A second-round inquiry from the Beijing Stock Exchange (北京证券交易所) has spotlighted mounting concerns for Changzhou Aolist Electric Co., Ltd. (常州奥立思特电气股份有限公司), casting a shadow over its initial public offering ambitions. The regulator’s pointed questions zero in on a critical issue for any prospective investor: does Aolist face a significant risk of a sharp earnings decline? Beyond profitability, the probe extends to the authenticity of its overseas sales, complex related-party dealings, and the questionable necessity of its proposed fundraising projects, presenting a multi-faceted due diligence challenge for the market.
Summary of Critical Findings
The Beijing Stock Exchange’s (北京证券交易所) inquiry reveals several red flags for potential Aolist investors:
– Profitability is under pressure from negative-margin new customers, rising fixed costs, and shifting trade policies, raising concerns about a significant risk of a sharp earnings decline.
– Discrepancies between Aolist’s falling revenue in the garden tool segment and overall positive Chinese export growth data require robust explanation.
– Key questions surround the authenticity of overseas sales and the rationale behind multiple loss-making foreign subsidiaries.
– A proposed capital raise for new capacity appears contradictory given falling utilization rates across existing product lines.
Dissecting the Core Profitability Concerns
The heart of the regulator’s scrutiny lies in Aolist’s recent financial performance, which hints at underlying operational strains. The company’s application documents reveal a worrying trend: for the period of January to September 2025, its non-GAAP net profit attributable to the parent company fell by RMB 6.4368 million year-on-year, a decrease of 11.46%. This downturn wasn’t isolated but appears symptomatic of deeper issues.
Sources of Margin Erosion and Segment Weakness
Aolist attributed the profit decline to a confluence of negative factors: low-margin orders from new customers like ARB and Echo, the transfer of construction-in-progress to fixed assets (increasing depreciation costs), and changes in trade policy. However, the regulator demands a granular, quantified breakdown of each factor’s impact, suggesting the company’s initial explanation lacked sufficient detail to assess the true, lasting damage.
A particularly alarming data point involves a key new client, ARB. Despite becoming Aolist’s fifth-largest customer, ARB’s business carries a negative毛利率 (gross margin). The company blames low pricing on new models and unfavorable exchange rates. Due to the ARB relationship alone, Aolist expects the gross margin on its order backlog to drop by approximately 2 percentage points. This scenario directly feeds into the overarching question of whether there is a significant risk of a sharp earnings decline if such low-quality revenue continues to grow.
The weakness extends to specific business segments. Garden tools, historically the largest application area for Aolist’s micro-motor business, saw revenue plunge 20.27% year-on-year in the first nine months of 2025. This decline is starkly at odds with broader industry data showing China’s total garden machinery exports grew by 3.45% in Q3 2025. This inconsistency forces the question: is Aolist losing market share due to competitive disadvantages?
– Relationship Strain: Revenue from a major garden tool customer, Black Cat Group (黑猫集团), has been on a consistent downtrend. Black猫 reportedly added new suppliers in 2024, reducing its procurement share from Aolist.
– Top Client Impact: Revenue from Aolist’s largest customer, Techtronic Industries (创科实业), also fell during the period, impacted by trade policy changes.
These factors collectively paint a picture of a company grappling with customer concentration risk and competitive pressures in its core markets.
Innovation Versus Commercial Reality
Scrutiny on Cross-Border Operations and Sales AuthenticityFor a company where overseas sales constitute 62.32% of its main business revenue, the integrity of its international operations is paramount. The UBS inquiry raises substantial doubts in this area, probing whether the financials presented are a true reflection of sustainable business activity.
Questionable Performance of Overseas Subsidiaries
Aolist has four overseas subsidiaries. Notably, three—Vietnam Aolist, Vietnam Datang (越南大唐), and Malaysia Cheng Bang (马来西亚诚邦)—have been either loss-making or marginally profitable for the latest reporting year and period. The regulator has demanded an explanation for their persistent underperformance and an analysis of their internal transfer pricing mechanisms to ensure compliance with laws and avoidance of profit shifting. The existence of multiple, consistently unprofitable foreign entities naturally raises concerns about their operational purpose and financial management.
Verification Gaps and Unusual Financial Flows
The Fundraising Conundrum: Building Capacity Amidst Slumping UtilizationContradictory Capacity Expansion PlansFinancial Resources and Shareholder PrioritiesBroader Market Implications and Investor TakeawaysThe Aolist case is not an isolated event but a reflection of the Beijing Stock Exchange’s (北京证券交易所) evolving and stringent review standards. Following a period of rapid expansion, the exchange is now deepening its focus on post-listing quality and sustainable growth, moving beyond mere compliance checklists.