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Written by: Haichuan; Edited by: Li Li

On January 14, 2026, Hangzhou Fuen Co., Ltd. (hereinafter referred to as “Fuen Co.”) successfully registered for a mainboard IPO. Fuen Co.'s mainboard IPO was accepted on June 24, 2025, with CITIC Securities as the sponsor. It was approved at the meeting on December 26, 2025, and submitted for registration on December 29 of the same year.

For this listing, Fuen Co. plans to raise 1.25 billion yuan to fund an integrated project for environmentally friendly textured yarn fabrics, a high-end environmentally friendly recycled materials research institute, and a green intelligent manufacturing project. However, given that current production capacity is not fully utilized and downstream brand clothing stores are closing at an accelerating rate, the risk of capacity digestion for Fuen Co. cannot be overlooked. Additionally, considering the company’s pre-IPO cash-out dividends, this sudden distribution of profits before the IPO, followed by a need for financing to expand production, clearly shifts future risks onto public investors. This has also raised questions about the reasonableness and necessity of the fundraising in this listing.

Suspicious Equity Holding

The prospectus shows that for this IPO, Fuen Co. intends to raise 1.25 billion yuan mainly for the recycled environmentally friendly textured yarn fabric integrated project (File No. 82, 2023), a high-end environmentally friendly recycled materials research institute, and a green manufacturing project.

Fuen Co. was formerly “Xiaoshan Fuen Textile Co., Ltd.” (hereinafter “Fuen Ltd.”), established in 1997 with a registered capital of 1 million yuan. It was jointly founded by Wang Enwei (holding 43.34%), Han Youxian (3.33%), Zhu Dahai (3.33%), Wang Weicheng (5%), Lu Jatu (3.33%), and the Yinan Village Economic Cooperative of Jingjiang Town, making it a village-run joint venture. Among them, Han Youxian, Zhu Dahai, Wang Weicheng (Wang Enwei’s brother), and Lu Jatu are all villagers of Yinan Village, with their contributions entirely funded by Wang Enwei, acting as Wang Enwei’s nominee shareholders. Fuen Co. states in the prospectus that Wang Enwei chose to hold some shares via nominees to “ensure the number of shareholders meets the minimum requirement for establishing a limited liability company.”

On December 5, 2020, Yinan Village Economic Cooperative transferred all its shares in Fuen Ltd. (corresponding to 416,700 yuan in capital) to Wang Enwei. On the same day, Fuen Ltd. held a shareholders’ meeting approving an increase in registered capital to 8.6 million yuan, with Wang Enwei investing an additional 3.75 million yuan, Han Youxian 966,700 yuan, Zhu Dahai 966,700 yuan, Lu Jatu 966,700 yuan, and Wang Weicheng 950,000 yuan, totaling 7.6 million yuan in new capital. After this capital increase, Wang Enwei’s shareholding rose to 53.49%, while Han Youxian, Zhu Dahai, Wang Weicheng, and Lu Jatu each held 11.63%. Thus, Fuen Ltd., originally a village-run joint venture, became a private company fully owned by Wang Enwei.

In July 2002, Lu Jatu transferred his 1 million yuan stake in Fuen Ltd. to Wang Enwei. In August 2011, Zhu Dahai, Han Youxian, and Wang Weicheng transferred their combined 3 million yuan stake to Wang Enwei. All previous arrangements of nominee shareholding have thus been legally解除.

It is worth noting that the reason Wang Enwei initially chose to have Han Youxian and others hold shares on his behalf was “to meet the minimum shareholder requirement.” However, during the second capital increase, continuing to have Han Youxian and others simultaneously invest large sums seems unnecessary. Moreover, after the December 2000 capital increase, the shareholding proportions of Han Youxian and others increased significantly, raising questions.

Some analysts believe that Wang Enwei’s decision to have Han Youxian and others make large investments in December 2000 was likely to avoid unclear personal fund sources, requiring dispersed investments from multiple people. According to public records, Wang Enwei was born in 1955, with a junior high education, and before founding Fuen Ltd., served as the director of Yinan Textile Factory in Xiaoshan. In 2000, at age 45, Wang Enwei invested 7.6 million yuan into Fuen Ltd., a substantial sum at the time.

According to the Company Law of the People’s Republic of China and related regulations, individual shareholders must clarify their fund sources when increasing capital to ensure legality, and companies must retain relevant proof (such as bank transfer records, income certificates) for verification. Did Wang Enwei, Han Youxian, Zhu Dahai, Wang Weicheng, and Lu Jatu clearly explain their fund sources during the December 2000 capital increase? What was Wang Enwei’s true purpose in continuing to have Han Youxian and others make large investments? These questions are not clearly answered in the prospectus or inquiry responses.

“Precise” Cash-out Dividends

As of the signing date of the prospectus, Paya Holdings held 64 million shares, accounting for 36.57% of the company, making it the controlling shareholder. The actual controllers are Wang Enwei (father), Wang Neili (eldest daughter), and Wang Xuelin (daughter-in-law), who directly or indirectly control 83.89% of the total shares. Additionally, Wang Enwei’s youngest daughter and Wang Neili’s sister, Wang Neizhi, holds 4.57%, giving the Wang family a total shareholding of over 88%, in an absolute controlling position.

As a typical family business, Fuen Co. has highly concentrated ownership within the Wang family, and its core decision-makers are all family members. The prospectus discloses that founder Wang Enwei has stepped back from frontline management, currently serving as a director. His eldest daughter, Wang Neili, born in 1981, is now the chairwoman of Fuen Co., and her son-in-law Wang Xuelin is the general manager.

From these positions and shareholding arrangements, it is evident that Wang Enwei values his family members and family enterprise highly. Moreover, Fuen Co. engaged in a sudden dividend payout before the IPO. The prospectus shows that in 2022, the company paid out 381 million yuan in cash dividends, far exceeding its net profit of 277 million yuan that year. Some investors questioned whether this was a “clearance dividend.” Since Wang Enwei’s family holds over 88%, more than 335 million yuan of the dividend payout flowed into their hands.

In recent years, regulators have intensified efforts to crack down on sudden and clearance-style dividends, including listing pre-IPO large dividends as a negative factor in IPO review. According to the Shenzhen Stock Exchange’s IPO review rules, companies planning to go public that have distributed dividends exceeding 50% of net profit over the same period and with a total dividend amount over 300 million yuan, especially if more than 20% of the raised funds are used for working capital or debt repayment, are not allowed to list.

Data shows that from 2022 to 2024, Fuen Co. achieved net profits of 277 million, 229 million, and 275 million yuan respectively, totaling 781 million yuan over three years. The 2022 dividend of 381 million yuan accounts for approximately 48.78% of the cumulative net profit, narrowly avoiding the 50% threshold, which some interpret as a strategic transfer of benefits to the family.

In fact, behind such large dividends, the company’s cash flow and debt repayment indicators are not optimistic. The prospectus indicates that after the 2022 dividend, Fuen Co.’s cash and cash equivalents were only about 101 million yuan (as of the end of 2023). By the end of 2024, the current ratio was 1.23 and the quick ratio was 0.91, both significantly below safe levels. Clearly, after this “exhaustive” dividend, the company’s short-term solvency has sounded an alarm.

Top Five Customers Contribute 70% of Revenue

For this IPO, Fuen Co. plans to raise 1.25 billion yuan mainly for the recycled environmentally friendly textured yarn fabric integrated project (File No. 82, 2023), a high-end environmentally friendly recycled materials research institute, and a green manufacturing project. Once completed, the company expects to add an annual capacity of 75 million meters of textured yarn fabrics and 5 million meters of plain fabrics, more than doubling its current capacity of 76 million meters.

However, based on current capacity utilization, external analysts are skeptical about the digestion capacity of the new capacity after full production. Data from 2022-2024 shows capacity utilization rates of 93.79%, 94.39%, and 92.92%, respectively—indicating near-full utilization. Additionally, the company’s financial data over the past three years shows limited growth prospects.

Financially, from 2022 to 2024, Fuen Co. achieved revenues of 1.764 billion, 1.517 billion, and 1.813 billion yuan; net profits of 277 million, 229 million, and 275 million yuan. Performance has fluctuated significantly. Notably, in 2023, revenue declined by 14%, and net profit dropped by 17.11%. The company explains in the prospectus that in 2022, some terminal brands increased fabric stockpiles to mitigate potential risks from public health events, which affected procurement plans in 2023, leading to a decline in main business revenue.

Beyond external factors like the pandemic, the highly concentrated customer base is a key risk. Downstream clients include brands like H&M, Uniqlo, GU, ZARA, Peacebird, and Lilang. From 2022 to 2024, the top five apparel brands accounted for about 70% of revenue, indicating high customer concentration risk.

It is also noteworthy that amid high inflation and a sluggish economy, many domestic and international fashion brands face severe survival challenges. In 2024, about 3,546 physical stores in China closed, with major brands like Metersbonwe and Semir closing large numbers of stores. For example, Peacebird closed 835 stores.

Similarly, H&M, a key client of Fuen Co., is also struggling. In 2019, H&M had over 500 stores in China, but by the end of 2024, that number had fallen to 300. Globally, H&M closed 116 stores in FY2024 and plans to close another 190 in FY2025.

In this context of idle capacity and widespread store closures among downstream brands, Fuen Co. still plans large-scale financing to expand capacity. Coupled with the pre-IPO cash-out dividends, this pattern of rapid dividend distribution followed by aggressive expansion appears to be appropriating early profits and transferring future risks to public investors, raising doubts about the rationality and necessity of the fundraising.

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