IPO Radar | Equity Structure Features Multi-Layer Nesting Architecture, Why Is Caike Technology Expanding Production Against the Trend?

Hebei Caike New Materials Technology Co., Ltd. (hereinafter referred to as Caike Technology) has recently officially advanced its initial public offering (IPO) process, aiming to raise over 210 million yuan through the capital market. Against the backdrop of cyclical fluctuations in the chemical new materials industry, the company’s announced capacity expansion plan has attracted attention. The capital market is not only focused on its financial indicators but also on the true operational efficiency of its underlying assets and the risks at the controlling shareholder level.

At the same time, the mismatch between the expansion pace and end-market demand constitutes Caike Technology’s most critical operational contradiction. The company plans to invest as much as 210 million yuan in fundraising for new capacity construction and technological upgrades; however, its main business capacity utilization rate has already fallen below 70%. This stark contrast could very well become a “stumbling block” for the company’s entry into the capital market.

Control Rights “Hidden Tricks”

In terms of top-level equity structure design, there appear to be “loopholes” in the logic used in the prospectus. Caike Technology’s prospectus discloses that the actual controller, Ge Yi, has a spouse and children who indirectly hold over 40% of the core controlling platform through multiple complex offshore structures. To achieve single control, “Qi Lin, Ge Chengyu, and Ge Chenghui have signed ‘Voting Rights Transfer Agreements’ to entrust the voting rights of Radiant Pearl BVI, Hero Time BVI, and Star Path BVI, which hold Caike New Energy, to Ge Yi, and these agreements are irrevocable.”

This operation, which bypasses statutory concerted action disclosure through voting rights entrustment, introduces uncertainty into the future governance structure. The prospectus explicitly warns: “If Radiant Pearl BVI, Hero Time BVI, and Star Path BVI transfer their shares of Caike New Energy to other parties (excluding Mr. Ge Yi) after 36 months from the listing date, Mr. Ge Yi will no longer hold voting rights corresponding to the disposed shares of Caike New Energy, thus posing a risk to control stability.”

Meanwhile, the external capital operations of the controlling shareholder also pose potential financial entanglement risks. According to the prospectus, another related enterprise controlled by the actual controller, Shandong Caike New Materials, has introduced nine external institutional shareholders, including Hainan Chip Chuang Future. During this financing process, all parties signed stringent listing escrow agreements. Although the influx of off-balance-sheet funds meets the short-term funding needs of related enterprises, it also transmits long-term escrow pressures directly to the actual controller.

The specific terms of the escrow agreement point to a clear and urgent deadline. The company disclosed in the prospectus: “If Shandong Caike New Materials fails to complete the listing by December 31, 2026, and the nine external institutional shareholders request a buyback (assuming they hold shares for 3.5 years without dividends, the buyback amount = 2.11 billion yuan × (1 + 8% × 3.5) = 2.70 billion yuan), then the actual controller, Ge Yi, Shandong Caike New Materials, and Caike Huayu face the risk of triggering share repurchase clauses.”

Faced with a potential rigid repayment gap of up to 270 million yuan, the personal liquidity reserves and cash realization ability of the actual controller have attracted significant attention. If the buyback clause is triggered, the repayment pressure from the huge debt will become immediately apparent. If the actual controller cannot properly arrange the buyback funds, there is a risk of changes in the ownership of the issuer’s shares. The issue then shifts to cash consumption and the fundamentals of core business.

Capacity “Idling”

Beyond the potential risks in the top-level equity structure, the company’s real operational environment in core business areas is also under severe test. Due to the dual impact of economic downturn and industry cycle decline, terminal demand has fluctuated. The company’s previously invested production lines are under order pressure, and overall operating capacity shows a downward trend.

Source: Prospectus

The decline in core operating capacity utilization has left idle marks in the latest financial data. As of the end of the first half of 2025, the overall capacity utilization rates of the company’s main product lines have fallen below 70%. Specifically, DMSS capacity utilization dropped to 68.82%, DATA to 62.07%, and DMAS to only 69.58%. Many specialized chemical production equipment are operating below full load.

Source: Prospectus

However, despite the reality of idle existing capacity, management still insists on launching large-scale capital expenditure plans. Caike Technology stated: “The investment amount for this fundraising project is 210.3257 million yuan,” with significant funds directly allocated to “the expansion project of 5,000 tons of DMS and 1,500 tons of DMSS annually” and “the expansion project of 1,000 tons of DATA annually.” Under the background of insufficient load on existing production lines, continuing to use raised funds to build new capacity inevitably raises questions about market rationality.

The construction of new capacity will impose heavier pressure on the company’s current profit model. Caike Technology estimates that the expansion will “result in an additional annual depreciation and amortization of 12.3936 million yuan after project completion, accounting for 2.73% of the audited operating income in 2024.” Once the heavy asset investment is capitalized, if the new capacity cannot generate enough orders to absorb it, the increased depreciation costs could easily drag down overall operating profits.

In response to the coexistence of expansion and low capacity utilization, Caike Technology stated: “Due to the ramp-up period of the new capacity, there is a risk that the company’s return on net assets may decline over a certain period.” Under the current operating rate of only about 60% to 70%, the path to digesting the new large capacity becomes critical. When further considering industry competition and rival players, the difficulty of realization becomes even more apparent.

External Environment Turbulence

Placing Caike Technology’s operational efficiency within a broader industry context, external environmental changes are increasingly hindering its order acquisition. On one hand, frequent changes in overseas trade policies are noted, with the prospectus explicitly stating: “As of the date of this prospectus, the goods sold by the company to U.S. customers still face tariffs of up to 35%.” On the other hand, the procurement strategies of key major customers have changed, directly affecting the company’s basic order volume.

Specifically, the prospectus also discloses: “By the end of 2024, DIC Group’s U.S. production entity has resumed normal operations, and in 2025, it did not purchase DMSS from the issuer.” Moreover, it points out: “Sudarshan of India completed the acquisition of German Hoechst on March 3, 2025. After the acquisition, if Hoechst resumes self-production of DMSS intermediates, it will reduce Sudarshan’s procurement from the issuer.” The demand fluctuations of these end customers pose greater challenges to capacity digestion.

Comparative data from industry peers also reflect the pressures faced in the industry chain. Compared with peers, Caike Technology’s product bargaining power appears to weaken. The prospectus shows that the average selling price of the main product DMSS has fallen from 52,400 yuan/ton in 2022 to 48,100 yuan/ton in the first half of 2025; the price of DMAS has dropped from 22,500 yuan/ton to 18,300 yuan/ton. Industry analysts point out that under the dual pressures of declining prices and low utilization of existing equipment, forcing large-scale capital expenditure will only accelerate internal cash consumption.

Source: Prospectus

Heavy asset investments into profit realization require a closed-loop transmission. From the release of new capacity, downstream order acquisition, to cash collection, any disruption at any node can extend the working capital cycle and increase financial risks.

Faced with internal hidden dangers and external pressures, Caike Technology’s attempt to rely on listing fundraising to improve the situation faces tests. Under the influence of changing demand from major end customers and low utilization of existing equipment, the effect of new fixed asset investments may be counterproductive. Considering the 270 million yuan escrow clause, the company’s sustained profitability still needs market verification.