Defeng Technology's Hong Kong stock IPO: Shareholders cleared the original price five days before the presentation and left the market. After its establishment, it has made profits for five consecutive years. Why is the cumulative loss at the end of 2021 close to 100 million yuan?

Produced by: Sina Financial Listed Company Research Institute
On November 14, Beijing Defeng New Journey Technology Co., Ltd.(hereinafter referred to as "Defeng Technology" or the "Company") submitted a listing application to the main board of the Stock Exchange, with Sunny Fortune serving as the exclusive sponsor.
Five days before the submission, China Merchants Yingqu cleared its position at the stock price four years ago, and Yongkang Puhua took over all the shares it held. Whether the transaction price was fair and whether it was suspected of profit transfer remained to be tested.
At the main business level, Defeng Technology's production and operation are highly dependent on labor costs. Although the number of employees has been significantly reduced by 57.7% in recent years, employee costs still account for nearly 40% of total revenue, and the profit space is extremely limited. In fact, during the reporting period, Defeng Technology was in a loss state in all other years except for a profit of 5.522 million yuan in 2024.
Interestingly, many professional media have reported that Defeng Technology has achieved continuous profits since its establishment in 2015 and will remain until the IPO of the Science and Technology Innovation Board in 2023. This seems to be the exact opposite of the company's true earnings.
Shareholders cleared their positions at the original price 5 days before the submission
Defeng Technology is a mature technology developer of AI-enabled Industrial Internet of Things (AIoT) production optimization software solutions, focusing on helping China's energy, manufacturing and hybrid industries achieve energy efficiency improvement, operational excellence, production safety and sustainable development.During the reporting period, the company has completed more than 600 projects, mainly serving China's state-owned enterprises, with more than 200 customers, some of whom are leading companies in the power and utilities, oil and gas and tobacco industries, such as China's power grid duopoly, three major oil giants, and tobacco monopoly companies.
According to the Frost and Sullivan report, Defeng Technology is the fifth largest independent professional AIoT service provider in China based on fiscal year 2024 revenue, with a market share of approximately 1.8%. Based on fiscal year 2024 revenue, the company is also the third largest independent professional AIoT service provider in China's energy industry, with a market share of approximately 9.9%.
Since its establishment in 2015, Defeng Technology has won the favor of many institutions, including Yunqi Capital, Innovation Works, China Merchants Venture Capital, Puhua Capital and other institutions. According to statistics from the Sina Financial Listed Company Research Institute, Defeng Technology has completed five rounds of financing and raised a total of 656 million yuan. As of March 2022, the post-investment valuation of Defeng Technology reached 2.35 billion yuan.
In October 2023, Defeng Technology signed a listing guidance agreement withChina International Capital Corporationto prepare for listing on the Science and Technology Innovation Board of the Shanghai Stock Exchange. One year later, the company terminated its A-share listing plan and recently submitted a listing application to the Stock Exchange. The sponsor was changed to Rijin Capital.
On the eve of Defeng Technology's submission, shareholders cashed out. On November 9 this year, China Merchants Yingqu transferred its 723,300 shares (accounting for about 1.52% of the total share capital) to Yongkang Puhua for a consideration of 30 million yuan. After the completion of the transfer, China Merchants Yingqu no longer holds any shares in the Company.
Interestingly, China Merchants Yingqu acquired a stake in Defeng Technology through Series B financing in April 2021, at a price of 30 million yuan. The latest valuation of Defeng Technology is 2.35 billion yuan. Based on this calculation, the value of the shares held by China Merchants Yingqu is approximately 35.72 million yuan, a premium of 19.07% to the cost of shareholding.
So, after a lapse of four and a half years, why did China Merchants Yingqu clear its position at the "original price"? Is there any suspicion of profit transfer?
As of the submission, Wang Qingjie, founder of Defeng Technology, directly holds 27.74% of the company's shares, and indirectly controls the company's shares by serving as the executive partner of Tianjin Dynamic Growth Enterprise Management Center (limited partnership) and Tianjin Jinlongjie Enterprise Management Center (limited partnership). 16.64% of the company's shares; in summary, Wang Qingjie controls 44.38% of the company's shares in total and is the controlling shareholder and actual controller of the company. In addition, Yunqi Capital holds a 14.2% stake and is the company's largest external investor.
In terms of operating performance, during the reporting period, Defeng Technology's revenue was 313 million yuan, 442 million yuan, 525 million yuan, and 159 million yuan respectively, with a compound annual growth rate of approximately 29.7%; the adjusted net profit was-42.359 million yuan, -8.724 million yuan, 5.522 million yuan, and-28.575 million yuan respectively, and it is still at a loss overall.
It should be emphasized that Defeng Technology adopts a labor-intensive model, and its production and operation are highly dependent on labor costs. Whether its technical "moat" is stable remains to be discussed. At the same time, in recent years, the company has continued to lay off employees and cut costs.
At the end of each reporting period, Defeng Technology had 1000, 826, 456 and 423 employees, with employee costs of approximately 173 million yuan, 211 million yuan, 160 million yuan and 63.4 million yuan respectively, accounting for approximately 55.3%, 47.6%, 30.5% and 39.8% of the total revenue for the same period respectively.
According to a report released by 36Krypton five years ago, Defeng Technology has served hundreds of customers, with annual revenue exceeding 100 million, and has been profitable for five consecutive years. Regarding the difficulty in making profits for industrial Internet companies, Wang Qingjie said that controlling R & D costs and precise market strategies are the key to corporate profits. In the early days of Defeng's establishment, the team quickly clarified the product positioning by investigating similar products at home and abroad, especially comparing foreign products of C3IOT, Uptake, and Predix. In terms of market expansion, Wang Qingjie believes that expanding the market in the To B field is not suitable for the tactics of "burning money". Companies need to accurately solve problems for customers based on a clear market positioning. In addition to directly receiving customers, Defeng is also cooperating with operators through channels.
According to the 21st Century Business Herald, if Defeng Technology continues to make a comeback on the science and technology innovation board, continued profitability is its major advantage.Dianshi Capital (one of Defeng Technology's Series C investors) official Weibo also revealed that since its establishment, Defeng Technology has continued to be profitable while maintaining rapid growth.
It can be clearly seen that before Defeng Technology rushed to the Hong Kong stock IPO, many media focused its promotion on sustainable profitability, and Wang Qingjie, founder of Defeng Technology, had unique insights on "the difficulty of making profits for industrial Internet companies."
However, according to the prospectus of Defeng Technology, as of the end of 2021, its cumulative losses have reached 94.484 million yuan, and in 2022 and 2023, it will also be in a loss state. The above report seems to be inconsistent with the company's true earnings.
Behind this, is Defeng Technology suspected of exaggerating publicity or using improper means such as false advertising to induce and mislead investors?
In recent years, Defeng Technology has been in a state of continuous "blood loss". The net cash flow from operating activities in each period is-173 million yuan, -193 million yuan, -64.172 million yuan and-36.801 million yuan respectively. The cumulative net outflow is approximately 467 million yuan, exceeding the total loss for the same period.
This is mainly because contract performance costs, contract assets and accounts receivable occupy a large amount of working capital. As of the end of June 2025, Defeng Technology's contract performance costs, contract assets and accounts receivable were 64.31 million yuan, 394 million yuan and 214 million yuan respectively, totaling 6.7.2 billion yuan, accounting for 88.98% of current assets and 88.49% of total assets.
During the reporting period, Defeng Technology's accounts receivable turnover days were 139 days, 110 days, 112 days and 217 days respectively, and the adjusted accounts receivable turnover days were 182 days, 215 days, 315 days and 653 days respectively., showing an increasing trend year by year.
Defeng Technology explained that the extension of the company's accounts receivable turnover days was mainly caused by customers in the state-owned sector. Typical settlement periods for state-owned sector customers are usually longer. If there is any change in government funds, causing the company's state-owned sector customers to delay payments within their respective credit periods, or the payment cannot be fully settled for any reason, this may in turn lead to a provision for impairment losses and affect the company's cash flow.
In the first half of 2025, Defeng Technology's adjusted accounts receivable turnover days were much higher than accounts receivable turnover days. One of the important reasons was that the company's two state-owned enterprise customers requested an extension of the settlement approval process.
During the reporting period, Defeng Technology recognized impairment losses on accounts receivable of approximately 6 million yuan, 7 million yuan, 10.7 million yuan and 16.1 million yuan respectively, showing a year-on-year growth trend, reflecting the continued increase in bad debt risks. As of the end of June 2025, accounts receivable with an age of more than one year were 70.65 million yuan, accounting for 33% of the total accounts receivable.
In addition, whether contract assets can be successfully converted into accounts receivable and recovered is affected by various factors such as the customer's internal approval process, financial payment plan, project measurement standards, and project change approval.Even if the customer is a local government and has a good reputation in theory, in extreme circumstances (such as local fiscal constraints and policy adjustments), there is still a risk of not being able to collect money in time or in full.
During the reporting period, Defeng Technology's contract assets aged over two years were 12.9843 million yuan, 131 million yuan, 98.0371 million yuan and 93.7818 million yuan respectively, accounting for approximately 12.5%, 57.4%, 22.0% and 23.8% of the total contract assets for the same period respectively.
Due to insufficient operating cash flow, Defeng Technology relies heavily on shareholder capital contributions to supplement working capital needs. As of the end of June 2025, its cash and cash equivalents were only 43.989 million yuan, a significant decrease of 51.31% from the beginning of the year.