BYD Supplier Breaks A: Hengdao Technology's over 70% of revenue is "paper wealth," Wang Hongchao previously cashed out over 50 million

Article | Frontline of Entrepreneurship

After listing on the New Third Board for half a year, Hengdao Technology has launched a challenge to the Beijing Stock Exchange.

Recently, Zhejiang Hengdao Technology Co., Ltd. (hereinafter referred to as Hengdao Technology) completed registration with the Beijing Stock Exchange, with Guotai Haitong Securities as the sponsor.

This is a company mainly engaged in hot runner systems, with products widely used in automotive lighting, interior and exterior car accessories, 3C consumer electronics, and other fields. Its clients include well-known companies such as BYD, Sanan Optoelectronics, and Gree Electric.

However, behind the impressive client list, the company hides development concerns: less than 3% domestic market share, mired in a “price war”; over 70% of revenue comes from accounts receivable, with nearly half overdue; the actual controller Wang Hongchao failed a “bet,” and before the IPO, he transferred shares and cashed out over 50 million yuan.

In today’s fiercely competitive industry, whether Hengdao Technology can break through development bottlenecks and gain long-term recognition from the capital market is a major focus of external attention.

** Less than 3% Market Share, Cutting Prices to Boost Performance?**

Hengdao Technology was founded in 2010.

At that time, Wang Hongchao and Yu Yinghai jointly invested to establish the predecessor of Hengdao Technology, Hengdao Limited, with a registered capital of 10 million yuan. They held 90% and 10% respectively. Yu Yinghai is Wang Hongchao’s brother-in-law.

Wang Hongchao is a top graduate from Tsinghua University. Before starting his business, he served as an executive at Shaoxing Keqiao Yongxin Pipe Manufacturing and Shaoxing Tianchang Hot Runner Technology, accumulating rich technical and industry experience in hot runner systems.

Since its founding, Hengdao Technology has focused on the niche market of hot runner systems. Its products are mainly used in the automotive sector, covering automotive lighting and interior/exterior parts. A small portion is also used in 3C electronics and home appliances. Downstream clients include mold factories, auto parts manufacturers, and complete vehicle manufacturers, primarily industrial B2B customers.

Image / Hengdao Technology IPO Prospectus (New Third Board version)

Objectively, the hot runner system market has good prospects. According to QYResearch, the global hot runner market sales volume grew from 18.924 billion yuan in 2019 to 23.154 billion yuan in 2024, and is expected to reach 30.168 billion yuan by 2030.

As the saying goes, no blue ocean is without competitors.

On one hand, well-established overseas companies like Liu Dao, Shengwanty, and Oruikang Plastic started earlier and have long dominated the main domestic market. QYResearch reports that in 2024, foreign brands hold about 70%-80% of the domestic hot runner market share. On the other hand, domestic companies such as Maistef, Haotes, and Hengdao Technology are also developing rapidly.

In the fierce market competition, a “price war” is imminent.

The IPO prospectus shows that Hengdao Technology’s hot runner systems have already been reducing prices. From 2022 to the first half of 2025 (hereinafter referred to as the reporting period), the average selling prices per point were 6,548.43 yuan, 6,731.01 yuan, 6,038.57 yuan, and 5,557.61 yuan respectively.

Specifically, the prices in 2024 and the first half of 2025 decreased by 10.29% and 7.96% year-on-year.

Image / Hengdao Technology Response Letter

Hengdao Technology explained that in the early reporting period, due to capacity constraints, the company prioritized fulfilling orders for automotive lighting hot runner systems, which have higher gross margins. The sales growth of interior/exterior automotive parts hot runner systems was slower. In 2024, the sales volume of lower-priced interior/exterior systems increased significantly, leading to a decline in overall average price.

Additionally, due to intense market competition in hot runner systems, the company adjusted prices accordingly based on overall market conditions but denied engaging in “significant price cuts to promote sales.”

However, Hengdao Technology’s market share remains very low. The response letter shows that from 2022 to 2024, the company’s domestic hot runner market share was 2.07%, 2.29%, and 2.96%, respectively, still below 3%.

Because of its small overall scale, the company lacks sufficient “bargaining power” with clients. Short-term growth still relies heavily on increasing sales volume. Whether it can break out of the “price-to-volume” competition logic in the future remains to be seen.

BYD Becomes the Largest Customer, Over Half of Accounts Receivable Overdue

In fact, Hengdao Technology’s client list is quite prestigious.

Currently, the company’s main clients include well-known enterprises such as BYD, Chery, Sanan Optoelectronics, Xingyu, Haitai Tech, and Gree Electric. Its products are already used in models from BYD, SAIC Volkswagen, SAIC General Motors, Li Auto, NIO, Chery, and others.

Backed by a number of high-profile clients, Hengdao Technology’s scale is also expanding. During the reporting period, the company achieved revenues of 143 million, 168 million, 234 million, and 147 million yuan; net profits attributable to shareholders of the parent were 38.74 million, 48.66 million, 68.87 million, and 40.31 million yuan.

Image / Hengdao Technology IPO Prospectus

However, much of this performance is “on paper.” During the reporting period, accounts receivable were 106 million, 135 million, 179 million, and 216 million yuan, accounting for 74.23%, 80.32%, 76.19%, and 73.34% of operating income respectively (annualized).

Image / Hengdao Technology IPO Prospectus

Hengdao Technology admits that its clients are mainly injection mold factories, which tend to be small in scale and have small individual transaction amounts. Due to the slow payment cycle typical of the industry, there is some financial pressure.

Moreover, injection mold factories face higher operational risks due to intensified market competition and poor management, which can lead to difficulties in collecting receivables, increased bad debts, and liquidity issues.

In reality, about half of Hengdao Technology’s accounts receivable are overdue. During the reporting period, overdue receivables accounted for 51.59%, 54.84%, 52.04%, and 48.80% of total receivables.

Image / Hengdao Technology IPO Prospectus

Furthermore, the company’s accounts receivable financing has increased. During the reporting period, the book value of receivables financing was 14.5949 million, 29.4672 million, 42.8486 million, and 38.4656 million yuan.

Image / Hengdao Technology IPO Prospectus

One reason for this is the deepening cooperation with BYD and its supply chain clients, who often use DiLink as a payment method. DiLink’s payment cycle is generally six months, which increases the accounts receivable debt certificates. (Editor’s note: DiLink is BYD’s supply chain information platform.)

In 2021, Hengdao Technology became a qualified supplier of BYD. By 2022, BYD had become its third-largest customer, contributing 3.3259 million yuan in sales that year.

By 2023, BYD had become the company’s largest customer, with sales soaring 233% to 11.0878 million yuan. Since then, BYD has maintained its position as the top client.

Image / Hengdao Technology Response Letter

However, over a hundred million yuan of funds are tied up by clients, resulting in limited cash flow for the company. As of mid-2025, the company’s cash and cash equivalents stood at 46.21 million yuan, with short-term loans of about 20.11 million yuan, leaving limited room for maneuver.

So, how will the company address the high level of accounts receivable? What is the likelihood of overdue receivables being recovered? Can it improve its bargaining power with key clients? We attempted to get insights from Hengdao Technology but have not received a response as of publication.

Wang Hongchao Failed a Bet, Cashed Out Over 50 Million Yuan Before IPO

During operations, Wang Hongchao also brought external capital into Hengdao Technology.

In November 2017, Hengdao Limited, Wang Hongchao, and Jiugao Investment signed a capital increase agreement, which outlined Jiugao Investment’s equity repurchase rights and conditions.

Three years later (November 2020), as the company anticipated it could not meet the bet targets set by Jiugao Investment, Wang Hongchao was obliged to buy back all his shares.

Image / Hengdao Technology IPO Prospectus (New Third Board version)

Another three years later (November 2023), Hengdao Technology again attracted external investors. Huairui Fengshou subscribed 6 million yuan for 2.16 million shares, accounting for 5.5046% of the registered capital; Touyan Venture Capital invested 3 million yuan for 1.08 million shares, representing 2.7523%.

Image / Hengdao Technology IPO Prospectus (New Third Board version)

Despite the failed bet, Wang Hongchao signed a “betting agreement” with Huairui Fengshou and Touyan Venture Capital, committing to listing by the end of 2028. Later, an agreement was signed to解除 this bet clause upon submitting the application to the Beijing Stock Exchange.

Subsequently, Hengdao Technology did not raise funds through additional capital but Wang Hongchao cashed out by transferring shares. In the first half of 2024 (June), Wang Hongchao transferred 1.9031 million shares (about 4.85% equity) to Hangzhou Yuanjing, cashing out 53.35 million yuan.

Image / Hengdao Technology IPO Prospectus

Currently, Hengdao Technology’s capital chain is not very strong. Why did Wang Hongchao choose to cash out millions instead of raising new capital? How does the company plan to ensure sufficient cash flow? We attempted to inquire but have not received a response.

However, after these operations, Wang Hongchao still maintains tight control over Hengdao Technology.

Before the IPO, Wang Hongchao directly held 69.20% of the company’s shares, and his employee stock ownership platform Shaoxing Houfu and Shaoxing Huo respectively held 5.40% and 3.90%. In total, Wang Hongchao controls 78.50% of the voting rights, making him the actual controller.

Interestingly, as a founding shareholder, Wang Hongchao’s role is very different from that of Yu Yinghai—he serves as chairman and general manager, firmly controlling the company; Yu Yinghai is only an employee and does not appear in core management.

Image / Hengdao Technology IPO Prospectus

This stark contrast has led outsiders to wonder about Yu Yinghai’s background and why his presence in the company is so minimal. We attempted to get clarification from Hengdao Technology but have not received a response.

Meanwhile, Wang Hongchao’s nephew and Yu Yinghai’s son, Yu Pengfeng, holds a high position. It is known that Yu Pengfeng, born in the 1980s, worked at the Shaoxing branch of Industrial and Commercial Bank of China for nine years. In 2019, he joined Hengdao Technology as Vice President of Technology. He is now a shareholder, director, and vice president of technology.

Relying on Hengdao Technology, Wang Hongchao has made a fortune, and family members have also gained a stake. But the outside world is more concerned about how Hengdao Technology will expand its market share, strengthen its bargaining power, and improve performance steadily.

From a Tsinghua graduate entrepreneur to backing BYD’s A-share listing, Hengdao Technology’s development trajectory has hit the automotive industry’s growth point, but it also faces fierce competition in niche segments and multiple operational challenges. Without expanding enough growth space, it may struggle to gain long-term recognition from the capital market.

Note: The main illustration is from Hengdao Technology’s official website.