New stock preview | Smart energy solution industry leader, Shengru Technology once again "listed"

The leading domestic smart energy solution provider, Sheng Ruan Technology, is making a comeback on the Hong Kong stock market after a previous failure. Will they be able to get the green light from the Hong Kong Stock Exchange this time? It was learned that Sheng Ruan Technology recently submitted an application for listing on the main board of the Hong Kong Stock Exchange, with GF SEC (Hong Kong) as its exclusive sponsor. It was disclosed that the company is the largest independent solution provider in the Chinese smart oil and gas field solution market, with a market share of 4.9%, and is also the only representative focused on the energy industry among the 49 national-level cross-industry and cross-sector industrial Internet platforms recognized by the Ministry of Industry and Information Technology. The company's performance is moderate, with a compound annual growth rate of 15.9% for revenue and 25.66% for net profit from 2022 to 2024. However, in the first four months of 2025, revenue growth has slowed to single digits at 4.07%, with net losses expanding to 20 million yuan, mainly due to the impact of product delivery cycles and revenue recognition, which is in line with last year's performance concentrated in the second half of the year. As of April 30, 2025, the company had cash and cash equivalents of 67 million yuan. In the context of energy transformation, smart energy solutions are one of the current investment hotspots. However, is Sheng Ruan Technology's fundamentals worth a look? Business revenue shows volatility Sheng Ruan Technology provides full-chain solutions from informatization, digitalization to numericalization construction in three main directions, namely smart energy solutions, smart manufacturing solutions, and smart city solutions, with smart energy as the core. In the first four months of 2025, the revenue distribution of these businesses was 65.4%, 9.6%, and 25% respectively. The company provides smart energy solutions for large and medium-sized energy companies in the oil and gas industry, divided into six categories including oil and gas exploration solutions, petroleum engineering solutions, oil and gas extraction solutions, oil and gas production solutions, safety and environmental protection solutions, and operational management solutions. The smart energy solution business showed steady growth from 2022 to 2024, but revenue saw a sharp decline in 2025, leading to a drop in its revenue share from 85.9% to 65.4%. Additionally, the company provides smart manufacturing solutions for growing vertical industries such as petrochemicals, petroleum equipment, and automotive components, as well as smart city solutions for public management agencies. These two businesses have shown significant revenue fluctuations, with a substantial increase in revenue in 2023, followed by a decline in 2024, and another substantial increase in the first four months of 2025, with the smart city solution business growing by 112.8% and accounting for 25% of revenue, up by 12.8 percentage points. As of April 30, 2025, the company had completed over 330 smart city projects. Source of data: Lingxun data As the company's second-largest revenue business, the smart city solution leverages cutting-edge technologies such as the Internet of Things, artificial intelligence, cloud computing, and big data to empower public management agencies with efficient management and services, offering solutions for three main application scenarios: industrial parks, emergency command, and government affairs. The application of technology is the key to the commercialization of the company's research and development results. Based on open-source software such as artificial intelligence, the Internet of Things, and cloud computing, the company has independent research and development capabilities, using government demand as a market entry point to rapidly expand its market share. This business is rooted in Shandong Province and radiates to surrounding provinces. As of April 30, 2025, the company has provided government affairs solutions for 11 cities in Shandong Province, covering over 50 public administrative departments such as data departments, organization departments, administrative approval departments, and human resources departments. In addition, its emergency command solution has covered nine cities and seven counties in Shandong Province, providing emergency command for over ten major events and over 100 large-scale emergency drills. It is worth noting that the company's performance mainly relies on existing customers, with a high degree of customer concentration. The contribution of the top five customers has consistently exceeded 70%, reaching 73.5% in the first four months of 2025, with the largest customer contributing 37.9%. However, stable customer cooperation relationships have enabled the company to obtain a higher proportion of customer benefits through negotiation. The company had 268, 407, and 403 customers in 2022, 2023, and 2024 respectively, with 76 customers in the first four months of 2025. In terms of profitability, factors such as changes in business structure and the way orders are obtained through bidding and direct negotiations have had a significant impact on gross margin. The profit margin has shown a downward trend. In the first four months of 2025, the company's gross margin was 24.6%, a decrease of 6.3 percentage points year-on-year and a decrease of 16.8 percentage points compared to 2022. Looking at individual business segments, the gross margins of the three major businesses all showed a downward trend, with the smart energy solution business contributing the core gross profit, with its gross margin dropping from 42.7% to 26.9%, a decrease of 15.8 percentage points. However, the company has managed its expenses well, as sales, administrative, and research and development expense ratios have all shown a downward trend from 2022 to 2024, with significant decreases in the first four months of this year. This is mainly due to revenue recognition being concentrated in the second half of the year, and the optimization trend in expense rates over the years has resulted in the company's net profit margin climbing from 9.6% in 2022 to 11.3% in 2024. The company's ROE of this subsidiary was 17.25%, 20%, and 17.9% in 2022, 2023, and 2024 respectively. Industry steady growth, industry leaders still worth watching From an industry perspective, according to a Frost & Sullivan report, C SMARTERENERGY solutions, including smart energy, smart oil and gas fields, smart coal, and smart new energy, all have maintained double-digit growth rates. The overall market size of smart energy solutions is 32.4 billion yuan in 2024, with a compound annual growth rate of 19.1% over the past five years, and is expected to reach 66.9 billion yuan by 2029, with a compound annual growth rate of 15.6% for the next five years. Furthermore, according to the Frost & Sullivan report, the market for the digital transformation of China's manufacturing industry is large and growing steadily, with double-digit compound annual growth rates for small and medium-sized manufacturers, expected to reach 2.28 trillion yuan by 2029. The market for smart city solutions in China is also significant, with a market size of 2.83 trillion yuan in 2024, with a compound annual growth rate of 16.3% over the past five years, and is expected to reach 3.99 trillion yuan by 2029. Sheng Ruan Technology is in a leading position in the segmentation sectors of its core business, such as in the smart energy solution market, where it held a 10.7% market share in 2024, ranking second with 2.3%, and only a small difference from the third-place. In the market for smart oil and gas field solutions in China, the company ranks first among independent solution providers with a market share of 4.9%. Although positioned at the industry's forefront, business growth is lower than the industry average, indicating a decline in the company's competitiveness. The market size for smart manufacturing and smart city solutions is large and has maintained steady double-digit growth. As mentioned earlier, the company has a technological advantage, with its smart city business expanding from Shandong to the whole country, showing promising prospects. However, the revenue fluctuations in these two businesses do not follow a linear trend with the industry. Although there was substantial growth in 2025, it was mainly due to a small base, so the sustainability of future growth still needs to be observed. In addition, the company's funds are currently not abundant. On the one hand, the company's performance scale is still relatively small, with low profit margins, resulting in a cumulative net profit of only 151 million yuan over the three years from 2022 to 2024. A significant portion of this amount comes from customer credit, as the company's accounts receivable accounted for a high proportion of revenue in 2024, reaching 91.4%. The company's cash and cash equivalents remain low, with 67 million yuan as of April 2025, while the company has bank loans of 42 million yuan. In summary, Sheng Ruan Technology's performance is moderate, and its core business is slightly weaker compared to industry peers, with a downward trend in competitiveness. The performance of the other two major business segments is volatile, and there is also a high degree of customer concentration, indicating uncertainty in growth. In terms of profitability, changes in customer acquisition models and business structure adjustments have led to a decline in gross margins, while expense optimization has led to a steady increase in net profit margins. However, as a leading provider of smart energy solutions, the key point is the steady development of the industry. In the context of energy smart transformation, it is still worth paying attention to.