Hairou Innovation IPO: Less than three years of cumulative losses exceeding 2.8 billion yuan, over 5 billion yuan in redeemed liabilities, and early investors' privileges can be restored, with going public as the only way out?

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Recently, Shenzhen Hairou Innovation Intelligent Technology Group Co., Ltd. (hereinafter referred to as “Hairou Innovation”) launched a sprint to the Hong Kong Stock Exchange, with Goldman Sachs and CITIC Securities serving as joint sponsors. Hairou Innovation’s IPO fundraising will mainly be used for technological R&D upgrades, capacity expansion, and replenishing working capital.

Although Hairou Innovation is a leading global ACR solution provider with a market share exceeding 30% and considerable revenue growth, it is currently in a typical “blood-spattered expansion” stage. Ongoing operational losses, high marketing investments, combined with huge debt obligations from earn-out agreements, all create uncertainty in the company’s operations.

In addition, during the reporting period, the company’s redeemed liabilities increased from 2.89B yuan to 3.96B yuan, and after completing Pre-IPO financing in early 2026, it further rose to 5.07B yuan. The interest expense on redeemed liabilities alone exceeds 200 million yuan annually, eroding profits and amplifying accounting losses. More critically, although early investors’ redemption rights and other special rights were temporarily suspended during the listing application, if the company withdraws the application voluntarily, is rejected, or fails to complete the listing within 18 months, these rights will automatically be restored. This means that going public is not only a financing method but also a key exit to relieve pressure from earn-out agreements and ease the capital chain crisis. If the listing process is delayed, the company will face liquidity shocks and control risks caused by concentrated investor exercising their rights, severely testing financial stability.

Less than three years of cumulative losses exceeding 2.8 billion yuan, nearly half of revenue from top five clients, sales expense rate far exceeding gross profit margin

Hairou Innovation was founded in 2016 by Chen Yuqi, Xu Shengdong, and Fang Bing in Shenzhen, focusing on R&D and deployment of ACR warehouse robots, growing over ten years into a global top automation warehousing solution provider. In recent years, revenue has continued to grow rapidly, but the company is mired in huge losses. From 2023 to September 2025, the company’s revenue was 807 million yuan, 1.36 billion yuan, and 1.26B yuan respectively. During the same period, the annual (period) losses were 1.01B yuan, 1.26B yuan, and 589 million yuan, totaling a loss of 2.85 billion yuan in less than three years.

(Source: Company Prospectus)

Low gross profit margin is the core reason for Hairou Innovation’s “poor-looking” profits. Data from the prospectus shows that the company’s gross margin increased as revenue outside mainland China grew, from 16% in 2023 to 28.9% in the first three quarters of 2025. However, this level of profitability remains relatively low in the robotics and smart warehousing industry, mainly due to product mix changes, strong bargaining power of major clients, and intensified market competition.

(Source: Company Prospectus)

During the reporting period, gross profit margins in mainland China were 18.7%, 21.1%, and 20.0%, while overseas markets in China had gross margins of 45.7%, 41.4%, and 43.9%, more than double that of the domestic market. Hairou Innovation explained in the prospectus that overseas clients in China demand higher standards for service throughout the project lifecycle, driving continuous demand for value-added services, which can generate recurring revenue and structurally higher gross margins. In contrast, the domestic market is characterized by fiercer competition and higher price sensitivity, often limiting project pricing space and resulting in lower profit margins.

(Source: Company Prospectus)

With such low gross margins, the company’s profit space is limited, and high operating expenses further erode profits.

First, high marketing expenses are a key factor dragging down Hairou Innovation’s performance and causing ongoing losses. The prospectus shows that during the reporting period, sales and marketing expenses remained high, with 424 million yuan, 489 million yuan, and 386 million yuan in the first three quarters of 2023, 2024, and 2025, totaling nearly 1.3 billion yuan. In terms of expense ratio, sales expenses once reached 52.7% in 2023, but as revenue base expanded, the ratio decreased from 52.7% in 2023 to 30.5% as of September 30, 2025.

Second, high R&D expenditure is also a significant factor in the company’s losses. In 2023, 2024, and the first three quarters of 2025, R&D expenses totaled 900 million yuan. Although the R&D expense ratio decreased from 38.3% in 2023 to 20.4% in the first three quarters of 2025, the absolute amount remains high.

Additionally, the company’s revenue still depends on a few major clients. The prospectus shows that revenue contribution from the top five clients surged from 32.1% in 2023 to 48.2% in the first three quarters of 2025, with nearly half of revenue concentrated among these five clients. Dependence on the first-largest client is especially prominent, with revenue share rising from 15.6% in 2023 to 30.4% in the first three quarters of 2025, amounting to 384 million yuan, nearly doubling in just over two years. This deep reliance on a single client means the company’s performance is highly linked to the capital expenditure and cooperation stability of key clients. If core clients reduce orders due to strategic adjustments, supply chain diversification, or market competition, or if cooperation relationships deteriorate, Hairou Innovation faces significant revenue volatility risks, and its profitability and business growth resilience could be directly impacted.

(Source: Company Prospectus)

Over 5 billion yuan of earn-out redemption liabilities, early investors’ rights can be restored, listing may be the only way out?

For Hairou Innovation, going public is not just a financing tool but also an exit to relieve earn-out obligations and ease capital chain pressures.

By the end of the first three quarters of 2023, 2024, and 2025, the company’s current liabilities continued to rise rapidly, reaching 4.26B yuan, 5.58B yuan, and 6.39B yuan respectively. The main factor driving this increase is the redemption obligations arising from multiple rounds of financing with earn-out agreements.

The prospectus shows that at each period-end, the company’s redeemed liabilities were 2.89B yuan, 3.51B yuan, and 3.96B yuan, accounting for over 62% of current liabilities, dominating the liability structure. According to public media reports, in January 2026, Hairou Innovation completed Pre-IPO + Series financing, attracting private equity firms such as Atlantic Capital Group, Fong Yuan Capital, and IDG Capital. As a result, the company raised approximately “RMB 1.25B + USD 418 million,” roughly 4.13B yuan. Subsequently, redeemed liabilities increased to 5.07B yuan.

(Source: Company Prospectus)

Moreover, interest expenses on redeemed liabilities further erode profits and magnify accounting losses. In 2023, 2024, and the first three quarters of 2025, interest on redeemed liabilities was 211 million yuan, 240 million yuan, and 212 million yuan respectively.

(Source: Company Prospectus)

Finally, according to the special rights clauses disclosed in the prospectus, Hairou Innovation faces notable risks related to earn-out agreements. The company granted early investors rights such as redemption, preemptive subscription, anti-dilution, and director appointment. Although the redemption rights were temporarily suspended during the listing application, there are clear automatic restoration conditions: if the company voluntarily withdraws the listing application, is rejected by regulators, or fails to complete a qualified listing within 18 months after submission, these rights will re-activate. Such earn-out arrangements with restoration clauses create a strong link between the company’s financial stability and the listing process. If the listing is delayed, the company will face severe liquidity shocks and control rights pressures.

(Source: Company Prospectus)