Xingyu Co., Ltd.'s Hong Kong IPO Journey: Receiving Employment Support and Terminating Contracts with Recent Graduates

This summer, 100 recent graduates joined Xingyu Co., Ltd., an A-share listed company, full of expectations for the future. However, not long after they joined, 107 of them were suddenly dismissed by Xingyu Co., Ltd.

Subsequently, many employees who were suddenly dismissed reported the incident to the European Union, the Hong Kong Stock Exchange, and other institutions.

Under pressure, Xingyu Co., Ltd. issued an apology statement, stating that it would provide corresponding compensation to the 107 recent graduates whose labor contracts were terminated.

This controversy surrounding the termination of contracts with recent graduates has brought to light more of Xingyu Co., Ltd.'s past employment practices.

A review of Xingyu Co., Ltd.'s previous Hong Kong IPO prospectus reveals that at the end of 2025, its labor dispatch ratio once exceeded the statutory limit of 10% of the total workforce. It had also previously been involved in failing to pay social security and housing provident fund contributions for its employees in full.

While the company continues to need to explain its employment issues, Xingyu Co., Ltd. has been receiving various government subsidies, including employment support, for a long time, totaling 451 million yuan from 2023 to 2025.

Against this backdrop, Xingyu Co., Ltd. is at a critical juncture in its quest for a Hong Kong IPO.

On August 15, Xingyu Co., Ltd. just received the filing notice from the China Securities Regulatory Commission regarding its overseas issuance and listing, marking another step forward in its Hong Kong IPO.

Filing a record does not mean that the listing has been approved. Xingyu Co., Ltd. still needs to complete procedures such as the Hong Kong Stock Exchange hearing. At this time, the sudden involvement in a large-scale dispute over the termination of contracts with recent graduates also means that the company may need to provide more explanations on labor compliance, employee rights, and even ESG aspects.

A contract termination brings up old labor disputes.

When the hundred fresh graduates joined Xingyu Co., Ltd., they probably didn't expect their first job to end so quickly.

On August 25, a notice from the Changzhou Municipal Human Resources and Social Security Bureau confirmed Xingyu Co., Ltd.'s brutal practice of large-scale layoffs.

The report shows that Xingyu Co., Ltd. recruited 440 college graduates from the class of 2026 this year, and then terminated the labor contracts of 107 of them, directly pointing out that "the method was simple and rigid and lacked sufficient and effective communication".

Under pressure, Xingyu Co., Ltd. issued a public apology two days later, admitting that the incident exposed "decision-making errors" and "management oversights".

The company then came up with a remedial plan, providing job-seeking and living allowances and free accommodation to the graduates who were laid off, and promised to provide further financial compensation to those who still had not found jobs after a period of time.

A temporary solution has been found to resolve a dispute that lasted for several days involving the termination of contracts by recent graduates.

This is not the first time Xingyu Co., Ltd. has needed to explain its employment issues.

As of the end of 2025, Xingyu Co., Ltd. had 2,984 dispatched workers, and its subsidiary Foshan Xingyu had an additional 120 dispatched workers.

Back then, the number of dispatched workers within the Xingyu Group system exceeded the red line that the number of dispatched workers used by the employing unit should not exceed 10% of its total workforce.

In its prospectus, Xingyu Co., Ltd. also admitted that the proportion of dispatched workers used by both the company and Foshan Xingyu had exceeded the legal limit.

This employment issue was only resolved before Xingyu Co., Ltd. submitted its second IPO application to the Hong Kong Stock Exchange. By the end of February this year, Foshan Xingyu had reduced the proportion of dispatched workers to below 10%, while Xingyu Co., Ltd. did not complete the rectification until the end of May.

Coincidentally, Xingyu Co., Ltd. has also failed to pay social security and other benefits for its employees in full.

From 2023 to 2025 and in the first quarter of 2026, the total difference in social security and housing provident fund contributions accounted for approximately 1.4%, 1%, 0.8%, and 0.7% of Xingyu Co., Ltd.'s revenue during the same periods, respectively. At the same time, some employees' social security and housing provident fund contributions were also paid through third-party agents, and there were also cases of insufficient contributions.

In stark contrast, less than a year before this incident involving the termination of contracts with recent graduates, Xingyu Co., Ltd. had been recognized for its performance in employment and social security.

In December 2025, the All-China Federation of Industry and Commerce, the Ministry of Human Resources and Social Security, and the All-China Federation of Trade Unions jointly awarded Xingyu Co., Ltd. the title of "National Advanced Private Enterprise in Employment and Social Security". It is one of only six private enterprises in Jiangsu Province to receive this award.

What's rather intriguing is that while the issue of employment constantly requires explanation, Xingyu Co., Ltd. has been a beneficiary of various employment support policies over the past few years.

From 2023 to 2025, Xingyu Co., Ltd. received government subsidies of RMB 118 million, RMB 175 million and RMB 158 million respectively, totaling RMB 451 million over the three years.

It is worth mentioning that these subsidies involve projects related to research and development and employment support.

From the excessive proportion of dispatched workers and the insufficient payment of social security and housing provident fund contributions for some employees, to the recent termination of contracts for 107 recent graduates, the labor compliance issues that have been exposed have forced the market to re-examine the fundamentals of Xingyu Co., Ltd.

The narrative of globalization is being challenged.

Xingyu Co., Ltd.'s main business is not complicated; it sells car lights to emerging electric vehicle manufacturers and automakers such as Volkswagen, BMW, and Mercedes-Benz.

In 2025, the company's revenue from automotive lighting products reached RMB 14.431 billion, accounting for 94.6% of total revenue. Among them, revenue from front lights and rear lights was RMB 8.04 billion and RMB 5.547 billion respectively, constituting the vast majority of revenue.

With the increasing penetration rate of new energy vehicles, Xingyu Co., Ltd. has seen its performance soar in the past few years, with revenue increasing from RMB 10.248 billion in 2023 to RMB 15.257 billion in 2025; during the same period, net profit also increased from RMB 1.102 billion to RMB 1.624 billion.

However, with the slowdown in the automotive market, Xingyu Co., Ltd. has inevitably been affected. Its revenue growth rate in the first half of 2026 was 1.87%, a slowdown of more than 15 percentage points compared with the same period in 2025.

This also brings pressure to collect payments. As of the end of June 2026, Xingyu Co., Ltd.'s total accounts receivable and notes receivable amounted to RMB 6.503 billion, accounting for more than 90% of its current revenue.

The changes in net cash flow from operating activities also offer a glimpse into the pressure Xingyu Co., Ltd. is facing. In the first half of 2026, net cash flow from operating activities was only 991 million yuan, a year-on-year decrease of 17.28%.

In other words, as competition among downstream vehicle manufacturers intensifies, Xingyu Co., Ltd. not only faces the pressure of slowing demand, but also has to bear the capital tied up due to longer payment terms.

With domestic growth slowing down, overseas markets naturally become an important direction for Xingyu Co., Ltd. to find new growth opportunities.

Europe is currently the market where production capacity has been established first. Xingyu's first-phase factory in Serbia went into operation in 2022, mainly producing rear lights and providing localized support for European markets such as Germany, the Czech Republic, and Spain. Now, the company is advancing the second-phase project, planning to produce approximately 6 million lighting units annually, and further expanding its product range from rear lights to high-value products such as front lights.

North America is the next stop. Xingyu Holdings has successively established entities such as Xingyu Mexico, Xingyu USA, Xingyu Delaware, and Xingyu North Carolina, and also plans to continue expanding into the Middle East, India, and South America markets.

For this reason, Xingyu Co., Ltd. launched its IPO in Hong Kong, planning to use part of the proceeds from the IPO to build factories overseas.

However, just as Xingyu Co., Ltd. was preparing to invest more funds and production capacity overseas, the labor compliance issues that were exposed one after another added new uncertainties to this globalization story.

Before truly selling its automotive lights globally, Xingyu Technology must first answer the question of whether it possesses the labor compliance capabilities expected of a global supplier.

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