Assessment of Customer Concentration and Accounts Receivable Bad Debt Risks for Husong Technology

Based on the collected information, I now provide you with a comprehensive assessment and analysis of Husong Technology’s customer concentration and accounts receivable bad debt risks.

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Husong Technology Group Co., Ltd. is a provider of intelligent production line platforms for process industries, focusing on intelligent production line solutions for micro-nano materials. According to data disclosed in the prospectus, the company has extremely high customer concentration [1]:

Report Period	Revenue Share of Top 5 Customers	Revenue Share of Largest Single Customer
2022	96.0%	71.9%
2023	92.1%	43.7%
2024	85.1%	41.7%
2025H1	97.0%	47.4%

: In H1 2025, customer concentration rebounded to an extremely high level of 97%, indicating that the company’s dependence on a small number of customers has not been effectively improved, but has further intensified [1].

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Husong Technology’s average turnover days of trade receivables and notes show a significant deterioration trend [1]:

• 2024
  : 88 days
• H1 2025
  :
  511 days
  (up 480.7%)

The sharp deterioration of this indicator shows that the company’s collection capacity has dropped significantly, and accounts receivable are seriously stagnant.

Period	Net Cash Flow from Operating Activities
2024	-RMB 88.308 million
H1 2025	-RMB 66.787 million

Although the company recorded a book net profit of RMB 15.298 million in 2024, operating cash flow has remained negative, indicating poor profit quality and serious insufficiency in actual collection capacity [1].

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Based on financial data, Husong Technology has the following bad debt risk signals:

Risk Dimension	Assessment Result	Risk Level
Customer Concentration	Top 5 customers account for 97%	Extremely High
Account Age Structure	Turnover days increased from 88 days to 511 days	Extremely High
Cash Flow Status	Sustained net outflow	High
Single Customer Dependence	Largest customer accounts for 47.4%	High
Performance Volatility	H1 2025 revenue decreased by 73.5% YoY	High

According to historical data from the 2017 annual report (the company was listed on the NEEQ before), its accounts receivable bad debt provision accrual policy is as follows [2]:

Account Age	Accrual Ratio
Within 1 year	1%
1-2 years	10%
2-3 years	20%
3-4 years	50%
Over 4 years	100%

If the current accounts receivable aging structure deteriorates and a large amount of receivables fall into the age range of over 1 year, the bad debt provisions to be accrued in accordance with the above policy will have a significant impact on profits.

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High customer concentration (97%)
       ↓
Deterioration of single customer's operations / Termination of cooperation
       ↓
Failure to collect accounts receivable
       ↓
Bad debt losses erode profits
       ↓
Risk of cash flow breakdown
       ↓
Short-term debt repayment pressure (As of June 2025, cash reserves dropped to RMB 170 million, a significant decrease from RMB 432 million at the end of 2024) [1]

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Assuming a default by a major customer among the top five customers, the impact under different bad debt ratio scenarios is as follows:

Bad Debt Ratio	Estimated Impact Amount (as % of 2024 Revenue)	Impact on Net Profit
5%	Approximately RMB 35.5 million	Fully offsets 2024 net profit
10%	Approximately RMB 71 million	Equivalent to 10% of 2024 revenue
20%	Approximately RMB 142 million	Far exceeds the company’s bearing capacity

• Cash Burn Rate
  : From H2 2024 to H1 2025, the semi-annual net cash outflow was approximately RMB 132 million (RMB 432 million - RMB 170 million × 2 + adjustments)
• Number of Months of Cash Reserve Support
  : At the current burn rate, cash reserves can support operations for approximately
  7-8 months

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Assessment Dimension	Comprehensive Score	Risk Level
Customer Concentration Risk	9/10	Extremely High
Accounts Receivable Collection Risk	8.5/10	High
Adequacy of Bad Debt Provisions	7/10	Medium-High
Liquidity Risk	7.5/10	High
Comprehensive Risk Rating	—	High Risk

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1. High Alert
   : A customer concentration rate of 97% means the company’s performance fully depends on the cooperation stability of a small number of customers
2. Focus on Account Age
   : A turnover period of 511 days indicates a significant deterioration in accounts receivable quality; close attention should be paid to changes in account age distribution
3. Cash Flow Monitoring
   : Continuously track the cash burn rate and assess short-term solvency
4. Customer Diversification
   : The company needs to accelerate customer expansion to reduce dependence on single customers
5. Industry Cycle
   : Changes in the prosperity of the downstream new energy industry will directly affect customers’ payment capacity and willingness

: In view of the above multiple risk factors, when evaluating the investment value of Husong Technology, investors should take customer concentration and accounts receivable bad debt risks as core considerations and make prudent decisions.

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[1] OFweek Intelligent Manufacturing Network - “Husong Technology Spurts Towards HKEX Listing: Obvious Performance Volatility, Extreme Dependence on a Small Number of Customers” (https://m.ofweek.com/im/2026-01/ART-201900-12003-30678656.html)

[2] Eastmoney.com - “Husong Intelligence 2017 Annual Report” (http://pdf.dfcfw.com/pdf/H2_AN201804201127469495_1.pdf)