economic News,” despite high sales and marketing expenses and financial costs, Tiandi Hexing has not yet achieved profitability in the first three quarters of 2023, 2024, and 2025 (hereinafter referred to as “the reporting period”).

Meanwhile, during the reporting period, the company’s top five customers and suppliers changed frequently. The company’s largest customer and largest supplier in the first three quarters of 2025 were established in 2023 and 2024 respectively, and both began business cooperation with the company for the first time in 2025. This raises questions about the stability of the company’s business.

Behind this also reveals the “secret” to Tiandi Hexing’s significant revenue growth: the company acquires new large customers at low gross profit margins. Additionally, in the first three quarters of 2025, the company’s trade receivables turnover days extended to 597 days.

Profitability Concerns: Sales and Marketing Expenses Account for Over 20% of Revenue, No Profit in the Reporting Period

According to the prospectus, Tiandi Hexing is a provider of industrial cybersecurity and energy digital intelligence solutions.

Performance-wise, during the reporting period, Tiandi Hexing’s revenue was 474 million yuan, 727 million yuan, and 439 million yuan respectively, but the company did not achieve profitability, with losses of 193 million yuan, 45.69 million yuan, and 94.67 million yuan respectively.

The losses stem from high sales and marketing expenses, which were 137 million yuan, 180 million yuan, and 95.13 million yuan respectively, accounting for over 20% of revenue in each period. Additionally, Tiandi Hexing has high financial costs, amounting to 66.56 million yuan, 114 million yuan, and 93.93 million yuan during the reporting period.

Regarding the high sales and marketing expenses, Tiandi Hexing explained that starting in 2023, the company provides preliminary testing, research, and analysis services (usually free of charge) at the early project stage to gain project opportunities, expand industry coverage, and customer base, leading to relatively high expenses in 2023 and 2024. In the first three quarters of 2025, sales and marketing expenses showed a moderate decline as the strategic goals of these marketing initiatives had been achieved.

Furthermore, the prospectus shows that Tiandi Hexing began acquiring partial stakes in Beijing Bike Testing Technology Co., Ltd. (hereinafter “Bike Testing”) from 2024, which is listed on the New Third Board. According to the announcement from the stock transfer system, on September 25, 2024, June 19, 2025, and January 20, 2026, Tiandi Hexing completed acquisitions of 27.6016%, 10.3943%, and 13% of Bike Testing respectively.

Notably, Tiandi Hexing stated that on September 25, 2024, when it first acquired shares of Bike Testing, the company also entered into a series of unanimous action agreements with Bike Testing’s shareholders He Lirong and Zhang Jing, obtaining voting rights of 17.76% and 10.39% respectively. As a result, Tiandi Hexing held 55.75% of Bike Testing’s voting rights and gained control, beginning from October 1, 2024, and included Bike Testing’s financial results in the consolidated financial statements.

The prospectus shows that Bike Testing’s revenue in Q4 2024 and the first three quarters of 2025 was 82.9 million yuan and 20.06 million yuan respectively, accounting for 11.4% and 4.6% of Tiandi Hexing’s total revenue in those periods.

Tiandi Hexing’s financial costs mainly consist of interest on redeemed debt, which accounted for 99.5%, 95.1%, and 98.3% of financial costs during the reporting period. The company previously issued redeemable preferred shares to investors, with a redemption obligation that incurs interest expenses.

Business Stability in Question: Frequent Changes in Top Five Customers and Suppliers

The reporter noted that during the reporting period, revenue from the largest customer accounted for 5.1%, 13.5%, and 24.5% of Tiandi Hexing’s total revenue respectively, showing a continuous increase.

It is worth noting that the largest and fifth-largest customers in the first three quarters of 2025 were new customers that only began cooperation in 2025. Similarly, in 2024, the largest, second-largest, and fifth-largest customers all started business in that year. The third and fourth largest customers in 2023 also only began cooperation in 2023.

Interestingly, according to the prospectus, the largest customer A in the first three quarters of 2025 was established in 2023, mainly engaged in software and hardware development and retail, cloud computing equipment sales, and information system integration and promotion, with a registered capital of 1 million yuan. In those three quarters, Tiandi Hexing’s sales to this customer totaled 108 million yuan, mainly hardware and software sales. Is this transaction reasonable?

On the other hand, during the reporting period, the procurement amounts from the top five suppliers accounted for 27.3%, 57.8%, and 55.5% of the company’s total procurement respectively. The largest supplier’s procurement proportion was 7.0%, 33.3%, and 41.5% respectively.

The largest, second-largest, and fifth-largest suppliers in the first three quarters of 2025 were also new suppliers that only began cooperation in 2025. Similarly, in 2024, the top four suppliers all started cooperation that year, and in 2023, the top four suppliers also only began cooperation in 2023.

Why do the top five customers and suppliers change so frequently during the reporting period?

Additionally, the largest and second-largest suppliers in the first three quarters of 2025 are companies established in 2024. Is it reasonable that companies founded in 2024 became the top suppliers within a year, especially with procurement amounts exceeding 100 million yuan and accounting for over 40% of total procurement?

Tiandi Hexing stated in the prospectus that its top five customers and suppliers during the reporting period are all independent third parties.

Revenue Growth “Secret”: Gaining Large Customers at Low Gross Margins, Trade Receivables Turnover Reaches 597 Days

Despite high sales and marketing expenses, Tiandi Hexing’s gross profit margins during the reporting period were 60.9%, 50.4%, and 48.6%.

The declining gross profit margin over time may also reveal the “secret” behind the company’s rapid revenue growth.

Regarding the reason for the year-over-year decline in gross margin in 2024, Tiandi Hexing explained in the prospectus that, on one hand, the company introduced a new large enterprise customer in 2024, which involved hardware and software sales at relatively high costs for two new projects, and the company strategically undertook these projects; on the other hand, the energy digital intelligence solutions business line launched in 2024 contributed a relatively low gross margin. For the first three quarters of 2025, the company only stated that its gross margin remained stable compared to the same period in 2024.

As previously mentioned, the largest customer B in 2024 and customer A in the first three quarters of 2025 were both new customers that only began cooperation during those periods, accounting for 13.5% and 24.5% of total revenue respectively.

The prospectus also shows that revenue from customers A and B mainly comes from hardware and software sales, which have gross margins significantly lower than Tiandi Hexing’s other two major business segments, at only 5.2% and 6.2% respectively in 2024 and the first three quarters of 2025.

In other words, Tiandi Hexing acquired business from its largest customers at extremely low gross margins during 2024 and the first three quarters of 2025.

Furthermore, as revenue increased during the reporting period, Tiandi Hexing’s trade receivables grew from 664 million yuan at the end of 2023 to 1.108 billion yuan by the third quarter of 2025, accounting for 65.02% of the company’s total assets of 1.704 billion yuan at the end of Q3 2025.

Tiandi Hexing stated that during the reporting period, the company generally grants customers credit periods of 0 to 180 days. In fact, the trade receivables turnover days in the first three quarters of 2025 reached 597 days. Of the 1.037 billion yuan in trade receivables (net of impairment provisions) at the end of Q3 2025, over half were overdue by more than one year.

During the reporting period, the company’s trade receivables allowance for credit losses was approximately 23.8 million yuan, 52.2 million yuan, and 71.1 million yuan respectively.

Regarding these questions, the “Daily Economic News” reporter sent an interview letter to Tiandi Hexing on March 5. As of the deadline for this report, no response has been received.

Daily Economic News