Guofu Hydrogen Seeks 2nd HK Listing Amid Years of Losses

On the eve of National Day, Jiangsu Guofu Hydrogen Energy Technology and Equipment Co., Ltd. (hereinafter referred to as "Guofu Hydrogen Energy") officially submitted a listing application to the Stock Exchange, marking its second attempt to冲刺 for an IPO on the Hong Kong stock market.

Previously, Guofu Hydrogen Energy had tried to enter both the A-share and Hong Kong stock markets but was unsuccessful. Now, hydrogen energy companies such as Yihuatong (688339.SH, 2402.HK), Guohong Hydrogen Energy (9663.HK), and Jinyuan Hydrogenation (2502.HK) have successfully listed on the Hong Kong stock market in 2023. In addition to Guofu Hydrogen Energy, Reshaping Energy has also submitted an application to go public in Hong Kong.

Guofu Hydrogen Energy is a hydrogen energy equipment integrated solution provider headquartered in Lianyungang, Jiangsu, and has completed the layout of the hydrogen energy industry chain, including production, storage, transportation, refueling, and application. It is worth noting that Guofu Hydrogen Energy originated from another local listed company in Lianyungang—Furui Special Equipment (300228.SZ), and the two companies have a close connection due to a key figure, Wu Pinfang. If the listing goes smoothly, it will also mean that Wu Pinfang will complete his second IPO in life.

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From the latest prospectus disclosed by Guofu Hydrogen Energy, it is not difficult to find that the company is facing common problems in the hydrogen energy industry: continuous losses, high receivables, and customer dependence, which undoubtedly add uncertainty to its listing path. In this regard, on October 9th, a reporter from China Business News called and wrote to Guofu Hydrogen Energy, and the other party said "contact the board office", but as of the time of publication, the board office phone has been unanswered.

Building the Second IPO

The prospectus shows that in June 2016, Guofu Hydrogen Energy was jointly established by Furui Special Equipment and Xinyun Technology, with respective holding ratios of 70% and 30%. At that time, Wu Pinfang, the founder and actual controller of Furui Special Equipment, served as the chairman and general manager of Guofu Hydrogen Energy.

Looking back at the history of Furui Special Equipment, the company was co-founded by Wu Pinfang and another actual controller, Huang Feng, in August 2003, and was listed on the Shenzhen Stock Exchange in June 2011. It mainly engages in the manufacturing of the entire industrial chain of natural gas liquefaction, storage, transportation, loading and unloading, and terminal application equipment, energy operation services, and high-end energy equipment manufacturing.

From public information, Wu Pinfang and Huang Feng had intersections when they served at Zhangjiagang Second Chemical Machinery Factory and Zhangjiagang Shengdayin Chemical Machinery Co., Ltd. (hereinafter referred to as "Shengdayin Chemical Machinery"). At Shengdayin Chemical Machinery, Wu Pinfang served as the deputy chairman and general manager, and Huang Feng served as the executive deputy general manager.

In June 2014, Wu Pinfang began to reduce his holdings in Furui Special Equipment and frequently reduced his holdings from 2016 to the beginning of 2020 until he exited the major shareholder ranks in 2021. In June 2019, Wu Pinfang resigned from Furui Special Equipment and no longer served as the chairman, director, and relevant positions on the board's special committees of the company.

As for the reason for resigning, Guofu Hydrogen Energy stated that at that time, Wu Pinfang's holding ratio in Furui Special Equipment was relatively small, and he had no intention of continuing to participate in the management and decision-making of Furui Special Equipment, and there were suitable candidates to succeed as chairman.It is worth mentioning that in December 2018, Furui Special Equipment transferred its 56% stake in Guofu Hydrogen Energy to Xinyun Technology, since when Guofu Hydrogen Energy has been separated from its affiliation with Furui Special Equipment. In August 2020, Guofu Hydrogen Energy completed its shareholding reform and has been controlled by Xinyun Technology.

Xinyun Technology was jointly established by two general partners, Wu Pinfang and Wang Kai (note: the son-in-law of Wu Pinfang's sister-in-law), along with 24 limited partners, two months earlier than Guofu Hydrogen Energy.

The prospectus shows that Xinyun Technology, Wu Pinfang, Wang Kai, Hydrogen Jie New Energy, Hydrogen Ying New Energy, and Hydrogen Win New Energy have formed the single largest shareholder group of Guofu Hydrogen Energy. Wu Pinfang and Wang Kai signed a consistent action agreement in 2020, stipulating that they must act in unison when exercising voting rights as shareholders and directors of Guofu Hydrogen Energy. In case of disagreement, Wu Pinfang's decision prevails. As a whole, the single largest shareholder group of Guofu Hydrogen Energy has the right to exercise approximately 26.89% of the voting rights.

Over the past few years, Wu Pinfang has shifted his focus to the hydrogen energy track. An industry insider told reporters that Wu Pinfang is optimistic about the development of the hydrogen energy industry, but it is uncertain whether Guofu Hydrogen Energy can replicate the path of Furui Special Equipment again. The current economic environment is not friendly, and the overall development of the hydrogen energy industry is still immature.

In 2022, Guofu Hydrogen Energy embarked on the road to listing, but it was not smooth sailing. In June of the same year, Guofu Hydrogen Energy submitted a listing application to the Shanghai Stock Exchange, intending to list on the Science and Technology Innovation Board, but it voluntarily withdrew the IPO application in November.

"Considering that the expected time required for our listing on the A-share market may not be consistent with the company's financing plan, we voluntarily withdrew the listing application in order to raise funds through other means or introduce new investors to promote business development," said Guofu Hydrogen Energy.

Guofu Hydrogen Energy's failure in A-shares is not an isolated case. Guohon Hydrogen Energy, Jie Hydrogen Technology, Reshaping Energy, Zhongding Hengsheng, and Hanxing Energy have also suffered setbacks in A-share IPOs. Subsequently, turning to the Hong Kong stock market for listing has become a new direction for many hydrogen energy companies seeking breakthroughs.

Not yet profitable

Guofu Hydrogen Energy is a leading domestic hydrogen energy equipment manufacturer. In terms of product categories, Guofu Hydrogen Energy mainly provides high-pressure hydrogen supply systems for vehicles and related products, hydrogen refueling station equipment and related products, hydrogen liquefaction and liquid hydrogen storage and transportation equipment, as well as water electrolysis hydrogen production equipment and related products.

Among them, the high-pressure hydrogen supply system for vehicles and hydrogen refueling station equipment are in a leading position in the industry. According to the prospectus data, in 2023, Guofu Hydrogen Energy accounted for 23.6% of the market share in China's high-pressure hydrogen supply system for vehicles, ranking first; at the same time, among the suppliers of built hydrogen refueling station equipment and related products, its market share accounted for 25.7%, also ranking first.From the perspective of revenue structure, Guofu Hydrogen Energy's main income comes from on-vehicle high-pressure hydrogen supply systems and related products, as well as hydrogen refueling station equipment and related products. From 2021 to the first five months of 2024, the revenue generated by these two products accounted for approximately 57.5% and 42.5%, 76.7% and 23.3%, 57.6% and 23.6%, and 40.8% and 59.2% of the total revenue, respectively.

Hydrogen liquefaction and liquid hydrogen storage and transportation equipment, as well as water electrolysis hydrogen production equipment and related products, are the business directions that Guofu Hydrogen Energy has expanded in the past two years.

However, currently, China's total hydrogen liquefaction capacity and domestic demand for liquid hydrogen storage and transportation equipment are relatively small. Guofu Hydrogen Energy mentioned in its prospectus that it plans to participate in hydrogen liquefaction projects, using green hydrogen at a low cost for large-scale hydrogen liquefaction to reduce the cost of liquid hydrogen. In addition, Guofu Hydrogen Energy will also use favorable policies to reduce the cost of liquid hydrogen transportation.

The field of water electrolysis hydrogen production equipment is highly competitive, with many participants, including strong competitors from the fields of wind power, photovoltaics, energy storage, and electricity. The aforementioned industry insider told the reporter: "Currently, in the bidding process for alkaline water electrolysis hydrogen production equipment, some companies, in order to compete for market share, quote a single system for as low as more than 5 million yuan, which is very serious internal competition and actually does not make money."

The prospectus shows that in 2023, Guofu Hydrogen Energy's revenue from hydrogen liquefaction and liquid hydrogen storage and transportation equipment, and water electrolysis hydrogen production equipment and related products were 830 million yuan and 160 million yuan, respectively, accounting for 15.8% and 3% of the company's total revenue.

Like most hydrogen energy companies (whether listed or not), Guofu Hydrogen Energy has not yet achieved profitability.

From 2021 to the first five months of 2024, Guofu Hydrogen Energy's revenue was approximately 3.29 billion yuan, 3.59 billion yuan, 5.22 billion yuan, and 640 million yuan, respectively; net profit losses were 750 million yuan, 960 million yuan, 750 million yuan, and 970 million yuan, respectively.

From the above data, Guofu Hydrogen Energy's performance level in the first five months of 2024 compared to the same period in 2023 (net profit loss of -440 million yuan) has further expanded. According to Guofu Hydrogen Energy's forecast, the company will still incur a loss in 2024.

Guofu Hydrogen Energy explained that China's hydrogen energy industry is in the early stage of commercialization, leading to fluctuations in customer demand; the company is in the stage of improving core technology, expanding production capacity, and increasing sales, which involves a large amount of investment in R&D, management, marketing, business development, and recruitment to support the company's growth and competition with peers.

Despite long-term losses, since its establishment, Guofu Hydrogen Energy has obtained multiple rounds of financing.As of December 2023, shareholders of Guofu Hydrogen Energy holding more than 1.5% of the shares include Xinyun Technology, Avent Ventures, Jinpu Intelligence, Yongyuan Hua Neng, Fan Chuang Industry, Shuimu Hydrogen Source, Wu Pinfang, Qingdao Xinding, Jiquan Anpeng, Jining Jie Kun, Tang Ying, Dongfang Hydrogen Energy, Shanghai Zhuhuai, Hydrogen Ying New Energy, Enze Haihe, Wang Zhi, and Hydrogen Jie New Energy.

High Accounts Receivable

The prospectus shows that from 2021 to the first five months of 2024, Guofu Hydrogen Energy's trade and other receivables were 321 million yuan, 395 million yuan, 487 million yuan, and 427 million yuan, respectively, accounting for a high proportion of business income.

In terms of accounts receivable turnover, Guofu Hydrogen Energy's trade receivables turnover days were 252 days, 321 days, and 285 days from 2021 to 2023. Guofu Hydrogen Energy usually grants customers a credit period of one year or less.

However, due to the longer settlement time of trade receivables with several customers, from 2021 to the first five months of 2024, the trade and other receivables with an age of more than one year accounted for 30.1%, 33.8%, 37.7%, and 40.9% of the total trade receivables, respectively.

The top five debtors of Guofu Hydrogen Energy mainly include manufacturers of hydrogen fuel cell vehicles, as well as manufacturers of hydrogen fuel cell stacks and hydrogen fuel cell systems.

Guofu Hydrogen Energy mentioned in the prospectus that these debtors may encounter financial constraints from time to time, which may have a negative impact on the company's trade and other receivables as well as cash flow conditions, and may also result in impairment losses.

Moreover, most of Guofu Hydrogen Energy's revenue depends on major customers.

From 2021 to the first five months of 2024, the sales to the top five customers of Guofu Hydrogen Energy accounted for 44.8%, 53.5%, 56.7%, and 69.1% of total revenue, respectively, and the sales to the single largest customer accounted for 13.3%, 26.3%, 16.5%, and 32.4% of total revenue, respectively.

The reporter also noticed in the 2022 prospectus of Guofu Hydrogen Energy that there was an unstable situation among the top five customers. As for the current stability of customers, Guofu Hydrogen Energy did not respond.Not only that, but Guofu Hydrogen Energy also further highlighted the risk of inventory.

From 2021 to the first five months of 2024, the inventory of Guofu Hydrogen Energy was 168 million yuan, 290 million yuan, 178 million yuan, and 197 million yuan respectively. From 2021 to 2023, the inventory cycle days of Guofu Hydrogen Energy were 161 days, 261 days, and 199 days respectively.

Guofu Hydrogen Energy stated that if the inventory level cannot be accurately quantified, the company's business, financial and operational performance may be significantly adversely affected.