Leading New Energy Commercial Vehicle Parts Maker Liukong Drive Faces Cash Flow Crisis Amid IPO Review
China's Liukong Drive, specializing in electric drive systems for new energy commercial vehicles, is undergoing IPO review. Despite skyrocketing sales, cumulative losses of 118 million yuan, soaring accounts receivable, and ongoing cash flow outflows reveal a severe financial crunch.
Glittering Growth Overshadowed by Cumulative Losses
Liukong Drive, officially known as Suzhou Lvkong Transmission Technology, a Chinese company specializing in electric drive systems for new energy commercial vehicles, is gearing up for an IPO review on the ChiNext board. From 2023 to 2025, the company’s revenue surged from 770 million yuan to 3.354 billion yuan, transforming its net loss into a profit of 153 million yuan. However, since its establishment in 2011, the company has accumulated unresolved losses exceeding 118 million yuan, leaving its historical financial burdens unaddressed.
Questionable “On-Paper Profits” Amid Expanding Revenue
Amid its rapid growth, serious questions have emerged regarding the quality of the company’s earnings. During the reporting period, the company experienced a significant net cash outflow from operating activities for two consecutive years, with a cumulative outflow of 354 million yuan over three years. This indicates a state of “on-paper profits,” where recorded earnings are not being converted into actual cash.
Exploding Accounts Receivable Straining Cash Flow
The core issue behind the worsening cash flow lies in the explosive growth of accounts receivable. By the end of 2025, accounts receivable had surged 186.49% year-on-year to 1.484 billion yuan, with an average annual growth rate of 91.68%. This abnormal increase suggests that the company may have relaxed its credit standards to boost sales, raising concerns about future bad debt risks. In fact, the company’s allowance for doubtful accounts linked to receivables has exceeded 130 million yuan, further straining its finances.
Debt Repayment Capacity Below Industry Peers
Financial indicators reflecting the company’s solvency consistently lag behind industry averages. Both its current ratio and quick ratio remain well below those of competitors, pointing to weak short-term debt repayment capabilities. Furthermore, its debt-to-asset ratio climbed to 79.78%, surpassing the industry average by more than 16 percentage points, highlighting significant pressure from its debt structure. At the end of 2025, the company’s cash deposits stood at 276 million yuan, while short-term borrowings amounted to 790 million yuan, creating a substantial funding gap.
IPO Plan Fails to Address Operating Capital Needs
As the company’s internal cash generation capacity continues to weaken, it plans to raise 1.58 billion yuan through this IPO. However, all the funds are earmarked for production capacity expansion and the construction of an R&D center, with no plans to allocate funds to alleviate its strained operating capital. With ongoing operational cash outflows, rising short-term debts, and an IPO plan that fails to address immediate liquidity needs, significant doubts loom over the company’s ability to maintain stable long-term operations.
Frequently Asked Questions
- What is the main business of Liukong Drive?
- Liukong Drive is a leading supplier in China’s new energy commercial vehicle market, focusing on the development, manufacturing, and sales of electric drive systems and related components. These technologies are critical for the electrification of commercial vehicles.
- What are the most concerning aspects of the company’s financial situation?
- The most worrying issues include the ongoing significant outflows in operating cash flow despite surging revenues. Accounts receivable have skyrocketed, creating a "on-paper profit" situation where earnings are not being converted into cash. Additionally, unresolved cumulative losses and short-term borrowings far exceeding cash reserves highlight a severe liquidity crunch.
- How does the company plan to use the funds raised through this IPO?
- According to the disclosed plans, the 1.58 billion yuan to be raised through the IPO will be fully allocated to expanding production capacity and constructing an R&D center. None of the funds will be used to ease the current strain on operating capital, leading to concerns about the limited impact of the IPO on improving the company’s cash flow situation.
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