From Luoyang Bearing Factory to Listed Company: LYC’s Mixed-Ownership Reform and Capitalization Journey

If the birth of Luoyang Bearing was a historical choice, then its two rounds of mixed‑ownership reform were an imperative self‑revolution.

In 2004, the book debt of Luoyang Bearing Group reached 2.4 billion yuan, with annual interest expenses exceeding 100 million yuan. Business operations once came to a standstill, and many employees were laid off. At that time, Henan Province introduced Yongmei Group for restructuring, but this did not fundamentally resolve Luoyang's debt and institutional problems. Disputes over old debts persisted, and the asset transfer for the new company was repeatedly delayed.

The pivotal step that truly steered Luoyang toward a modern corporate system occurred during the “Battle for Luoyang Bearing” in 2006. At that time, the Luoyang State‑owned Assets Supervision and Administration Commission signed a framework agreement with the world's second‑largest bearing manufacturer, Germany's Schaeffler Group, which proposed to acquire Luoyang Bearing Group for 1.1 billion yuan. The news sparked an uproar. The China Bearing Industry Association urgently petitioned relevant state departments, strongly opposing the foreign takeover on grounds of national industrial security. Under mounting pressure, a joint investigation team from five ministries visited Luoyang and ultimately blocked the full acquisition, allowing only minority stake or partial cooperation.

The “Battle for Luoyang Bearing” ended as a victory for China's domestic industry, but the company's operational difficulties remained unresolved. Over the following decade, Luoyang Bearing struggled to survive. From 2016 to 2022, its revenue fluctuated between 3 billion and 5 billion yuan, and net profit attributable to parent companies swung wildly, with another loss in 2022.

The real turning point came in 2022. That year, Luoyang Bearing earnestly implemented the three‑year action plan for state‑owned enterprise reform, and in line with the national “Technology‑Reform Demonstration” enterprise requirements, formally launched mixed‑ownership reform. Unlike previous simple debt restructurings, this reform was more systematic – not only to introduce capital, but also to bring in market‑oriented mechanisms, modern governance structures, and management concepts.

After two rounds of mixed‑ownership reform, Luoyang Bearing introduced eight high‑quality strategic investors, including Zhengzhou Coal Mining Machinery Group, AVIC Industry Investment Co., Ltd., and Beijing Guochuang New Energy Vehicle Equity Investment Fund Partnership, achieving a largely diversified equity structure.

This reform brought not only capital but also a renewal of mechanisms. On January 27, 2024, the founding conference of Luoyang Bearing Group Co., Ltd. was held, marking a major step forward in the mixed‑ownership reform and laying a solid foundation for the company's listing. Driven by the reform, in 2023, while the industry remained flat year‑on‑year, Luoyang Bearing's revenue grew by 30.6%, and net profit grew by 300%, with key operating indicators leading the industry's major enterprises.

Wang Xinying, Party Secretary and Chairman of Luoyang Bearing, said with emotion at the unveiling ceremony: “The establishment of the new Luoyang Bearing marks a solid step towards professionalism, standardisation, and market orientation, opening a new era for Luoyang Bearing.” Jiao Chengyao, Party Secretary and Chairman of Zhengzhou Coal Mining Machinery Group, also reviewed the phoenix‑like rebirth of Luoyang Bearing: through mixed‑ownership reform, the three‑system reform, and a series of measures, the company's vitality and operational efficiency steadily improved, and it remained profitable for six consecutive years.

Notably, during the reform, Luoyang Bearing also implemented an employee stock ownership plan for core staff, with an equity increase ratio of 10%. After the formation of the ownership structure – Guohong Group holding about 38%, strategic investors about 52%, and core staff about 10% – the institutional vitality was unleashed. The introduction of equity incentives tied nearly a thousand core employees to the company's fate, and this return of a “sense of ownership” was a key factor in the rejuvenation of the old state‑owned enterprise.

After the mixed‑ownership reform, the pace of Luoyang Bearing's capitalisation accelerated significantly.

In July 2024, China Securities Co., Ltd. announced that Luoyang Bearing Group had formally filed for coaching with the Henan Securities Regulatory Bureau, preparing for its A‑share IPO. At that time, the company had a clear equity structure: Luoyang Guohong Investment Holding Group held 38.003% as the largest shareholder; Zhengzhou Coal Mining Machinery Emerging Industry Investment Fund held 15% as the second largest; and the well‑known listed bearing company XCC (Wuzhou Xinchun) became the fourth largest shareholder with 8.5%, reflecting strong recognition from industry capital.

On November 28, 2025, Luoyang Bearing's IPO application was officially accepted by the Shenzhen Stock Exchange, and entered the enquiry stage on December 14. On January 5, 2026, the China Securities Association announced the first batch of on‑site inspection candidates for IPO applicants in 2026, and Luoyang Bearing was on the list. On‑site inspection is one of the strictest regulatory procedures in IPO review – in fact, among the 11 companies selected for inspection, only Luoyang Bearing, Yuexin Semiconductor, and Pinzhun Laser had entered the enquiry stage, while the other 8 were still in the “accepted” status, indirectly confirming the relative speed of Luoyang Bearing's IPO progress.

Facing the regulatory “big exam,” Luoyang Bearing, with the coordinated efforts of its intermediaries, passed the on‑site inspection smoothly with a solid and standardised fundamental profile. After completing two rounds of enquiry responses, the company quickly moved to the review stage and successfully passed the listing review on May 19, 2026.

The following day, Luoyang Bearing's ChiNext IPO review status was updated to “Submitted for Registration.” It is now only one step away from a successful listing – waiting for the CSRC's registration approval. Once registered, this veteran state‑owned enterprise, bearing the glory of the “First Son of the Republic,” will officially open a new chapter in the capital market. However, the listing prospectus also clearly states that “the IPO and listing on the ChiNext are subject to the CSRC's registration process, and there is uncertainty” – Luoyang Bearing's capitalisation journey has only completed its first half.

According to the prospectus, Luoyang Bearing plans to raise approximately RMB 1.8 billion through this offering, with China Securities Co., Ltd. as the sponsor, BDO China Shu Lun Pan Certified Public Accountants as the auditor, and Beijing Kangda Law Firm as the legal counsel. The proceeds will be invested in five projects in priority order: RMB 192 million for the development and application of high‑speed train bogie bearings; RMB 789 million for the intelligent production construction of new energy bearings; RMB 428 million for the precision bearing industry upgrade project supporting major technical equipment; RMB 193 million for the industrialisation of high‑precision small slewing bearings; and RMB 197 million for bank loan repayment.

This RMB 1.8 billion fundraising plan essentially outlines Luoyang Bearing's strategic blueprint for the new era. High‑speed train bogie bearings – this signals that Luoyang Bearing is targeting the “peak” of domestic substitution in high‑speed railway bearings. In the past, China's high‑speed railway bearings were largely imported; Luoyang is now engineering and industrialising its earlier R&D achievements in high‑speed EMU bearings to achieve domestic substitution. The intelligent new energy bearing project corresponds to Luoyang's positioning in the wind power and new energy vehicle sectors, focusing on developing new energy vehicle hub bearing units, ball screws, and other precision components. The precision bearing industry upgrade for major technical equipment and the industrialisation of high‑precision small slewing bearings reflect Luoyang's continued deepening in its traditional strong areas.

In the narrative of the capital market, Luoyang Bearing tells a story of “domestic substitution” – being constrained and then breaking through independently – which aligns with the ChiNext's positioning of “innovation, creation, and entrepreneurship” as well as “new technologies, new industries, new business models, and new sectors.”

In terms of performance, Luoyang Bearing has delivered a remarkable report card. From 2023 to 2025, revenue grew from RMB 4.441 billion to RMB 6.034 billion, and net profit attributable to parent companies doubled from RMB 231 million to RMB 529 million. In 2025, the company seized multiple opportunities – the surge in wind power demand, accelerated domestic substitution, and lower steel prices – and net profit attributable to parent companies grew by over 110% year‑on‑year, with the comprehensive gross margin recovering to 21.99%.

However, entering 2026, the trend of slowing growth has been verified by solid data. In the first quarter of 2026, the company reported revenue of RMB 1.325 billion, up 6.14% year‑on‑year; net profit attributable to parent companies after deducting non‑recurring items was RMB 108 million, up only 6.04% year‑on‑year. This growth rate has significantly slowed compared with the doubling of 2025, which the company attributes to a combination of short‑term factors such as a high base of non‑recurring items, the impact of periodic policies in some markets, and exchange rate fluctuations. After the policy dividends recede, Luoyang Bearing faces a severe test of growth sustainability.

However, no company's capitalisation journey is without its dark clouds. Luoyang Bearing, in its pursuit of faster growth, has left behind several worrying risk factors.

The most prominent issue is high leverage. During the reporting period, the company's资产负债率 (debt‑to‑asset ratio) stood at 82.19%, 79.43%, and 79.57%, persistently hovering around the critical red line of 80%. The current ratios were 0.99, 1.01, and 1.07 – a ratio of 0.99 means that for every 1 yuan of current liabilities, there are only 0.99 yuan of current assets, indicating a short‑term liquidity gap. Liu Zhigeng, a well‑known financial and tax expert, told the media that high growth comes with high debt, with the debt ratio remaining near 80% for a long time, far exceeding the 60% safety line for manufacturing enterprises. Combined with a current ratio below the 1.2 warning line, the short‑term repayment pressure is significant.

Luoyang's high leverage is no accident; it reflects a common feature of the entire high‑end equipment manufacturing industry – “capital intensity”: large fixed asset investments and long payback cycles, with companies generally relying on debt financing to expand capacity. The company also candidly admits in its prospectus that its business is still in a rapid growth phase, with significant funding needs for operations and fixed asset investments, and it mainly relies on debt financing, leading to a high level of debt. Relatedly, accounts receivable are high – in 2025, receivables reached RMB 2.724 billion, accounting for 45.15% of revenue. Net operating cash flow in 2025 fell by 49.07% year‑on‑year, making earnings quality and sustainability a key market concern.

The second risk area is related‑party transactions. During the reporting period, Luoyang Bearing purchased bearing steel and other raw materials from related party Jiyuan Iron and Steel, with cumulative related purchases exceeding RMB 2 billion over three years. The actual controller of Jiyuan Iron and Steel, Li Yutian, is a current director of Luoyang Bearing. From 2023 to 2025, the amounts of related purchases were RMB 700 million, 714 million, and 623 million, accounting for 16.70%, 16.81%, and 11.62% of total purchases respectively. Such large‑scale and sustained related‑party purchases raise questions about whether the pricing is fair and whether there is room for benefit transfer – issues that regulators and investors are closely watching. Luoyang Bearing states in its prospectus: “If the company fails to strictly follow the related‑party transaction decision‑making procedures, or if internal controls over related transactions fail, or if the pricing is not fair, there may be risks of related parties using such transactions to harm the company or minority shareholders.”

The third hidden concern comes from external constraints. The 4.995% equity held by the sixth largest shareholder, AVIC Industry Investment Co., Ltd., was frozen by a court due to a trust dispute from June 17, 2025 to June 16, 2028, and had not been released as of the signing date of the prospectus. If this matter is not properly resolved, the company faces the risk of equity structure changes. In addition, obvious shortcomings have been exposed in safety production and labour management: in April 2024, a production safety accident occurred at a wholly‑owned subsidiary's forging workshop; and on the labour compliance side, there have been complaints of forced overtime and wage deductions.

Notably, Luoyang Bearing was selected for the first batch of on‑site inspections in 2026, underwent the strictest regulatory “big exam” in January 2026, and passed it smoothly. The regulatory inspection is a comprehensive stress test of a prospective listed company's compliance, and passing it suggests that Luoyang Bearing has made effective rectifications – at least some risks have been properly addressed. However, it also means that more hidden risks may have already been exposed and remedied; what truly deserves attention are the issues that have not yet been exposed or only surface later.

A widely discussed issue is the compliance loophole in the distribution system. Public records show that one of Luoyang Bearing's “Best Performance Award” distributors – Wuhan Lijiali Bearing Co., Ltd. – has had zero employees enrolled in social insurance since its establishment in 2018 through to its 2024 business report disclosure, which is clearly inconsistent with its claimed scale of being “the general agent for Hubei province with the largest inventory.” Even more concerning is that a partner of Lijiali's shareholder Wang Guangwen, named “Yuan Xiaofeng,” shares the same name as a core employee of Luoyang Bearing, “Yuan Xiaofeng,” who holds 2.448% through the employee stock ownership platform. This phenomenon of “same‑name” distributors with zero social insurance employees casts doubt on Luoyang's operational compliance.

At the internal governance level, the completeness of information regarding Chairman Wang Xinying is also disputed. Third‑party public information shows that Chairman Wang simultaneously holds equity as the sixth largest shareholder of Hunan Tianyan Machinery, and this holding is not fully disclosed in the prospectus – whether this constitutes a material undisclosed matter remains to be clarified.