Preview of New US Stocks | Jiaji Technology: "Small but not beautiful" with high debt, high accounts receivable lingering in the automotive and financial IT tracks.

Currently, we are in the midst of an unprecedented digital revolution. Information technology has not only promoted global economic growth but also redefined our way of life. Faced with rapidly changing technological innovations, companies are accelerating their pace of digital transformation. This also provides numerous development opportunities for the information technology industry. According to Gartner data, global IT spending is expected to reach $4,678.8 billion in 2023, a 3.3% increase compared to the previous year. It is projected to reach $4,997.7 billion by 2024, a 6.8% year-on-year increase. The trillion-dollar market size undoubtedly has fueled the activity of related companies in the secondary market. On December 19, JAJIGlobal submitted a prospectus to the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO) to raise up to $20 million. The company is an IT service provider based in Shanghai, China, focusing on driving technological innovation and software-driven technology development in the securities and automotive industries. The company also provides business management and recruitment services to meet the diverse needs of its clients. JAJIGlobal is a subsidiary of Huaqin Technology Group, a global leading IT consulting and solutions provider specializing in the banking, insurance, and financial sectors. Founded in 2005, Huaqin Technology Group went public on NASDAQ in 2018, and currently holds 60% of JAJIGlobal's stock. In the 2024 fiscal year, Huaqin Technology Group saw a decrease in both revenue and net profit, with revenue declining by 5% to $143 million and a net loss of $1.8 million, compared to a net profit of $200,000 in the previous year. Alongside poor performance, Huaqin Technology Group's stock price has also been lackluster since 2024, with significant fluctuations and trading at a relatively low level. As of the closing on December 23, its stock price was only $1.11. So, with this IPO, can JAJIGlobal leverage its true strength to surpass its parent company? High debt and high accounts receivable cloud the fundamentals, showing a "small and not beautiful" picture Established in 2010, JAJIGlobal is an IT service and product provider focused on accelerating innovation and software-driven technology in the Chinese securities and automotive industries. Looking at it separately, in the automotive industry, due to unprecedented changes in the automotive industry, such as through Software-Defined Vehicles (SDV) and redefining the driving experience, JAJIGlobal supports customers in accelerating innovation and software-driven transformation by providing comprehensive IT consulting services, solutions, and product portfolio. In the securities industry, JAJIGlobal serves securities clients through its self-developed Intelligent Siasun Robot & Automation consulting decision engine, Data Management Platform (DMP), and real-time data analysis system. Currently, JAJIGlobal's IT products integrate cutting-edge technology and intelligent algorithms, covering driver health and safety monitoring, financial investment simulation, and enterprise intelligent decision support. These products also drive innovation and development in the securities and automotive industries. Looking at the revenue side, it has been showing slow growth in the past two years. In 2022 and 2023, JAJIGlobal achieved revenues of $10.75 million and $11.23 million, respectively, a year-on-year growth of 4.46%. In the first half of 2024, the company achieved revenue of $5.03 million, a year-on-year growth of 3.07%, showing a slowing growth rate. Looking at the profit side, unlike the slow revenue growth trend, JAJIGlobal's net profit in the past two years has shown high growth characteristics. In 2022 and 2023, the company's net profit was $680,000 and $1.33 million, respectively, a year-on-year growth of 95.59%. In the first half of 2024, the company's net profit was $180,000, a year-on-year growth of 143.24%, maintaining a high growth trend, although the profit scale is small. However, it is worth noting that although revenue and net profit have been growing, JAJIGlobal's high debt level and accounts receivable undoubtedly raise concerns about its liquidity. According to the prospectus, as of 2023, the company had cash and cash equivalents of $851,300 and total current assets of $842.86 million, with net accounts receivable as high as $5.421 million. At the same time, the company's current liabilities were $4.835 million, at a high level. With this asset structure data, the company's liquidity risk is evident. Overall, although JAJIGlobal's core financial indicators of revenue and net profit continue to grow, it has not yet formed a certain scale effect and its overall revenue and profit scale are small. At the same time, its high debt and high accounts receivable further exacerbate the company's "small and not beautiful" fundamental characteristics. "Opportunities and challenges coexist" in the industry, enhancing competitiveness remains key Looking at the industry's development potential and competitive landscape, it is evident that "opportunities and challenges coexist" for JAJIGlobal. According to a research report released by the market research company MarketsandMarkets, the Asia-Pacific region is expected to become the largest automotive software market from 2023 to 2030. The region is currently experiencing rapid progress in advanced vehicle technologies, especially in China, Japan, and South Korea. These countries' car manufacturers are shifting their focus to advanced technologies such as Advanced Driver Assistance Systems (ADAS), autonomous driving systems, remote information processing, and communication services. Therefore, vehicles equipped with ADAS heavily rely on software to control their various functions. As demand for these vehicles continues to increase, the automotive software market in the Asia-Pacific region is expected to grow rapidly. In addition, the securities services industry. In June 2023, the China Securities Association officially released the "Three-Year Improvement Plan for Network and Information Security of Securities Companies (2023-2025)." The plan states that from 2023 to 2025, securities companies' average investment in information technology should not be lower than 10% of average net income or 7% of average operating income. In 2023, securities companies significantly increased their investment in information technology to promote the.Safe operation of the system and improving the efficiency of the system operation.It can be seen that from the perspective of industry development trends, the two major sub-sectors in which JiaJi Technology is currently operating undoubtedly have certain development potential. Therefore, for JiaJi Technology, this is clearly an opportunity for the company to further enhance the certainty of its performance. However, considering the industry's competitive landscape and the company's competitive strength, it is evident that JiaJi Technology is also facing "challenges" in its continuous development. On one hand, the competition in the IT services market is fierce, and it continues to intensify, posing significant competitive pressure on JiaJi Technology. Looking at the domestic securities and automotive IT industries, there are numerous domestic enterprises, and market concentration is not yet obvious, leading to intense competition. In the securities IT sector, Hundsun Technologies Inc. is the leader in financial IT with a market share of approximately 28%, while Shenzhen Kingdom Sci-Tech ranks second with about 12%. In the automotive IT sector, Baidu Apollo ranks first, with Huawei and Alibaba ranking second and third, respectively. Furthermore, JiaJi Technology also faces differentiation competition from some emerging enterprises. Some emerging companies like JiaJi Technology focus on specific areas, such as the securities and automotive industries, to provide professional IT services and products in an attempt to establish a presence in the market. Therefore, facing pressure from industry giants and other competitors, JiaJi Technology needs to continuously improve its technical capabilities and service levels to attract customers with differentiated services and solutions. On the other hand, a limited number of customers account for a significant proportion of the company's revenue, leading to high customer concentration levels, which may increase uncertainty in JiaJi Technology's future performance growth. According to the prospectus, JiaJi Technology's main customers are key participants in the automotive and securities services industries, with high credit ratings. However, it is worth noting that payment processing cycles for state-owned automotive customers may be longer and more complex, which could potentially impact the company's operating cash flow. For the years 2022, 2023, June 30, 2023, and June 30, 2024, revenue from the company's top five customers accounted for 78.3%, 77.6%, 67.5%, and 68.3% of the total revenue, respectively. Therefore, a decrease in demand from these customers may have a negative impact on the company's overall operations. In response to this, JiaJi Technology has stated that it must monitor and address any potential decrease in demand from key customers to maintain its business. In the face of these development challenges, JiaJi Technology has clearly realized the importance of addressing them. Regarding the use of the funds raised this time, the company stated that approximately 30% will be used for product development to expand the functionality and value of the technology and products under development; approximately 30% will be used for acquiring a small to medium-sized company with similar business to further develop and expand current business operations; approximately 20% will be used for global expansion, including overseas marketing and operations, as well as establishing offshore development centers to handle overseas software development, customer support, data input, and IT operations; and approximately 20% will be used for general company purposes, including working capital. In conclusion, from a fundamental perspective, compared to its parent company Huaqin Technology, JiaJi Technology's revenue and net profit are showing a growth trend, but its smaller scale, high debt, and high receivables indicate that there is still some distance from achieving the strength of its parent company. Additionally, with significant competition pressure and high customer concentration levels, JiaJi Technology clearly has a long way to go to truly attract investors' interest.