F-1/A: Julong Holding Limited Files for IPO on Nasdaq Capital Market

Julong Holding Limited, a Cayman Islands holding company operating primarily in China, has filed a Form F-1 registration statement for an initial public offering of its Class A ordinary shares on the Nasdaq Capital Market.

Summary

• Julong Holding Limited, a Cayman Islands holding company with operations mainly in mainland China, has filed for an IPO of its Class A ordinary shares.
• The company intends to list on the Nasdaq Capital Market under the ticker symbol JLHL.
• The offering is contingent upon Nasdaq's approval of the listing application.
• Julong Holding Limited operates through its PRC subsidiaries, providing intelligent integrated solutions to public utilities, commercial properties, and multifamily residential properties.
• The company's business lines include engineering solutions, operation and maintenance of intelligent projects, and sales of related equipment and materials.
• For the fiscal years ended September 30, 2023 and 2024, Julong Holding Limited reported revenues of RMB119.08 million and RMB173.65 million (US$24.74 million), respectively, and net income of RMB11.22 million and RMB17.08 million (US$2.43 million), respectively.
• As of September 30, 2024, the company's backlog included RMB40.82 million (US$5.82 million) in engineering solutions and RMB15.78 million (US$2.25 million) in operation and maintenance contracts.
• The company faces risks associated with its operations in China, including regulatory oversight, currency conversion restrictions, and uncertainties related to the Foreign Investment Law.
• The company is required to file with the CSRC in accordance with the Trial Measures with respect to the offering and listing.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act) and may be delisted if the PCAOB cannot inspect its auditors for two consecutive years.
• The company will be a controlled company post-IPO, with Mr. Jiaqi Hu holding a significant portion of the voting power.
• The company is an emerging growth company and a foreign private issuer, which allows it to take advantage of certain reduced reporting requirements.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook for the company, highlighting its growth, market position, and strategic plans. However, it also acknowledges significant risks associated with operating in China and the competitive industry, which tempers the overall sentiment.

Positives

• The company has a proven track record and a long-standing reputation for professionalism and operational excellence.
• The company offers a go-to one-stop-shop of an integrated suite of solutions offering tremendous value propositions to customers.
• The company has superior technology-enabled solutions that drive strong business growth.
• The company has experienced rapid growth and sustained profitability.
• The company has highly experienced management and an entrepreneurial corporate culture.

Negatives

• The company is subject to significant regulatory oversight and discretion by the PRC government.
• The company faces uncertainties with respect to how the PRC Foreign Investment Law may impact the viability of its current corporate structure and operations.
• The company may be prohibited from trading in the United States under the HFCA Act if the PCAOB is unable to inspect or investigate completely its auditors.
• The company relies on certain major customers for a large portion of its revenues.
• The company may experience delays and/or defaults in customer payments and may not be able to recover on claims against customers for payment.

Risks

• A significant slowdown or decline in economic conditions in mainland China could adversely impact the company's results of operations.
• If the company is unable to accurately estimate the overall risks, revenues or costs on its projects, it may incur contract losses or achieve profits that are below anticipation.
• The company's backlog is subject to unexpected adjustments and cancellations, and it may not be able to fully realize the revenue value reported in its backlog.
• The timing of new contracts could result in volatility in the company's cash flow and profitability.
• The company may not be able to sustain the growth of its business or manage the expansion of its operations.
• The company operates in a highly competitive industry and may not be able to compete effectively.
• The company's reliance on certain major customers for a large portion of its revenues may materially affect its business, financial performance, financial position and prospects.
• The company's continued success requires it to hire, train and retain qualified personnel in a competitive industry.
• The COVID-19 pandemic affected and may again adversely affect the company's business and results of operations and financial condition.
• The company may pursue business opportunities that diverge from its current business model, which may cause its business to suffer.
• The company's projects could be hindered due to its dependence on third parties to complete many of its contracts.
• The intelligent integrated solutions industry is schedule driven, and the company's failure to meet the schedule requirements in its contracts could adversely affect its reputation and/or expose it to financial liability.
• The company's business depends, to a large extent, on its reputation for quality, reliability, timely delivery and safety in the intelligent integrated solutions market.
• The company is susceptible to operational risks that could affect its business, financial condition and results of operation.
• A significant portion of the company's business of engineering solutions of intelligent projects depends on its ability to provide quality guarantee deposits.
• Deterioration in the company's safety record could adversely affect its business, financial condition and results of operation.
• The company's operations are subject to special hazards that may cause personal injury or property damage, subjecting it to liabilities and possible losses which may not be covered by insurance.
• The company may experience delays and/or defaults in customer payments and may not be able to recover on claims against customers for payment.
• Force majeure events, such as weather conditions, natural disasters, health epidemics and pandemics or other contagious outbreaks and terrorist attacks, could negatively impact the company's business, which may affect its financial condition, results of operations or cash flows.
• Failure to comply with, or changes in, laws or regulations could have a material adverse effect on the company's business, financial condition and results of operation.

Future Outlook

The company intends to use the net proceeds from this offering for strategic acquisitions, geographic expansion, research and development, and general corporate purposes.

Industry Context

The intelligent integrated solutions market in China is experiencing rapid growth, driven by national strategic direction, industry development demands, and emerging technologies. The market size is expected to reach RMB3,763.6 billion in 2028, representing a CAGR of 15.6% from 2023.

Comparison to Industry Standards

• The document mentions that the intelligent integrated solutions market in China is highly fragmented with over 10,000 providers.
• The document mentions that Julong Online is well-recognized by a range of well-known companies in China, such as well-known international airports in Chinas first-tier cities and renowned public universities.
• The document mentions that Julong Online has a wide range of high-quality qualifications in a number of critical industry sectors, which enables it to undertake a wide range of different projects to keep the business expanding.

Related Party Transactions

• Beijing Jianlei International Decoration Engineering Co., Ltd, a company controlled by Mr. Jiaqi Hu, our founder, chairman and chief executive officer, outsourced contracts to provide engineering solutions of intelligent projects for some customers to us for an aggregate amount of RMB14,205 thousand, RMB64,897 thousand, and RMB71,613 thousand (US$10,205 thousand), respectively.
• For the fiscal year ended September 30, 2023 and 2024, we purchased services from Beijing Yihai Construction Engineering Co., Ltd., a company controlled by Mr. Jiaqi Hu, our founder, chairman and chief executive officer, for amount of RMB87 thousand, and RMB116 thousand (US$17 thousand), respectively.
• Beijing Huiju Tianxia Investment Co., Ltd. made a payment of RMB350 thousand (US$50 thousand) for legal fees incurred in connection with this offering to Beijing Dacheng Law Firm on behalf of Julong Online.

Stakeholder Impact

• Shareholders will be subject to the risks associated with a controlled company structure and the potential for delisting under the HFCA Act.
• Employees may benefit from the company's growth and expansion plans, as well as its commitment to training and development.
• Customers may benefit from the company's continued focus on providing high-quality, one-stop services and solutions.
• Suppliers and subcontractors may benefit from the company's continued growth and expansion, as well as its commitment to maintaining stable relationships.

Next Steps

• The company will apply to have its Class A ordinary shares listed on the Nasdaq Capital Market.
• The company is required to report the offering and listing status to the CSRC within 15 business days following completion of the offering.
• The company intends to use the net proceeds from this offering for strategic acquisitions, geographic expansion, research and development, and general corporate purposes.

Key Dates

Keywords

IPO, Julong Holding, intelligent integrated solutions, Nasdaq, China, Class A ordinary shares, CSRC, HFCA Act, PCAOB, financials