Analysis of the Impact of ETEK (603005.SS) Controlling Shareholder's Cash-Out Event on Operational Stability

Based on public information, Chen Zejian (CHEN ZEJIAN), the actual controller of Wuhu ETEK Automotive Electronics Co., Ltd., conducted three equity transfers through platforms he controls such as Wuhu Jiatai between May and October 2022, indirectly cashing out approximately

[1]. It is worth noting that this cash-out occurred during the critical period when the company was preparing for its Shanghai Stock Exchange main board IPO, and the company was not yet listed at that time.

In addition to the controlling shareholder, several important shareholders also cashed out during the same period[2]:

• Chery Automobile (Ruichuang Investment)
  : Cashed out approximately RMB 600 million in total
  • Received RMB 50 million from equity transfer in June 2022
  • Cashed out RMB 550 million by transferring 10.9% of shares in January 2024
• Xiaomi Changjiang Industrial Fund
  : Cashed out approximately RMB 15 million
• Fosun Fund
  : Cashed out approximately RMB 80.86 million

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From a time perspective, more than three years have passed since the cash-out event, and the market has fully digested the relevant information[2]. During this period, the company’s operations have demonstrated strong resilience:

Indicator	Performance
Compound Revenue Growth Rate (2022-2024)	26.26%
Peer Ranking	9th among 21 companies
Profitability	Net profit margin of 25.04%, ranking among the top in the industry
Return on Equity	Top 30% in the industry

The company’s business not only remained unaffected after the cash-out but also achieved sustained and steady growth, indicating that the event has limited impact on the company’s short-term operational stability[3].

Despite the large-scale cash-out, the company’s equity structure remains relatively stable[1][2]:

• Actual Controller
  : Chen Zejian controls a total of
  34.36%
  of the voting rights of the shares, and remains the company’s actual controller
• Second Largest Shareholder
  : Chery Automobile holds
  14.99%
  of the shares through Chery Co., Ltd.
• Xiaomi Affiliates
  : Hold a total of
  14.07%
  of the shares through Xiaomi Changjiang Industrial Fund, Hainan Jimu, and Xiaomi Zhizao
• Institutional Investors
  : CICC Capital, Huaye Tiancheng, CITIC Securities, Cornerstone Capital, Fosun, etc. hold approximately
  15%
  of the shares in total

The company’s equity presents a diversified structure, with the introduction of multiple well-known investment institutions, which helps optimize the governance structure and enhance capital strength.

From the perspective of business operations, the company has demonstrated good business continuity[3]:

• Stable Management
  : Chen Zejian still serves as the chairman, presiding over the company’s strategic decision-making
• IPO Progressing Smoothly
  : The company’s Shanghai Stock Exchange main board IPO was accepted for review by the Listing Committee on January 20, 2026, with a proposed fundraising amount of RMB 1.5 billion
• Steady Business Growth
  : Revenue reached approximately RMB 3.5 billion in 2024, with all product lines maintaining growth momentum
• Solid Market Position
  : Maintains the top position in the segmented markets such as body domain controllers and remote physical keys

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The company has a deep binding relationship with Chery Automobile, which is both an advantage and a potential risk[1][3]:

• Large Amount of Related-Party Procurement
  : The company’s procurement amount from Chery and its related parties accounts for a relatively high proportion
• Customer Concentration
  : Chery is the company’s largest customer, with a high degree of dependence on a single customer
• Question of Independence
  : The prospectus shows that the regulator has raised inquiries about the fairness of the company’s related-party transactions

Data disclosed in the prospectus shows that there are concerns about the company’s R&D investment intensity[2]:

Item	ETEK	Industry Average
Average Annual Salary of R&D Personnel	RMB 144,500	RMB 261,000
Proportion of R&D Personnel	46.29%	—
R&D Expense Ratio	To be further disclosed	Industry Level

The annual salary of R&D personnel is significantly lower than the industry average (a gap of approximately 45%), which may affect the stability of core technical personnel and technological innovation capabilities.

There is a large gap between the company’s executive compensation and R&D personnel’s compensation[2]:

• Total executive compensation in 2024:
  RMB 13.0395 million
• Annual salary of controlling shareholder Chen Zejian:
  RMB 3.4551 million
• Total compensation of five core executives:
  RMB 8.268 million
  , accounting for
  63.4%
  of the total executive compensation

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• The cash-out occurred in 2022, and the market has fully digested the impact
• The company’s business maintains growth, and the IPO process is smooth
• The controlling shareholder still holds control of the company

• Independence of Related-Party Transactions
  : Whether the company can reduce its dependence on Chery after the IPO
• Sustainability of R&D Investment
  : Whether the company will increase R&D expenditure to maintain technological leadership
• Direction of Capital Operations
  : Whether the IPO fundraising can be effectively converted into performance growth

, based on the following main reasons:

1. More than three years have passed since the cash-out event, and the company’s business has maintained steady growth during this period
2. The controlling shareholder still holds 34.36% of the control, and the company’s strategic direction has not changed
3. The management team is stable, and the core team continues to perform their duties
4. The company maintains a leading position in segmented markets and has strong market competitiveness

: high dependence on related-party transactions, relatively low R&D investment, and imbalance between executive compensation and R&D investment. These factors may affect the company’s independence and sustainable development capabilities after the IPO.

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For investors paying attention to this company, it is recommended to focus on the following indicators:

1. Changes in Related-Party Transactions After IPO
   : Pay attention to the fairness of pricing in business transactions between the company and Chery
2. Changes in R&D Investment
   : Track the R&D expense ratio and the salary level of R&D personnel
3. Changes in Management Shareholdings
   : Pay attention to the shareholding behaviors of the controlling shareholder and executives after the IPO
4. Quality of Performance Growth
   : Endogenous growth capacity after excluding related-party transactions

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[1] Shanghai Stock Exchange - Prospectus (Application Draft) of Wuhu ETEK Automotive Electronics Co., Ltd. (https://static.sse.com.cn/stock/disclosure/announcement/c/202506/002079_20250620_NS00.pdf)

[2] Sina Finance - ETEK, Nurtured by Chery, Achieves RMB 3.5 Billion Annual Revenue and Files for IPO; Xiaomi and Fosun “Lock in Profits” Before Listing (https://cj.sina.cn/articles/view/6192937794/17120bb4202002n8v4)

[3] Shanghai Stock Exchange - Inquiry Letter on the Application Documents for the Initial Public Offering and Listing of Wuhu ETEK Automotive Electronics Co., Ltd. on the Main Board (https://static.sse.com.cn/stock/disclosure/announcement/c/202512/002079_20251226_0T8T.pdf)