Shenzhen Nisoco Connection Technology Co., Ltd., a company claiming the top market share, has presented a financial report that alarms investors. However, when a company's gross margin drops 11.6 percentage points in just two and a half years, its R&D expenditure is less than half that of its peers, and the land for its fundraising project lacks a property certificate, yet it still charges toward a ChiNext IPO, it appears to be sprinting with heavy shackles.

The company, Nisoco, with CITIC Securities as its sponsor, had its IPO application accepted by the ChiNext board on December 27, 2025. Its business sounds sophisticated: high-voltage, high-current connection system components, serving hot sectors like new energy vehicles (NEVs), energy storage, and AI data centers. According to Frost & Sullivan data, Nisoco held a 37% market share in NEV charging port contact components in China for 2024, ranking first in the industry. Yet, a deeper look into its prospectus and responses to regulatory inquiries reveals a host of concerning issues beneath this "number one"光环.

First, the gross margin plummeted 11.6 percentage points in two and a half years. According to Nisoco's prospectus and inquiry responses, its core business gross margin for the reporting period (2022 to the first half of 2025) was 41.6%, 42.8%, 38.7%, and 30.0%, respectively. From the peak of 42.8% in 2023 to 30.0% in H1 2025, the drop is severe. This means for every 100 yuan of goods sold, gross profit decreased by 11.6 yuan. More critically, this decline far exceeded the industry average; the average gross margin for domestic NEV component peers fell only 1.2 percentage points over the same period, making Nisoco's drop nearly ten times worse.

Two primary reasons explain this sharp decline. On the cost side, the company is constrained by upstream suppliers. Nisoco heavily relies on copper, which constitutes over 60% of its procurement, primarily red copper. The prospectus shows the price of red copper surged from 61.64 yuan/kg in 2022 to 70.76 yuan/kg in H1 2025, a 14.8% increase, directly raising costs. On the sales side, downstream pressure squeezes margins. With major clients like BYD COMPANY wielding significant bargaining power, the company acknowledged in its inquiry responses "cost-reduction trends in the NEV industry" and "price declines for same-model products." Squeezed from both ends, profit margins have been drastically compressed.

Second, R&D investment is less than half the industry average, raising questions about innovation. The ChiNext board emphasizes innovation, but Nisoco's R&D data is concerning. Its R&D expense ratio for the reporting period was 3.27%, 3.34%, 4.61%, and 4.06%, respectively. In contrast, the average for comparable peers was 8.75%, 10.29%, 9.15%, and 7.14%. Nisoco's R&D intensity is consistently below half the industry average. While the company attributes this to "product focus" and "different R&D models" in its inquiry responses, the critical question remains: with rapid technological iteration in high-voltage, high-current connection systems, how can insufficient R&D sustain its 37% market share? Furthermore, most invention patents corresponding to its "core technologies" were obtained before 2022. Evidence of recent R&D innovation and tangible patent commercialization is scarce despite a long list of R&D projects mentioned.

Third, heavy customer concentration, with BYD COMPANY accounting for over 40%, poses significant risks. Nisoco's customer concentration is alarmingly high. Sales revenue from its top five clients as a percentage of total revenue was 53.72%, 60.99%, 64.97%, and 62.09% during the reporting period, showing a rising trend. In 2024, BYD COMPANY and China Aviation Optical-Electrical Technology together accounted for over 44% of sales. This indicates Nisoco's fate is heavily dependent on a few large customers. The company acknowledges this "high customer concentration" as a risk. Particularly concerning is that, according to the China Passenger Car Association, BYD COMPANY held a dominant 34.12% share of China's NEV market in 2024. If BYD COMPANY were to switch suppliers or demand even lower prices, Nisoco's ability to respond appears limited.

Fourth, weak cash collection, with a cash-to-revenue ratio consistently below 1, suggests profits may be largely paper gains. Another concerning financial metric is Nisoco's cash collection ratio. Data shows that for the past three full fiscal years, the ratio of cash received from selling goods and providing services to operating revenue was 0.51, 0.81, and 0.78, all below 1. This means a significant portion of sales did not translate into immediate cash but became accounts receivable. The book value of accounts receivable was 187 million yuan, 245 million yuan, 287 million yuan, and 234 million yuan during the reporting period, once exceeding 50% of current assets. Although the company states "subsequent collection is good," such high receivables pose a substantial bad debt risk if any client faces operational issues. Notably, the "Regulations on Securing Payments to Small and Medium Enterprises," effective June 2025, prohibits large enterprises from forcing SMEs to accept non-cash payment methods like electronic receivables certificates. BYD COMPANY has reportedly stopped using its "Dilian" settlement system for SMEs. While this may benefit Nisoco's future collections, it also hints at potential collection pressures hidden behind previous "Dilian" transactions.

Fifth, the fundraising project lacks essential approvals, with land still awaiting certification and buildings under mortgage. Nisoco plans to raise 1.373 billion yuan through this IPO, but the compliance of its fundraising projects is questionable. The land for its headquarters base and R&D center project in Shenzhen's Pingshan District, though acquired via auction on November 17, 2025, still had its property rights procedures pending as of the prospectus signing date. More problematic, the production construction project for stamped contacts and copper-aluminum busbars is planned in a leased factory building that lacks a property certificate and is mortgaged to a third party. Land compliance is a key regulatory focus for A-share IPOs. Raising funds for construction without secured property rights seems premature.

Sixth, high reliance on outsourcing, accounting for over one-third of processes, raises quality control concerns. Nisoco's production model also presents risks. Outsourcing costs accounted for over 33% of the sum of raw material procurement and outsourced processing costs during the reporting period. Non-core processes like plating and machining are largely outsourced. While outsourcing reduces asset burdens, it compromises quality control. The company admits in its inquiry responses: "If outsourcing vendors encounter product quality issues, insufficient capacity, or face penalties or shutdowns due to safety or environmental problems, and if the company fails to transfer orders promptly, it could adversely affect product quality, delivery capability, operational performance, and brand image." This candid admission is itself concerning.

In summary, Nisoco has strengths: leading market share, coverage of major automakers, and products in high-growth sectors. However, with numerous issues—declining gross margins weakening profitability, insufficient R&D raising innovation doubts, high customer concentration increasing operational risk, property right flaws in fundraising projects questioning compliance, and high outsourcing dependence threatening quality control—its path to a successful ChiNext listing appears fraught with challenges. This seems less like a standard IPO and more like an attempt to list while carrying significant burdens.