Top Group's Sprint for Hong Kong Stocks: Behind a 22.5% three-year compound revenue growth, a consecutive 3.2 percentage point decline in gross profit margin reveals underlying concerns

Business Model: Cross-Industry Expansion from Automotive Components into Robotics

Top Biotech is positioned as an integrated systems solution provider serving automakers (OEMs) and humanoid robot developers. It pioneered the “Tier 0.5” business model, which differs from the traditional Tier 1 model, by working closely with customers throughout the entire product development process. After more than 40 years of development, the company has built a diversified product portfolio covering both core automotive components and emerging humanoid robot components. Its automotive components business started with vibration damping systems and expanded into interior functional components, chassis systems, automotive electronics products, and thermal management systems. The humanoid robot component business, based on the company’s technological accumulation in automotive components, mainly includes actuators and other core components.

As of December 31, 2025, the company’s business footprint spans 11 countries and 42 cities, with more than 1,800 overseas employees. Globally, it has over 100 manufacturing plants, 4 R&D centers, 6 technical support centers, 8 sales companies, and 4 overseas warehousing centers, forming a global production and service network.

Revenue Growth: Three-Year CAGR Reaches 22.5%, with a Significant Deceleration in 2025

Top Biotech has achieved relatively fast revenue growth in recent years. From 2023 to 2025, the company’s revenue was RMB 19.7 billion, RMB 26.6 billion, and RMB 29.6 billion, respectively, with a three-year compound annual growth rate (CAGR) of 22.5%. However, it is worth noting that the revenue growth rate in 2025 slowed sharply from 35.0% in 2024 to 11.2%, suggesting that growth momentum may be weakening.

The revenue growth is mainly driven by demand growth resulting from the expansion of the new energy vehicle market, but the decelerating growth trend should be watched closely.

Net Profit Volatility: Down 7.4% YoY in 2025

Different from the revenue growth trend, Top Biotech’s net profit exhibits a wave pattern of rising first and then falling. From 2023 to 2025, the company’s annual profits were RMB 2.15 billion, RMB 3.00 billion, and RMB 2.78 billion, respectively. Net profit increased 39.7% YoY in 2024, but decreased 7.4% YoY in 2025.

The prospectus shows that the decline in net profit in 2025 is mainly due to two factors: first, R&D expenses increased by RMB 272 million because the company expanded its R&D team and strengthened R&D efforts; second, administrative expenses increased by RMB 149 million, mainly due to the expansion of its overseas administrative team.

Three Consecutive Drops in Gross Margin: From 21.8% to 18.6%, a Cumulative Decline of 3.2 Percentage Points

Top Biotech’s gross margin has declined for three consecutive years, dropping from 21.8% in 2023 to 18.6% in 2025, a cumulative decrease of 3.2 percentage points.

By business segment, the gross margins of the company’s main products all show a downward trend:

• Vibration damping systems: from 22.6% to 19.3%
• Interior functional components: from 19.0% to 16.0%
• Chassis systems: from 21.9% to 18.0%
• Automotive electronics: from 18.6% to 15.7%
• Thermal management systems: from 17.9% to 15.6%

It is worth noting that the robot actuator system business, which only started generating revenue in 2023, saw a more pronounced decline in gross margin—from 80.4% down sharply to 27.6%. Over three years, it cumulatively fell by 52.8 percentage points, reflecting substantial profitability pressure faced during the commercialization of this emerging business.

Net Profit Margin Volatility and Downtrend: From 10.9% to 9.4%, Down 1.9 Percentage Points in 2025

Affected by the decline in gross margin and increased expenses, Top Biotech’s net profit margin rose briefly in 2024 but showed a clear downturn in 2025. From 2023 to 2025, the company’s net profit margins were 10.9%, 11.3%, and 9.4%, respectively.

In 2025, the net profit margin decreased by 1.9 percentage points YoY, mainly due to the combined impact of the gross margin decline and increases in R&D and administrative expenses. This trend indicates that while the company’s revenue growth slows, its profitability is also weakening.

Breakdown of Operating Revenue: Automotive Electronics Business CAGR of 546.2%

In terms of business structure, Top Biotech’s revenue mainly comes from five major automotive parts product lines, while the robot actuator system—an emerging business—is being cultivated.

The automotive electronics business is the standout performer. It grew from RMB 181 million in 2023 to RMB 2.769 billion in 2025, with a two-year CAGR of 546.2%. Its share of total revenue also rose from 0.9% to 9.4%. Although the base for the robot actuator system business is relatively small, it also achieved a CAGR of 208.5%.

Meanwhile, revenue from the traditional and advantaged business—vibration damping systems—declined. The CAGR for 2023–2025 was -0.5%, and its share fell from 21.8% to 14.4%.

By region, the company’s revenue mainly comes from the China market. In 2025, China accounted for 78.8% of revenue. The overseas revenue share decreased from 29.7% in 2023 to 21.2% in 2025.

High Customer Concentration: Top Five Customers Contribute More Than 65% of Revenue

Top Biotech faces a relatively high risk of customer concentration. In 2023, 2024, and 2025, revenue from the top five customers accounted for 63.4%, 67.1%, and 65.8% of total operating revenue, respectively. Over the same period, the revenue share from the largest customer was 39.8%, 28.4%, and 25.7%, respectively.

Although the revenue share of the largest customer shows a downward trend, overall customer concentration remains high. The prospectus shows that the company’s largest customer is a U.S.-leading new energy vehicle enterprise (“Customer A”), which entered the company’s supply chain in 2016. High customer concentration means the company’s operating performance will be affected to a significant extent by the business conditions of its major customers and changes in procurement policies, creating certain operating risks.

Moderate Supplier Concentration: Top Five Suppliers’ Purchase Share Decreases Each Year

Compared with customer concentration, Top Biotech’s supplier concentration is relatively lower and is declining. In 2023, 2024, and 2025, purchases from the top five suppliers accounted for 25.0%, 22.6%, and 20.5% of total purchases, respectively. Over the same period, the purchase share from the largest supplier was 12.4%, 9.4%, and 7.3%, respectively.

The company mainly procures raw materials and components such as steel, aluminum, rubber, polymer fibers, foam, fabrics, as well as plastics and injection-molded parts. The year-by-year decline in supplier concentration indicates that the company’s supply chain management capability is continuously improving and its reliance on any single supplier is decreasing.

Controlling Persons and Major Shareholders: Chairman Mr. Wu Holds 58.4%

As of the last date on which it was practically feasible to determine, Top Biotech’s shareholding structure is highly concentrated. Approximately 57.88% of the shares are held by Mico Hong Kong, which is wholly owned by Mr. Wu, the company’s executive director and chairman. Mr. Wu also directly holds approximately 0.52% of the company’s shares. Therefore, together, Mr. Wu and Mico Hong Kong hold approximately 58.40% of the company’s equity, making them the controlling shareholders of the company.

After the completion of the H-share offering, assuming that the over-allotment option is not exercised, the controlling shareholders’ shareholding proportion will be diluted, but they will still maintain control over the company. Highly concentrated shareholding may result in the controlling shareholder having absolute influence over major decisions of the company, and the interests of minority shareholders may be difficult to fully protect.

Risk Factors: Industry Competition and Profitability Decline as Major Challenges

Top Biotech discloses multiple risk factors in its prospectus, and investors should pay particular attention to:

2. Risk of Intense Industry Competition: Competition in the automotive industry and automotive parts industry is extremely fierce, and the company may be unable to continuously maintain its market position. With the rapid development of the new energy vehicle market, competition in the industry will further intensify.

3. Risk of Customer Dependence: A vast majority of the company’s revenue comes from a small number of major customers. If the company fails to retain existing customers or attract new ones, its operating performance will be materially affected.

4. Risk of Continued Gross Margin Decline: From 2023 to 2025, the company’s gross margin declined from 21.8% to 18.6%. If gross margin continues to decline, it will have a significant adverse impact on profitability.

5. R&D Risk: The company plans to expand its products into emerging industries such as humanoid robots. There is a possibility that its R&D efforts may not achieve the expected results, and the commercialization of new technologies and new products carries uncertainty.

6. Geopolitical Risk: The company’s overseas business accounts for approximately 20%. It faces risks related to geopolitical tensions and international trade frictions, such as tariffs, export controls, economic sanctions, and investment restrictions.

7. Uncertainty in Dividend Policy: Although the company’s historical dividend payout ratio is about 30%, future dividends declared may differ from historical circumstances, and the company cannot guarantee whether and when it will pay dividends.

Financial Challenges: Revenue Growth Slowing and Profitability Pressure Coexisting

Top Biotech’s current major financial challenges are reflected in three areas:

First, a significant slowdown in revenue growth. Revenue grew 35.0% in 2024, but the growth rate dropped to 11.2% in 2025, indicating that the company may face challenges such as market saturation or intensifying competition.

Second, continuous decline in profitability. Gross margin has declined three years in a row, and the net profit margin dropped significantly by 1.9 percentage points in 2025, reflecting weakening cost control capabilities or declining product competitiveness.

Third, unclear profitability prospects for emerging businesses. The gross margin for the robot actuator system business fell sharply from 80.4% to 27.6%. During the commercialization process, the business faces substantial profitability pressure, and whether it can become a future growth engine remains uncertain.

Peer Comparison: Gross Margin Below the Industry Average

Although the prospectus does not provide detailed peer comparison data, based on industry average figures, automotive parts companies’ gross margins are typically in the range of 20%–30%. Top Biotech’s gross margin of 18.6% in 2025 is already at a relatively low level within the industry and shows a continuous downward trend, which is worth investors’ attention.

Compared with international competitors, the company still has gaps in R&D investment and global expansion strategy. From 2023 to 2025, the company’s R&D expenditures were RMB 986 million, RMB 1.224 billion, and RMB 1.496 billion, respectively. R&D spending as a percentage of revenue remained around 4.9%–5.0%, which is lower than the typical 6%–8% R&D investment level of international leading automotive parts companies.

Click to view the full text of the announcement>>

Statement: The market carries risk; investment requires prudence. This article is automatically published by an AI large model based on third-party databases and does not represent Sina Finance’s viewpoints. Any information appearing in this article is for reference only and does not constitute personal investment advice. In case of any discrepancy, refer to the actual announcement. If you have any questions, please contact biz@staff.sina.com.cn.

Massive information, precise interpretation—find it all on the Sina Finance app

Responsible editor: Xiao Lang Express News