【In-Depth】Hidden Corners Behind Gu Qirong Materials' Glamorous Performance

Interface News Reporters | Yuan Yingqi, Niu Qichang

Interface News Editors | Chen Feixia, Song Yejun

As a supplier of down feathers for Hailan Home and Semir Apparel, Guchi Rongcai (001390.SZ) shows a double increase in revenue and net profit, but behind this, there is an extreme divergence: net profit growth alongside net cash outflows from operating activities.

Additionally, this company’s suppliers seem to hide secrets. Recently, Interface News reporters visited multiple supplier locations and found that some suppliers with zero insured employees once supplied millions of yuan worth of raw materials to listed companies, while others have significantly increased procurement quotas, effectively transforming into “big” suppliers.

The Mystery of Suppliers

Guchi Rongcai is based in the “Hometown of Chinese Down,” claiming to have established a mature down material supply chain system and to have built strategic partnerships with core suppliers to ensure stable raw material supply. However, investigative checks reveal that many core suppliers of Guchi Rongcai have business registration information that is severely inconsistent with transaction scales worth tens of millions.

One such supplier, Nanling Anming Down Co., Ltd. (hereafter “Anming Down”), was established in 2017 with a registered capital of 5 million yuan and actual paid-in capital of 5 million yuan. Its insured personnel have consistently been zero, with only three key staff members.

Guchi Rongcai lists Anming Down as a stable partner, purchasing over 70 million yuan from it annually between 2021 and 2023, and over 57 million yuan in 2024. Such procurement volume is comparable to the annual revenue of a medium-sized down processing company.

Image source: Wind, Interface News Research Department

“Down processing is a typical heavy-asset industry, not something a ‘small workshop’ can undertake. Normally, a company capable of reliably supplying hundreds of millions of yuan in down must have complete production lines for feather cleaning, sorting, disinfection, etc., with huge investments in warehousing and logistics. Just the frontline workers, technicians, and managers involved in production usually number no less than 20,” said Zhang Lei, a supply chain consultant in the down industry, to Interface News. “Raw material costs account for 30% to 50% of total down product costs. The capacity and strength of core suppliers directly determine procurement stability and product quality. Zero insured personnel and only three key staff mean the entity almost has no fixed production team and is unlikely to fulfill large procurement orders worth hundreds of millions.”

Further investigation by Interface News found that the actual controller of Anming Down, He De’an, also owns a canceled company, Nanling Debang Down Co., Ltd., whose registered phone number is the same as that of Guchi Rongcai.

How can a “micro-entity” with no social insurance records support a production line that requires millions of yuan annually for cleaning, sorting, disinfection, and warehousing? Market skepticism suggests it may be a shell company used to inflate procurement or facilitate利益输送. Interface News contacted Guchi Rongcai regarding this matter but had not received a response as of press time.

More concerning than a “zero-person supplier” is the “precise switching” of related suppliers. From 2021 to 2022, Nanling Gaoxiang Down Products Co., Ltd. (hereafter “Gaoxiang Down”) was Guchi Rongcai’s fifth-largest supplier, with total procurement of about 28 million yuan. In 2023, Gaoxiang Down was removed from the supplier list, replaced by Anhui Gaoxiang Down Products Co., Ltd. (hereafter “Gaoxiang Down Anhui”), controlled by the same individual, Gao Xiaojun. Procurement from this new supplier surged to 70 million yuan, making it Guchi Rongcai’s largest supplier that year.

Tianyancha shows that both companies are investments of Gao Xiaojun and are related entities under common control. Moreover, Gaoxiang Down also has zero insured personnel. Gaoxiang Down Anhui completed a change of ownership in 2020, with Gao Xiaojun taking full control after the original shareholders exited. This “old entity retreating, new related party emerging with doubled transaction volume” pattern has attracted market attention.

Image source: Tianyancha APP

Image source: Tianyancha APP

Additionally, Interface News found that Guchi Rongcai, Anming Down, and Gaoxiang Down had engaged in “trust-paid transactions with fund returns,” with total related funds reaching 24.5 million yuan. Such operations are typical of transfer loans in financial audits.

Image source: Prospectus

Where Did Anming Down Go?

Driven by numerous questions, Interface News reporters visited several major suppliers around Nanling County and Wuwei City.

Tianyancha shows that both Anming Down and Gaoxiang Down are registered in “Xianyang Town, Nanling County Economic Development Zone, Wuhu City.” However, despite inquiries within the development zone, no trace of these companies was found.

Staff from the Nanling County Market Supervision Bureau told Interface News that because the companies were established long ago, their business licenses listed the address as such, and the internal network system matches the public information. They could not locate specific addresses for the companies. “Address information doesn’t update automatically; unless the companies actively file changes with the registration authorities, the system retains the original registration details.”

A staff member from the Nanling County Economic Development Zone Management Committee said that as a supplier, Anming Down might be located inside Guchi Rongcai’s factory. “They’re all on the same production line. Guchi Rongcai has factory premises, so having a separate factory is redundant. During the initial rough processing stage of down, there might be external leasing companies, but which ones exactly, we’re not clear.”

Another staff member from the Nanling County Tax Bureau told Interface News that after verifying with Anming Down, “they indicated that the company should be located near Guchi Rongcai.”

Image source: Photo taken by Interface News reporter

“Suppliers renting listed companies’ factories for production means their core operations depend entirely on Guchi Rongcai’s physical space. This ‘factory within a factory’ model blurs the independence of both parties,” said Zhang Lei. “It’s like the supplier’s production process is under the ‘guarantee’ of the listed company. This means their relationship is no longer fully independent. The fairness of pricing and the authenticity of transactions are highly questionable.”

According to Guchi Rongcai’s prospectus, Anming Down and Gaoxiang Down have leased production sites from 2016, generating rental income of 1.3164 million yuan, 1.3102 million yuan, and 859,900 yuan in 2020-2022, respectively.

At that time, Guchi Rongcai emphasized that their relationships with these two suppliers were “completely independent,” and the factory leasing agreements expired in 2022. After expiration, both suppliers ceased production and moved out, completing all relocations. However, a security guard at Guchi Rongcai revealed that Anming Down had been renting the company’s factory for production until last year.

Even more suspiciously, Anming Down, which was among Guchi Rongcai’s top five suppliers with annual procurement exceeding 70 million yuan, seems to have “disappeared” starting in the second half of 2024.

The prospectus shows that in the first half of 2024, Anming Down was Guchi Rongcai’s second-largest supplier (procurement of 36 million yuan), but in procurement contracts exceeding 5 million yuan as of July 31, 2024, the company was absent. Instead, most suppliers are located in Wuwei or even outside the province, and there are no large suppliers in Nanling County where Guchi Rongcai is based.

Image source: Prospectus

Where did Anming Down go? When asked, several down processing companies in Wuhu responded that they had never heard of the company. Local insiders told Interface News that Guchi Rongcai is a dominant presence in Nanling County.

Transformation of Gaoxiang Down

During a visit to Wuwei City Down Industry Park, Interface News found nearly 20 down industry companies, including Gaoxiang Down and Anhui Wenxiang Down Products Co., Ltd. (hereafter “Wenxiang Down”). Compared to Nanling County where Guchi Rongcai is located, the industry cluster here is more prominent.

Both companies are relatively large within the park. Gaoxiang Down mainly produces goose down products; Wenxiang Down has a longer history, with more diverse production lines, including down feathers and feed. Both have about 50 employees.

Industry insiders in Wuhu told Interface News that Gaoxiang Down is essentially the predecessor of Gaoxiang Down Anhui, which relocated from Nanling County about three years ago. The company was established around 2017 and is considered a latecomer but has grown rapidly in recent years, with new factory buildings now in operation. Tianyancha shows that Gaoxiang Down’s revenue in 2024 reached 435 million yuan.

The timing of Gaoxiang Down’s establishment in Wuwei roughly coincides with Gaoxiang Down’s departure from Guchi Rongcai in 2022.

Images: Photos taken by Interface News reporters

Local industry insiders say that down processing is not technically complex. The main steps are washing, sorting, and stacking, after which the products are directly sold to downstream clothing companies. Because washing produces odors and wastewater, down processing companies must obtain environmental acceptance and sewage discharge permits.

However, after reviewing all suppliers of Guchi Rongcai, Interface News found that almost every company holds a sewage discharge permit, except for Anming Down and Gaoxiang Down, which do not.

An environmental protection official in Wuhu confirmed that sewage discharge permits are mandatory for down processing companies, and both Anming Down and Gaoxiang Down have not obtained such permits.

Are these two companies always operating inside Guchi Rongcai’s factory and using its sewage treatment facilities to meet environmental standards? This remains an unresolved question.

Prepaid Accounts and Funds Flow

Beyond supplier issues, the ongoing deterioration of Guchi Rongcai’s cash flow is also noteworthy.

In 2023, Guchi Rongcai achieved a net profit attributable to shareholders of 122 million yuan, a 25.53% increase year-on-year, but its net cash flow from operating activities was -5.55 million yuan, showing a stark divergence between profit growth and cash outflows. This trend worsened in 2025: in the first three quarters, operating cash flow was -87.03 million yuan, -143 million yuan, and -219 million yuan, respectively, continuing to be negative and widening the gap. In Q3 2025, revenue was 763 million yuan, with a net profit of 139 million yuan, further intensifying the divergence between profit and cash flow, indicating that profits are not translating into actual cash.

Guchi Rongcai explained that the discrepancy is due to long collection cycles from downstream customers and short payment cycles to upstream suppliers, which tie up a large amount of working capital.

“Slow downstream collections and fast upstream payments can cause cash flow issues, but this shouldn’t worsen continuously, nor should profit growth be accompanied by persistent cash outflows,” said CPA Wang Hao. “Especially, the abnormal surge in prepayments is hard to explain with normal business logic—if upstream suppliers’ payment cycles are short, the company wouldn’t need to make large prepayments; instead, it would control prepayment scales to reduce capital occupation.”

Accompanying the cash flow issues are abnormal increases in accounts receivable and prepayments. As of Q3 2025, accounts receivable surged 82.64% from the beginning of the period, and prepayments increased 65.82%, while revenue growth was only 0.3%. These two indicators far outpace revenue growth, indicating severe capital occupation. Prepayments have grown rapidly since late 2023, increasing by 121.28% from the end of 2022 to Q3 2025, reaching 257 million yuan.

Most critically, the flow of these large prepayments is highly concentrated among suspicious suppliers—Guchi Rongcai paid large prepayments to related suppliers like Anhui Gaoxiang and “zero-person suppliers,” whose operational scale and transaction amounts are inconsistent with their ability to fulfill such prepayments.

A notable detail is that in August 2025, Guchi Rongcai revised its “System for Preventing and Controlling the Use of Company Funds by Controlling Shareholders and Related Parties.” This came after market doubts about “abnormal prepayments and fund occupation” had begun to surface, and the revision was a sort of “post hoc” measure.

“While revising internal control systems is normal compliance, doing so only after doubts arise means the preventive function is compromised,” Wang Hao commented.

From continuous cash flow deterioration to the explosive growth of receivables and prepayments, Guchi Rongcai’s financial data presents multiple paradoxes. What is the company’s true profitability?