New Stock Analysis | Zejing Electronics: High Debt and Cash Flow Dilemma Difficult to Resolve, "Quantity to compensate for price" cannot disguise insufficient capital generation capability.

On March 9, the Hong Kong Stock Exchange disclosed that Jiangsu Zejing Automotive Electronics Co., Ltd. (hereinafter referred to as "Zejing Electronics") has passed the listing hearing on the main board, with HAITONG INT'L Capital Limited and CITIC SEC (Hong Kong) Limited as joint sponsors. This means that this domestic second largest supplier of in-vehicle HUD solutions is just one step away from listing on the Hong Kong stock market. However, behind this seemingly heralding breakthrough, through its prospectus and past financial data, the urgency of Zejing Electronics in seeking capital breakthrough under the pressure of slowing revenue growth, sustained large losses, and high debt levels can still be seen. This star company, which held a 16.2% share of the Chinese HUD market in 2024, is attempting to break through its long-standing problem of "increased revenue but not increased profitability" within the window of the continuously heating up smart cockpit race track using the power of the secondary market. Caught in the trap of increased revenue but not increased profitability According to the prospectus, Zejing Electronics is driving the transformation of intelligent cockpit visual and human-vehicle interaction systems from 2D to 3D, AR revolution, and market penetration through innovative solutions. The company has adopted an integrated self-developed technology architecture that integrates optical design, mechanical engineering, electronic design, software algorithms, and human-machine interface (HMI), and has been rigorously tested and validated, covering the core capabilities of HUD solutions, and possesses the unique ability to create sustainable market differentiation. In addition, the company provides a full range of HUD platform solutions, including CyberLens, CyberVision, testing solutions, and other innovative business solutions to meet diverse customer needs. According to data from Burning Insight Consulting, the market size of Chinese in-vehicle HUD solutions has increased from 1 million units in 2020 to 3.9 million units in 2024, with a compound annual growth rate of 41.2%, which is expected to grow to 12.7 million units in 2029, with a compound annual growth rate of 27.9% from 2025 to 2029. Through the latest financial data disclosed by Zejing Electronics, it can be seen that the company is showing strong expansion capabilities in terms of revenue scale, but its financial fundamentals are showing increasingly complex structural contradictions. In terms of annual data, Zejing Electronics' revenue has increased from 214 million yuan in 2022 to 578 million yuan in 2024, with a compound annual growth rate of 64.3% over two years, truly running at an "acceleration" pace in this specific sub-track. However, upon closer analysis of its growth curve, hidden worries have emerged: the year-on-year revenue growth rate was as high as 156.5% in 2023 (increasing from 214 million to 549 million), but it plummeted to 5.3% in 2024 (increasing from 549 million to 578 million). This cliff-like slowdown is even more alarming in the latest period data for the nine months ending on September 30, 2025 revenue was 480 million yuan, an increase of only 11.8% compared to the same period in 2024. Compared with the industry's projected future compound annual growth rate of 27.9%, Zejing Electronics' actual performance has already begun to fall behind. On the profitability front, Zejing Electronics is showing a puzzling trend. On one hand, the gross profit margin continues to improve, steadily increasing from 22.6% in 2022 to 27.3% in 2024, and maintaining a level of 27.3% in the first nine months of 2025. This usually means that as production scale increases, unit costs are diluted, supply chain bargaining power improves, and product structure tends towards high gross margin models (such as AR-HUD). However, on the other hand, the expense ratio has shown abnormal fluctuations. In 2022, due to the low revenue base, the combined sales, administrative, and research and development expenses accounted for a high proportion of 75.7% of revenue. With the explosive growth in revenue, the expense ratio dropped sharply to 26.2% in 2023, demonstrating good operating leverage. However, the good times did not last long, as the expense ratio rebounded to 28.8% in 2024, and further climbed to 28.4% in the first nine months of 2025. In particular, administrative expenses reached 60.95 million yuan in the first nine months of 2025, close to 80.33 million yuan for the entire year of 2024, indicating that the rigidity of expense growth far exceeds the revenue growth rate, suggesting that internal management efficiency may decrease with the scale expansion, eroding the hard-won improvement in gross margins. On the surface, Zejing Electronics' net losses have been gradually narrowing: from a huge loss of 256 million yuan in 2022, to losses of 175 million yuan and 138 million yuan in 2023 and 2024 respectively. However, the "water" in these figures lies in including a large number of non-operating items - fair value changes in financial liabilities. Excluding the factors of financial liabilities, the real operational loss situation is actually deteriorating. The data shows that, excluding the fair value changes in redeemable liabilities, the loss was 83.83 million yuan in 2022, significantly improved to 79.07 million yuan in 2023, but rebounded to 85.64 million yuan in 2024. As of 2025, the situation took a sharp turn for the worse, with a loss of as high as 33.97 million yuan in the first nine months, compared to 5.45 million yuan in the same period of 2024, a staggering 523% year-on-year increase. This means that although the company has "beautified" some of the losses through the accounting treatment of financial liabilities, the actual profitability of the main business has not improved, and even showed a cliff-like decline in 2025. Overall, Zejing Electronics is currently stuck in a "growth trap": revenue growth is slowing down, gross profit improvement is not enough to cover the rebound in fixed costs, and actual operational losses have sharply expanded in 2025. For this company that is about to land on the Hong Kong Stock Exchange, the markets focus should shift from the appearance of "narrowing losses" to the essence of "blood-making capacity". Scale effects difficult to outweigh the lack of pricing power The core financial paradox that Zejing Electronics is currently facing is that the improvement in gross profit margin coexists with slowing revenue growth and continued losses. Data shows that the unit price of Zejing Electronics' products is on a rapid downward trend. The price of W-HUD dropped by 13.8% over three years, while AR-HUD plummeted by 66.5% in 2024 to 1164.9 yuan. This cliff-like price drop directly led to the failure of the company's "offsetting price with volume" strategy - although sales volume increased to 624,600 sets in 2024, the year-on-year revenue growth rate was only 5.14%, far lower than 156.6% in 2023. This financially reflects the company's lack of sufficient pricing power, and it can only passively concede under the transmission effects of price wars in the automotive sector. It is worth noting that, while the selling price has dropped significantly, the company's gross profit margin has increased from 22.6% to 27.3%. This deviation may originate from two reasons: control of raw material costs (cost growth slower than sales growth) and changes in product structure (W-HUD still accounts for 88.4% of revenue, and its cost control is relatively mature). However, this gross profit space achieved through cost compression is limited, and once upstream raw material prices fluctuate or the proportion of AR-HUD increases (with a greater price drop), the current gross profit level will be difficult to maintain. In addition, Zejing Electronics' revenue growth is accompanied by a significant deterioration in operational efficiency, which is a typical risk signal for secondary suppliers in the automotive industry chain. The company's trade accounts receivable turnover days have increased significantly from 102 days to 140.5 days. This means that after the company sells products, the speed of cash collection has slowed by nearly 40 days. More alarming is the extension of its credit period to core customers from 60 days to 90 days. This income obtained through relaxing credit policies has lower financial quality, further confirming the company's weak negotiating position in the industry chain. Despite nearly 600 million in revenue, the company's operating cash flow did not turn positive until 2024 (29 million yuan), with accumulated net operating outflows exceeding 200 million yuan over the past three years. In this state, the company can only rely on financing to "stay alive". By the end of 2024, its asset-liability ratio was as high as 215.6%, with current liabilities far exceeding current assets. In the long run, Zejing Electronics urgently needs to shift from "cost advantages" to "technology premiums". The current financial data reflects that the company is more like a "hardware contract factory" in the wave of automotive intelligence, rather than a provider of technological solutions. If it cannot quickly narrow the gap with competitors such as Huawei in AR-HUD technology, leverage the IPO to improve the balance sheet, optimize cash flow, then in this round of industry elimination in the automotive sector, even with a 16.2% market share, it may still face difficulties due to its fragile financial structure.