Risk Analysis Report on 717 Million Yuan Accounts Payable of Fu'en Co., Ltd.

Based on the information I obtained, here is a detailed risk analysis report on the 717 million yuan accounts payable of Fu’en Co., Ltd.

According to the prospectus of Fu’en Co., Ltd. and media reports, as of the end of the first half of 2025, the

, accounting for of the company’s total liabilities of 835 million yuan [1].

Specific composition is as follows:

Item	End of 2022	End of 2023	End of 2024	End of June 2025
Notes Payable	546 million yuan	405 million yuan	527 million yuan	524 million yuan
Accounts Payable	146 million yuan	91 million yuan	199 million yuan	193 million yuan
Total	692 million yuan	496 million yuan	726 million yuan	717 million yuan

Accounts payable are mainly formed by payments for materials, labor services, engineering and equipment; notes payable are mainly formed by the company issuing bank acceptance bills to pay suppliers for purchases [1].

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for notes payable and accounts payable. During the reporting period, the interest expenses of Fu’en Co., Ltd. were only 119,100 yuan, 7,200 yuan, 529,500 yuan and 881,600 yuan respectively, while the interest income during the same period reached 5,692,200 yuan, 7,177,700 yuan, 9,196,500 yuan and 2,853,800 yuan respectively [1].

As of the end of the first half of 2025, the monetary funds, other debt investments and non-current assets due within one year of Fu’en Co., Ltd. are

, of which other debt investments and non-current assets due within one year are mainly principal and interest of large bank certificates of deposit [1].

Due to factors such as exchange gains and interest income, the financial expenses of Fu’en Co., Ltd. during the reporting period were

respectively, indicating the company’s high capital management efficiency [1].

Notes payable and accounts payable together account for 85.87% of total liabilities. Such a highly concentrated liability structure means:

• High supplier concentration; changes in major suppliers may affect the stability of the company’s procurement
• Debt repayment periods are relatively concentrated, which may lead to short-term repayment pressure

The carrying value of accounts receivable of Fu’en Co., Ltd. was 246 million yuan, 255 million yuan, 274 million yuan and 354 million yuan respectively [1]. Attention should be paid to the following aspects of accounts payable turnover:

• The collection period from downstream customers is longer than the payment period to upstream suppliers
• Capital turnover efficiency may be affected

Zhengkai Group is both a supplier and a customer of Fu’en Co., Ltd. As of the end of June 2025, the accounts payable of Fu’en Co., Ltd. to Zhengkai Textile Co., Ltd. is

, accounting for about 3.4% of total accounts payable [2]. Although the amount is small, continuous attention should be paid to related party transactions.

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Risk Dimension	Risk Level	Explanation
Solvency Risk	🟢 Low	Adequate monetary funds; about 700 million yuan can cover the 717 million yuan payables
Cost Risk	🟢 Low	Interest-free liability; negative financial expenses
Liquidity Risk	🟡 Medium	Single liability structure; high concentration of payables
Related Party Transaction Risk	🟢 Low	Small amount of related party payables, accounting for only 3.4%
Overall Rating	🟢 Low Risk

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The

, mainly based on the following:

1. Sufficient Capital Guarantee
   : The company holds nearly 700 million yuan in high-liquidity assets (monetary funds, large certificates of deposit, etc.), which is sufficient to cover the total accounts payable

2. Advantage of Interest-Free Liability
   : As operating liabilities, notes payable and accounts payable do not require interest costs, which is conducive to the company maintaining low financial costs

3. Sound Operating Status
   : From 2022 to 2024, the cumulative net profit was 757 million yuan, and the cumulative net cash flow from operating activities was 786 million yuan, with stable profitability and cash flow conditions [3]

4. In Line with Industry Characteristics
   : The textile industry generally uses bill settlement, and the scale of accounts payable matches the company’s business scale

• Continuously track the 2025 second-half performance (a decline is expected)
• Pay attention to the capacity digestion of IPO fundraising projects
• Monitor the impact of changes in international trade policies on export business

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[1] Eastmoney.com - Fu’en Co., Ltd.'s IPO to Be Reviewed: Supplier and Customer Invests at Low Cost, Proposed Fundraising Exceeds Net Assets (https://guba.eastmoney.com/news,cjpl,1644008105.html)

[2] Supplementary Legal Opinion of Grandall Law Firm (Hangzhou) on the Initial Public Offering and Listing on the Main Board of Hangzhou Fu’en Co., Ltd. (http://dataclouds.cninfo.com.cn/sjother2/documents/2025/20251121/3c1f0c89174047c6bf6865a519a4da33.pdf)

[3] Sponsorship Letter of CITIC Securities Co., Ltd. on the Initial Public Offering and Listing of Hangzhou Fu’en Co., Ltd. (http://reportdocs.static.szse.cn/UpFiles/rasinfodisc1/202506/RAS_202506_242105F00D4B55A7294B6BB8CB615D2B3DAF63.pdf)