F-1/A: Xinzi Launches IPO Amidst Market Volatility, Aims for PV Film Expansion

Xinzi, a Cayman Islands holding company operating in China's photovoltaic film sector, is launching an initial public offering of 3.75 million ordinary shares on Nasdaq Capital Market, seeking to raise approximately $15.85 million to fund significant production capacity expansion and market share growth.

Summary

• Xinzi is conducting an initial public offering of 3,750,000 ordinary shares, with an expected price range of $4.00 to $6.00 per share, aiming to list on the Nasdaq Capital Market under the symbol XZ.
• The company's revenue decreased by 23.47% to $25.14 million in 2024 from $32.85 million in 2023, primarily due to industry contraction, significant decrease in POE prices, and intense competition.
• Xinzi reported a net loss of $340,050 in 2024, a reversal from a net income of $458,573 in 2023.
• For the six months ended June 30, 2025, revenue decreased by 29.92% to $8.84 million from $12.61 million in the same period of 2024, but the company achieved a net income of $8,568, compared to a net loss of $700,723 in the prior year period.
• Gross profit margin improved to 15.21% for the six months ended June 30, 2025, from 8.38% in the same period of 2024, driven by lower raw material costs and enhanced cost controls.
• The company's current liabilities exceeded current assets by $3.85 million as of June 30, 2025, and $3.75 million as of December 31, 2024, indicating a going concern risk.
• Net proceeds from the IPO, estimated at $15.85 million, will be allocated to raw material and equipment purchases (30%), factory expansion (20%), internal control improvements (10%), brand recognition (10%), working capital (10%), employee compensation and training (10%), and emergency funds (10%).
• Xinzi aims to increase its market share from 2-3% (3GW capacity) to 10-15% (15GW potential capacity) by purchasing additional equipment and improving processes over the next five years.
• The company is subject to PRC regulatory oversight, including filing requirements with the CSRC for overseas listings and potential cybersecurity reviews, which could impact its operations and listing ability.

Sentiment

Score: 4

Explanation: While the company has clear growth strategies, strong R&D, and improved H1 2025 net income and gross margin, the significant revenue decline in 2024, the overall net loss in 2024, and the explicit 'going concern' warning due to current liabilities exceeding current assets, coupled with substantial PRC regulatory risks, present considerable challenges and uncertainties for investors.

Positives

• Gross profit margin significantly improved to 15.21% in H1 2025 from 8.38% in H1 2024, driven by lower raw material costs and strengthened cost control measures.
• Achieved a net income of $8,568 for the six months ended June 30, 2025, reversing a net loss of $700,723 in the same period of 2024.
• Operating cash flow turned positive in H1 2025, reaching $68,887, compared to a negative $424,121 in H1 2024.
• Strategic shift to focus on top domestic second-line and first-line photovoltaic module customers, avoiding direct competition with leading film enterprises.
• Strong emphasis on personalized product customization services, leading to reduced credit periods and lower accounts receivable turnover ratios compared to industry benchmarks.
• Successful reduction of product quality loss rate from 0.3% in 2020 to 0.01% currently through continuous optimization of production processes.
• Plans to expand production capacity from 3GW to a potential 15GW, aiming for a market share of 10-15% with IPO proceeds.
• Active exploration of overseas markets, with a target to export up to $3 million in products by 2026 and an existing cooperation agreement in Vietnam.
• Establishment of a production base in Suqian Development Zone to leverage government support and proximity to first-line photovoltaic enterprises, with 8 co-extruded film production lines planned.
• Hangzhou Xinzi is recognized as a national high-tech enterprise and holds certifications from Hangzhou Municipal Enterprise Technology Research and Development Center and Zhejiang Province Specialized and New Enterprise Certification.
• Possesses 5 invention patents, 1 software copyright, and 19 utility model patents, demonstrating strong R&D capabilities.
• Received EVA TUV certification (valid until Jan 2026) and POE TUV certification (valid until Dec 2027), enhancing product credibility and market access.
• Obtained green factory certification on April 28, 2024, highlighting commitment to environmental responsibility and sustainable practices.

Negatives

• Experienced a significant revenue decrease of 23.47% to $25.14 million in 2024 from $32.85 million in 2023, and a further 29.92% decrease in H1 2025 compared to H1 2024.
• Shifted from a net income of $458,573 in 2023 to a net loss of $340,050 in 2024.
• Current liabilities exceeded current assets by $3.85 million as of June 30, 2025, and $3.75 million as of December 31, 2024, raising substantial doubt about the company's ability to continue as a going concern.
• Operating activities resulted in negative cash flow of $761,836 in 2024, a significant deterioration from positive cash flow of $5,397,384 in 2023.
• The photovoltaic film industry faces intense competition and overcapacity, leading to downward pressure on prices and eroded market share for second-tier enterprises like Xinzi.
• High customer concentration, with one customer accounting for 34% of total revenues in H1 2025 and 32% in 2024, and 55% in 2023, posing a significant risk if business shifts.
• Dependency on key customers is exacerbated by the use of purchase orders instead of long-term contracts, increasing revenue volatility.
• Fluctuating raw material costs (e.g., POE price decline) impact production costs and profit margins.
• The company temporarily suspended construction of its Suqian production line due to industry contraction, negotiating long-term payment arrangements for equipment purchases.

Risks

• The Chinese government exerts substantial influence over business activities, may intervene at any time, or exert more control over overseas offerings and foreign investment in China-based issuers, potentially causing a material change in operations or a decline in share value.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations, which may change quickly with little advance notice, could limit legal protection.
• Required approval from Chinese authorities (CSRC) for U.S. listing, and inability to obtain or maintain such approval could lead to delisting and significant value decline.
• Recent greater oversight by the Cyberspace Administration of China (CAC) over data security, particularly for companies seeking foreign listings, could adversely impact business and offering, though Xinzi believes it is not currently subject to cybersecurity review.
• PRC regulations on offshore special purpose companies by PRC residents (SAFE Circular 37) may subject operating entities to liability, limit capital injection, or restrict profit distribution.
• PRC laws establish complex procedures for foreign acquisitions of PRC companies, potentially hindering growth through acquisitions.
• Cash transfers from PRC operating entities to the Cayman Islands holding company are subject to PRC regulations on dividend distribution and statutory reserves, limiting funds available for dividends to shareholders.
• Cash transfers from the Cayman Islands holding company to PRC operating entities are subject to PRC laws on loans and direct investment, potentially delaying or preventing the use of offshore financing proceeds.
• Restrictions on the remittance of Renminbi into and out of China and governmental control of currency conversion may limit the ability to pay dividends and affect investment value.
• Fluctuations in exchange rates between RMB and USD could result in foreign currency exchange losses.
• Custodians or authorized users of controlling non-tangible assets (chops and seals) may fail responsibilities, misappropriate, or misuse assets, disrupting operations.
• Classification as a PRC resident enterprise for tax purposes could result in unfavorable tax consequences, including a 25% enterprise income tax on worldwide income and withholding taxes on dividends/gains for non-PRC shareholders.
• Business may be materially and adversely affected if any operating entity declares bankruptcy or becomes subject to dissolution/liquidation.
• Non-compliance with PRC tax laws and regulations could negatively affect financial condition and results of operations.
• Exposure to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws.
• Difficulties for overseas regulators to conduct investigations or collect evidence within China, potentially hindering shareholder claims or regulatory oversight.
• Difficulties for investors in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against the company or management based on foreign laws.
• Uncertainties related to the Holding Foreign Companies Accountable Act (HFCA Act) and PCAOB inspection requirements, which could lead to delisting if auditors cannot be fully inspected for two consecutive years.
• No public market for ordinary shares prior to this offering, and no assurance of an active trading market or that shares will trade at or above IPO price.
• Immediate and substantial dilution for new investors due to IPO price being significantly higher than net tangible book value per share.
• The trading price of ordinary shares is likely to be volatile due to broad market factors, industry performance, company-specific factors, and regulatory developments.
• Potential for substantial future sales of ordinary shares by existing shareholders after lock-up periods, which could cause the price to decline.
• As an emerging growth company and foreign private issuer, the company is eligible for reduced reporting requirements, which may limit information available to investors and afford less protection.
• Material weakness identified in internal control over financial reporting (lack of sufficient financial reporting and accounting personnel), which if not remediated, could lead to misstatements or fraud.
• Increased costs associated with being a public company, particularly after ceasing to qualify as an emerging growth company.
• The obligation to disclose information publicly may put the company at a disadvantage to private competitors.

Future Outlook

Xinzi aims to become a leading provider of specialized solar photovoltaic module encapsulation films, recognized for innovation and sustainable practices. The company plans to progressively grow its market presence through Hangzhou Xinzi, targeting a 30% annual sales growth over the next five years. It intends to expand production capacity from 3GW to a potential 15GW by purchasing new equipment and improving internal processes, aiming for a 10-15% market share. Xinzi also plans to actively explore overseas markets, targeting $3 million in exports by 2026, and establish new production bases in photovoltaic cluster areas like Suqian. The company will continue to invest in R&D to develop new products like calcium carbide battery cell encapsulation film and heterojunction battery encapsulation film.

Management Comments

• Management believes current operating funds from net income and external borrowings are sufficient to sustain operations after the offering.
• Management is confident in the collection of account receivables and other receivables.
• Management believes it is necessary to enhance the collection of outstanding accounts receivable and other receivables and to be cautious in operational decisions and project selection.
• Management believes the current product structure (45% POE extruded film, 15% white/black film, 40% other transparent films) is reasonable and in line with current market development and requirements.
• Management believes that investing in the Suqian Economic Development Zone has important commercial value as Hangzhou Xinzi can fill the gap as it relates to adhesive film enterprises.

Industry Context

The transparent photovoltaic film industry is positioned for significant growth due to China's national strategy for carbon neutrality by 2060 and increasing global demand for clean energy. The industry is characterized by continuous technological advancements, leading to increased efficiency and lower costs of solar modules. However, it also faces intense competition, overcapacity (especially among second-tier enterprises), and fluctuating raw material costs. The market is shifting towards flexible electronics and thin-film PV technologies, which Xinzi's products are well-suited for. The industry is undergoing consolidation, with leading companies expanding production and lowering prices, putting pressure on smaller players. Xinzi's strategy to focus on specialized packaging films and R&D aligns with the need for innovation and quality in this dynamic sector.

Comparison to Industry Standards

• Hangzhou Xinzi identifies itself as having third-tier production capacity (between 10GW to 30GW) in the photovoltaic film industry, with its market share somewhat eroded by head enterprises, which maintain 50-60% market share.
• The company's accounts receivable turnover ratios (4.83% in 2024, 4.70% in 2023, and 5.14% in 2022) have consistently outperformed industry benchmarks, reflecting strong collection efficiency and stringent credit management.
• Hangzhou Xinzi's product quality loss rate has decreased from 0.3% in 2020 to 0.01% currently, indicating superior production process optimization compared to general industry standards.
• The industry gross margin of photovoltaic film is showing a downward trend due to intense market competition and overcapacity, which Xinzi is also experiencing.
• Hangzhou Xinzi is in the top 10 of major manufacturers of transparent photovoltaic thin films in the Chinese market in 2024, according to Beijing Boyan Zhishang Information Consulting Co., LTD.

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved in various legal, administrative, and regulatory proceedings, claims, demands, and investigations in the ordinary course of business, including breach of contract claims against suppliers, manufacturers, business partners, or customers for failure to pay.
• The company routinely initiates court claims for defaults and has rarely encountered counterclaims, generally achieving favorable judgments.
• No assurance can be given regarding the resolution of current or future litigation, which could incur defense and settlement costs, divert management resources, and negatively impact reputation and financial condition.

Related Party Transactions

• Hangzhou Xinzi sold 90% of its subsidiary, Yangzhou Taixinni Material Co., Ltd, to Hangzhou Suori intelligent equipment Co., Ltd (a related party) for RMB 270,000 (approx. $37,522) on March 25, 2024.
• The company utilizes Yangzhou Taixinni Material Co., Ltd (a related party) for the purchase of key raw materials (EVA and POE), with a prepayment of $616,888 made in December 2024 to secure pricing and timely delivery.
• Entered into equipment purchase agreements in December 2024 and January 2025 with Hangzhou Suori Intelligent Equipment Co., Ltd and Yangzhou Suoyi Intelligent Equipment Technology Co., Ltd (related parties) for a screw and barrel cooling system (RMB 656,500) and a refurbished twin-screw EPE production line (RMB 3.06 million).
• Due from related parties amounted to $45,139 as of June 30, 2025, and $135,629 as of December 31, 2024, typically interest-free and due on demand.
• Due to related parties amounted to $385,659 as of June 30, 2025, and $455,209 as of December 31, 2024, representing unsecured, non-interest bearing advances for working capital.
• Sales to related parties (Yangzhou Suoyi Intelligent Equipment Technology Co., Ltd. and Hangzhou Suori intelligent equipment Co., Ltd.) totaled $302,607 in H1 2025 and $116,330 in H1 2024.
• Purchases from related parties (Hangzhou Suori intelligent equipment Co., Ltd., Hangzhou Xinzi New Energy Co., Ltd., Hangzhou Linan Changqiao Plastic Packing Factory, Yangzhou Taixinni Material Co., Ltd.) totaled $1,068,005 in H1 2025 and $161,692 in H1 2024.

Stakeholder Impact

• Shareholders: Potential for dilution from the IPO, reliance on price appreciation for return as no dividends are expected, and exposure to significant PRC regulatory and operational risks, including potential delisting under the HFCA Act. Existing shareholders will experience immediate and substantial dilution.
• Employees: Increased compensation and benefit packages and investment in job training are planned with IPO proceeds, potentially improving employee satisfaction and retention.
• Customers: Personalized product customization and improved production processes aim to enhance customer satisfaction and product quality. Expansion of production capacity and customer base targets meeting growing demand and securing more stable orders.
• Suppliers: Strengthened communication and optimized supply chain management through digitalization are expected to improve relationships and ensure timely raw material supply.
• Creditors: The 'going concern' issue due to current liabilities exceeding current assets indicates potential challenges in meeting short-term obligations, though management is confident in collection of receivables and securing financing.

Next Steps

• Complete the initial public offering and listing on the Nasdaq Capital Market.
• File with the CSRC in connection with this offering and listing pursuant to the Trial Measures within three business days after the initial filing.
• Utilize IPO net proceeds for raw material and factory equipment purchases, factory expansion, internal control improvements, brand recognition, working capital, employee compensation and training, and emergency funds.
• Continue to expand production capacity to a potential 15GW over the next five years by purchasing mixers, extruders, molds, casting machines, cooling stretching machines, and slitting and rewinding machines.
• Increase digitalization to achieve higher production capacity, improved quality control, standardized production processes, and optimized supply chain management.
• Upgrade technology capabilities to expand R&D, focusing on calcium carbide battery cell encapsulation film and heterojunction battery encapsulation film series products.
• Actively explore marketing and sales opportunities in overseas markets, targeting $3 million in exports in 2026, with a focus on the Vietnamese market.
• Continue establishing production bases in photovoltaic cluster areas, such as the Suqian Development Zone, with plans to invest in 8 co-extruded film production lines.
• Formulate and execute a five-year development plan with a goal of 30% annual sales growth.
• Hire additional qualified accounting and financial reporting personnel and formalize internal control procedures to address identified material weaknesses.

Key Dates

Recommendation

Xinzi presents a mixed financial picture. While the company has strong growth strategies, a clear market alignment with national green energy goals, and demonstrated R&D capabilities, its recent financial performance shows significant revenue decline in 2024 and a net loss for the year. The 'going concern' warning due to current liabilities exceeding current assets is a serious concern. Although H1 2025 showed a positive net income and improved gross margin, the overall trend is volatile. The substantial regulatory risks associated with operating in China and the uncertainties of a foreign listing further complicate the investment thesis. The IPO proceeds are crucial for addressing liquidity and funding expansion, but the execution risk remains high. A 'hold' recommendation is appropriate, suggesting investors monitor the company's ability to execute its growth strategies, remediate internal control weaknesses, and navigate the complex regulatory environment, especially regarding its 'going concern' status, before making further investment decisions.

Keywords

Photovoltaic Film, Solar Energy, Renewable Energy, EVA Film, POE Film, EPE Film, SEC Filing, IPO, China, Nasdaq, Encapsulation Film, Green Energy, High-tech Enterprise, Manufacturing, Corporate Governance