Honghe Technology's funds are only 200 million yuan, aiming to leverage an 8 billion yuan project. The 1 billion yuan private placement has just been received, and the company plans to go public in Hong Kong to "quench its thirst."

Yangtze Business Daily reporter Shen Yourong

Honghe Technology (603256.SH), a company expected to be a 10x stock, is aggressively expanding production by investing 8 billion yuan, triggering skepticism in the market.

Recently, Honghe Technology announced that the company plans to invest in and build a “High-Performance Electronic Materials Industrial Park” project, with a total investment of approximately 8 billion yuan.

As of the end of September 2025, Honghe Technology’s total assets were 2.851 billion yuan, and its monetary funds were only 212 million yuan, corresponding to interest-bearing liabilities of 920 million yuan.

With financial pressure mounting, Honghe Technology’s launch of an 8 billion yuan mega-project will inevitably greatly increase leverage.

In February 2026, Honghe Technology completed a follow-on offering (private placement) and successfully raised 995 million yuan. The company plans to use 280 million yuan of the funds to supplement working capital.

One month after the follow-on offering was completed, Honghe Technology unveiled a plan to list in Hong Kong.

Honghe Technology’s rationale for a Hong Kong listing is that its 2025 operating performance grew sharply. According to the earnings guidance, due to the rapid growth in AI-related demand, the price of its electronic-grade glass fiber fabric increased, so the company’s net profit attributable to shareholders is expected to grow by roughly 8 times, reaching around 200 million yuan.

Over the past year, Honghe Technology’s stock price rose by up to 10-fold within its trading range.

A Hong Kong listing, if anything, may be a move to relieve Honghe Technology’s financial stress. Whether the 8 billion yuan expansion in capacity can meet expectations is highly uncertain.

Aggressive expansion with 8 billion yuan

Honghe Technology’s large-scale expansion plan has drawn substantial skepticism from the market.

According to the announcement, on March 26, Honghe Technology held a board meeting and approved a resolution on signing a “Project Investment Agreement” with the company. This resolution still needs to be submitted to the shareholders’ meeting for approval.

The content of this resolution is that the company plans to sign a “Project Investment Agreement” with the People’s Government of the Huangshi Economic and Technological Development Zone · Tieshan District, investing in the “High-Performance Electronic Materials Industrial Park” project. The project investment amount is approximately 8 billion yuan (including fixed asset investment and working capital). The final investment amount and construction period will be subject to the actual circumstances after implementation of the project.

The announcement states that the implementation of this investment project is based on the company’s strategic development needs and its judgment of the market prospects for the high-performance electronic materials industry.

Honghe Technology also highlighted risks: given that uncertainties exist in industry development trends and changes in market conditions, among other factors, they may affect the construction and operations of the investment project and the expected benefits.

Honghe Technology’s main business is the R&D, production, and sales of mid-to-high-end electronic-grade glass fiber fabric and electronic-grade glass fiber yarn. Previously, the company had already built multiple projects in Huangshi, and progress has been smooth.

According to the 2025 interim report, in 2021, Huangshi Honghe successfully brought into operation its ultra-fine yarn project for electronic-grade glass fiber. In June 2023, the company’s募投 project “50.40 million meters/year of high-end electronic-grade glass fiber fabric R&D and production project for 5G use” in Huangshi was fully operational. As a result, it achieved integrated production and operation of electronic yarn and electronic fabric.

While the necessity, reasonableness, and prospects of building the “High-Performance Electronic Materials Industrial Park” project with 8 billion yuan are for now set aside, just in terms of construction funding—how will Honghe Technology raise it?

As of now, Honghe Technology has not yet disclosed its 2025 annual report. As of September 2025, total assets were 2.851 billion yuan, and the proposed investment of 8 billion yuan is close to three times total assets. At the end of the period, monetary funds were 212 million yuan, and interest-bearing liabilities were 920 million yuan, indicating repayment pressure.

In February 2026, Honghe Technology completed a follow-on offering to raise 995 million yuan. The company will use 280 million yuan to supplement working capital. This fund-raising can ease the company’s financial pressure, but it cannot fundamentally solve the problem of financial funding. The remaining funds are intended for construction of two entity募投 projects, and the proposed use of funds is lower than the project’s planned investment amount.

At present, Honghe Technology has not yet disclosed the composition of funding sources for its 8 billion yuan investment. Obviously, relying solely on bank borrowing is not realistic; moreover, borrowing from banks would significantly increase the company’s financial pressure.

Net profit surge of about 8 times as major shareholders sell down

Just after completing an A-share follow-on offering and raising nearly 1 billion yuan, Honghe Technology has turned its attention to the Hong Kong stock market for further financing.

On March 20, 2026, Honghe Technology published an announcement stating that, to advance the company’s global strategy, enhance its ability to obtain financing overseas, improve its brand image, and accelerate the development of its overseas business, the company plans to list on the Main Board of the Hong Kong Stock Exchange.

Honghe Technology’s confidence in a Hong Kong listing comes from a sharp growth in performance. According to the earnings guidance, in 2025, the company expects net profit attributable to shareholders to be approximately 193 million yuan to 226 million yuan. Compared with the same period last year, this would increase by approximately 170 million yuan to 203 million yuan, representing growth of 745% to 889%. The company also expects non-recurring profit net to be approximately 187 million yuan to 219 million yuan. Compared with the same period last year, this would increase by approximately 181 million yuan to 213 million yuan, representing growth of 3,377% to 3,969%.

Honghe Technology explained that in 2025, terminal market demand increased due to the rapid growth in AI-related demand, which expanded demand for electronic-grade glass fiber fabric. As market demand affected the selling prices of the company’s products, the company’s net profit achieved rapid growth.

Such strong growth is also related to a relatively low base in the prior year.

In fact, as early as 2017, Honghe Technology’s net profit attributable to shareholders reached 165 million yuan; even if one calculates using the upper end of the 2025 forecast, it would only increase by about 37% compared with 2017.

Honghe Technology’s cash-generating ability is insufficient, and its capital expenditures are relatively large. From the time it listed on the A-share market in 2019 through the end of the third quarter of 2025, the company’s total capital expenditures were 2.162 billion yuan, which is 2.2 times the net operating cash flow in the same period.

Honghe Technology relies on bank loans to supplement working capital. At the end of 2020, the company had interest-bearing liabilities of 466 million yuan; by the end of September 2025, it was 920 million yuan, almost double.

For this Hong Kong listing, the market’s view is that Honghe Technology’s direct purpose is to address its need for funds. Of course, the company also wants to add resources to its internationalization strategy.

In the first half of 2025, revenue from Mainland China accounted for 84.59% of operating revenue, while revenue from areas outside Mainland China was relatively low.

In the secondary market, Honghe Technology’s share price surged at one point. The K-line chart shows that on February 8, 2024, the stock briefly fell to a low of 4.51 yuan per share during trading hours. After that, it rebounded and rose sharply. On February 26, 2026, during intraday trading, it reached a high of 85.83 yuan per share. Over two years, the increase within the range was as much as 18 times.

Recently, the company’s stock price has pulled back. On March 31, the closing price was 70.05 yuan per share, and the market value was about 63.4 billion yuan.

The company’s major shareholder and executives have been selling down to cash out.

From March 10, 2025 to June 9, the company’s chairman and general manager Mao Jiaming reduced his holdings by 320,200 shares, cashing out 39.898 million yuan; from December 8 to December 22, the company’s secretary to the board Zou Xinge reduced his holdings by 100,000 shares, cashing out 3.615 million yuan.

In addition, the consistent-action party of the company’s controlling shareholder, SHARP TONE, reduced its holdings by 2.7998 million shares from September 11, 2025 to November 5, cashing out 83.0186 million yuan. SHARP TONE is controlled by the company’s actual controller Wang Wenyang.

Whether Honghe Technology’s Hong Kong stock IPO will proceed smoothly is drawing close attention.

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