Industry leader with 48% gross margin, losses of hundreds of millions, 600-day payment collection | Is this company's IPO an opportunity or a trap?

On January 30, 2026, China’s leading industrial cybersecurity company, Beijing Tiandi Hexing, officially submitted its listing application to the Hong Kong Stock Exchange. Holding approximately 6.7% of the market share, it ranks first in the industry. However, this growth-leading company with steadily increasing revenue has yet to turn a profit. Its client list changes frequently, new major clients have been established for only two years, with a registered capital of just 1 million yuan. Trade receivables have soared to 1.1 billion yuan, and the turnover days are approaching 600 days… Is Tiandi Hexing’s IPO an investment opportunity or a trap?

This article will analyze from three perspectives: First, what is the true profitability and cash flow situation of Tiandi Hexing? Second, is its business growth sustainable and are its clients of good quality? Third, in the context of industry pressure, what is the actual value of Tiandi Hexing’s IPO?

Industry Context: The Diverse Faces of Cybersecurity

Viewing Tiandi Hexing within the broader cybersecurity industry, its challenges are not unique. In recent years, many listed cybersecurity companies have also struggled to balance profitability and growth.

Performance-wise, the cybersecurity sector in 2025 faced overall pressure. Among the top three revenue-generating companies, Qihoo 360 (Qihoo Security) is expected to report net losses of 1.134 to 1.359 billion yuan, marking two consecutive years of losses exceeding 1 billion yuan; Sangfor (300454) surpassed 8 billion yuan in revenue but admitted to declining gross margins and ongoing cost control pressures; Qimingxingchen (002439) saw revenue drop by about 30% year-over-year, with net losses expanding to 540-610 million yuan. Other listed cybersecurity firms also generally faced losses or declining performance.

In terms of revenue scale, where does Tiandi Hexing stand? According to the prospectus, the company’s revenue was 474 million yuan in 2023, rising to 727 million yuan in 2024, with 439 million yuan achieved in the first three quarters of 2025. Compared to other listed cybersecurity companies:

While Tiandi Hexing’s revenue is smaller than comprehensive firms like Sangfor and Qihoo 360, it surpasses peers such as CETC Network Security and Gel Software (603232). Compared to industry giants like Rockwell Network and Qimingxingchen (whose annual revenue is around 2.3-2.4 billion yuan), there is still a gap. Under such an environment, what gives this niche leader the confidence to pursue a Hong Kong IPO?

Track Leader: Tiandi Hexing’s Core Advantages

Tiandi Hexing operates in the industrial cybersecurity segment, one of the most technically demanding and promising niches within cybersecurity. According to Frost & Sullivan, China’s industrial cybersecurity market is projected to reach 29.4 billion yuan by 2029, with a CAGR of 25.0%. In this field, Tiandi Hexing holds a favorable position.

First, market position and industry barriers create a moat. Tiandi Hexing holds about 6.7% of the market share in China’s industrial cybersecurity, with an 8.4% advantage in the energy sector. Developing industrial cybersecurity solutions requires deep understanding of industrial communication protocols and compliance with industry-specific regulations, which entails high technical barriers. The company has provided solutions for over 6,000 projects across key sectors such as power, petrochemicals, rail transit, and intelligent manufacturing, serving more than 50% of central enterprises under the State-owned Assets Supervision and Administration Commission. This accumulated experience forms a formidable moat difficult for competitors to cross.

Source: Tiandi Hexing IPO Prospectus

Second, shareholder composition and client base. The prospectus shows that over ten institutions, including Beijing Jingguo Management, Zhongguancun Science City, Shanghai China Electric Power Investment, and China Electronics Fund, are shareholders. Wang Xiaodong holds 21.99%, making him the largest shareholder; Tianjin Xingyuan holds 9.54%; Beijing Jingguo Management 9.50%; Shenzhen Songhe 5.06%.

Source: Tiandi Hexing IPO Prospectus

Revenue from state-owned enterprise clients accounted for 80.8% in the first three quarters of 2025. Clients that have used its solutions for over three years contributed 70.5% of revenue.

Source: Tiandi Hexing IPO Prospectus

Third, strategic layout aligns with industry trends. The company’s integrated “Industrial Cybersecurity + Energy Digitalization + Backup Power Storage” solution matrix taps into key industry upgrade points. Through acquisitions like Beijing Bikece to enter energy digitalization, and partnerships with Haibo Electric for backup energy storage, it positions itself well. Especially with the deep integration of AI and industrial internet, the company’s release of an intelligent security analysis platform, which uses cloud-edge collaboration to enable smart control of industrial production scenarios, demonstrates forward-looking technological iteration.

Financial Puzzle: Revenue Growth Masks Profitability Challenges

However, the capital market’s logic is simple: stories matter, but data matter more. The financial data disclosed in the prospectus reveal a stark contradiction: revenue continues to grow, yet profitability remains elusive.

In 2023, 2024, and the first three quarters of 2025, Tiandi Hexing achieved revenues of 474 million yuan, 727 million yuan, and 439 million yuan respectively, with a 53% YoY increase in 2024. But despite revenue growth, the company has consistently reported losses, with net losses of 193 million yuan, 45.69 million yuan, and 94.67 million yuan over the same periods. Even after excluding non-recurring items like share-based payments and debt repurchases, adjusted net profit fell sharply from 70.23 million yuan in 2023 to 55.40 million yuan in 2024, and only 4.15 million yuan in the first three quarters of 2025.

Source: Tiandi Hexing IPO Prospectus

Behind these losses are long-standing high expenses. Sales and marketing expenses reached 1.37 billion yuan, 1.8 billion yuan, and 951.3 million yuan, each accounting for over 20% of revenue, significantly eroding profits. The company explains that since 2023, to expand industry coverage and customer base, it has provided free preliminary testing and research services to potential clients in early project stages.

More concerning is the high financial costs. During the reporting period, financial expenses were 66.56 million yuan, 114 million yuan, and 93.93 million yuan, mostly from interest on redeemed debt, accounting for 99.5%, 95.1%, and 98.3% respectively. These costs mainly stem from prior issuance of redeemable preferred shares.

Source: Tiandi Hexing IPO Prospectus

Gross margin has also declined steadily. The overall gross margin was 60.9%, 50.4%, and 48.6% over the periods, dropping over 12 percentage points in two years. Compared to peers like Qimingxingchen (~60%) and AsiaInfo (58.4%), Tiandi Hexing’s margins lag behind.

Source: Tiandi Hexing IPO Prospectus

Growth Strategy: Low Gross Margin to Secure Major Clients

Why has gross margin continued to decline? The prospectus attributes this mainly to two reasons: first, in 2024, the company onboarded a large enterprise client, leading to the acceptance of several high-cost hardware and software projects, causing gross margin on hardware and software sales to plunge from 28.3% in 2023 to 5.2% in 2024; second, the new energy digitalization business introduced in 2024 has a low margin, pulling down overall profitability.

Source: Tiandi Hexing IPO Prospectus

A deeper look at the business structure shows that these “strategic low-margin projects” are the core method for acquiring new large clients. The top two clients in 2024 and the first three quarters of 2025 are both new customers in their respective periods, contributing 13.5% and 24.5% of total revenue. The IPO prospectus explicitly states that most revenue from these key clients comes from hardware and software sales, with margins of only 5.2% and 6.2%, nearly break-even.

Source: Tiandi Hexing IPO Prospectus

This indicates that recent revenue growth has largely been driven by low-margin projects to secure large clients. This “growth at the expense of profit” model faces ongoing market scrutiny.

Cash Flow Challenges: Surging Receivables and Extended Collection Cycles

This low-margin, scale-driven growth not only erodes profitability but also leads to a significant increase in trade receivables and longer collection periods, posing financial risks.

The prospectus shows that as of the end of 2023, 2024, and September 2025, trade receivables were 664 million yuan, 975 million yuan, and 1.108 billion yuan, respectively, with continuous substantial growth. As of September 2025, receivables accounted for 65.02% of total assets of 1.704 billion yuan, making it the core component of assets.

Source: Tiandi Hexing IPO Prospectus

Along with rising receivables, collection cycles have lengthened considerably. The company states that it generally grants clients credit periods of 0 to 180 days, but in practice, the turnover days for receivables have increased, reaching 597 days in the first three quarters of 2025—far exceeding the disclosed credit limit. Of the 1.037 billion yuan in receivables at the end of Q3 2025 (net of impairment provisions), over half are over one year old.

Source: Tiandi Hexing IPO Prospectus

Cash flow is also a concern. Operating cash flow has been negative each period, with -84 million yuan, -92 million yuan, and -159 million yuan over the three years, totaling over 330 million yuan in cumulative outflows. In simple terms, the company is generating “book wealth,” not real cash.

Source: Tiandi Hexing IPO Prospectus

Strategic Opportunities: Market Expansion and Technological Upgrades

Despite challenges, the industry still offers clear growth opportunities.

Market expansion is accelerating. Frost & Sullivan projects that China’s industrial cybersecurity market will reach 29.4 billion yuan by 2029, with a CAGR of 25.0%. The energy digitalization solutions market is expected to hit 118.2 billion yuan, with a CAGR of 22.9%. In this high-growth environment, Tiandi Hexing, as an industry leader, should benefit from market expansion.

Source: Tiandi Hexing IPO Prospectus

Technological upgrades open new avenues. The deep integration of AI and industrial internet is creating new security needs and solutions. Tiandi Hexing’s intelligent security analysis platform, which combines AI algorithms to detect threats and respond intelligently in industrial networks, could unlock new growth potential.

At this crossroads, Tiandi Hexing faces a choice between two directions.