Barely a year after its listing, consumer electronics ODM leader Shanghai Longcheer Technology Co.,Ltd. (LONGCHEER) has delivered a worrying financial report. In the first quarter of 2026, the company's net profit attributable to shareholders plunged 90% year-on-year, with non-GAAP net profit swinging to a loss of RMB 151 million. As core operations continue to face pressure, the company announced on the evening of August 13 a blockbuster plan to acquire an 80% stake in Suzhou Anruike Information Technology Co., Ltd. for RMB 1.12 billion in cash, marking its entry into the data center infrastructure sector. This cross-industry acquisition, carrying a premium of 424.98%, is expected to recognize approximately RMB 900 million in goodwill.

With the main business still in decline and the prospects of the new venture unproven, the question remains whether this gamble by Shanghai Longcheer Technology Co.,Ltd. (LONGCHEER) is a strategic breakthrough or the beginning of greater risk.

Post-IPO Performance Slump: Q1 Non-GAAP Profit Turns Negative

Shanghai Longcheer Technology Co.,Ltd. (LONGCHEER) was listed on the Shanghai Stock Exchange main board in March 2024, primarily engaged in ODM business for smartphones and other smart products. In its first year as a public company, revenue reached RMB 46.382 billion, up 70.62%, but net profit attributable to shareholders fell 17.21% to RMB 501 million, with non-GAAP net profit declining 26.92% to RMB 384 million—a classic case of "increasing revenue without increasing profit."

Entering 2025, the downtrend continued. Annual revenue was RMB 42.125 billion, down 9.18% year-on-year. Although net profit attributable to shareholders barely managed positive growth, buoyed by RMB 262 million in non-recurring gains (including RMB 182 million in government subsidies and RMB 144 million in fair value changes of financial assets), non-GAAP net profit shrank further to RMB 323 million, down from RMB 384 million in 2024. Core profitability has been on a steady weakening trajectory.

The real alarm bell came with the Q1 2026 report. Quarterly revenue fell 19.35% to RMB 7.564 billion, while net profit attributable to shareholders plummeted 90% to just RMB 15.4087 million. Non-GAAP net profit recorded a loss of RMB 151 million, a swing from profit to loss with a decline of 349.16%. Core smartphone business revenue dropped 22.78% year-on-year, compounded by sharply higher administrative and R&D expenses, underscoring significant fundamental pressure.

In contrast, peer ODM giant Huaqin Technology posted a starkly different performance curve in H1: projected net profit attributable to shareholders of RMB 2.9 billion to RMB 3.05 billion, an increase of RMB 1.011 billion to RMB 1.161 billion, up 53.5% to 61.5%. The divergence stems from notable differences in business structures. Huaqin Technology has a more diversified portfolio, having built a second growth engine centered on data centers, AI servers, and switches beyond mobile devices. As data center and switch products continued to scale in H1, economies of scale emerged, and the rising revenue share of these segments further lifted overall profitability.

Additionally, Shanghai Longcheer Technology Co.,Ltd. (LONGCHEER) faces extended receivables collection cycles and volatile operating cash flow. From 2023 to 2025, accounts receivable turnover days were 96, 80, and 90 respectively—noticeably longer than industry peers. During the same period, Huaqin Technology's figures were 60, 65, and 63 days, consistently around two months. As of end-2025, accounts receivable stood at RMB 9.856 billion, representing 23.40% of revenue—higher than Fureden Electronics' 21.98%, Huaqin Technology's 19.94%, and Luxshare Precision's 14.57%.

Using Q1 data as a reference, collection quality and working capital management efficiency have deteriorated year over year. From 2023 to 2026, Q1 accounts receivable and notes receivable turnover days were 60, 80, 102, and 105 days respectively, showing a steady increase. In Q1 2026, net cash flow from operating activities was RMB 220 million, down 67.44% year-on-year, signaling severe strain on the core business's cash-generating ability.

High-Premium Cross-Industry Bet: A Risky Diversification

Against this backdrop, Shanghai Longcheer Technology Co.,Ltd. (LONGCHEER) has turned its sights to the data center infrastructure sector. According to the announcement, the transaction was valued using the market approach, with Anruike's total equity assessed at RMB 1.509 billion—a 424.98% premium over the book value of RMB 287 million on a consolidated basis. After negotiation, the overall valuation was adjusted to RMB 1.4 billion (after deducting RMB 100 million in dividends post-valuation date), with the 80% stake priced at RMB 1.12 billion.

Supporting the RMB 1.4 billion valuation are Anruike's performance commitments. Under the agreement, Anruike's net profit for 2026-2028 (based on non-GAAP net profit excluding equity incentive expenses) must be no less than RMB 130 million, RMB 160 million, and RMB 190 million respectively, with a cumulative total of no less than RMB 480 million over three years.

The market, however, responded coolly. On August 14, the day after the announcement, Shanghai Longcheer Technology Co.,Ltd.'s (LONGCHEER) A-shares opened higher but closed down 2.69% at RMB 39.80; H-shares plunged 10.55%. The secondary market's reaction indicates significant investor disagreement over this high-premium cross-industry acquisition. As of August 24, A-shares had fallen over 11% cumulatively in seven trading days, with H-shares down 13.58%.

More concerning is the goodwill issue. Upon completion, the company is expected to recognize approximately RMB 900 million in goodwill. Should Anruike fail to meet performance targets, goodwill impairment could be triggered, directly impacting profits. An M&A specialist noted that the market approach's logic is "future-oriented"—recognizing value in the target's client resources, management team, and solution design capabilities—but this method relies heavily on optimistic assumptions about industry prospects and company growth. "If expectations fail to materialize, the high premium directly translates into goodwill impairment risk."

The expansion doesn't stop there. In June 2026, the company completed acquisitions of 60% stakes in Kejuncheng and Jiya Metals for a combined RMB 540 million. Just two months later, it unveiled another RMB 1.12 billion acquisition. Together, these two deals total over RMB 1.6 billion—a significant financial burden for a company whose Q1 2026 non-GAAP net profit has already turned negative. As of end-Q1 2026, the debt-to-asset ratio had reached 71.84%. This acquisition, funded by internal cash, will further deplete cash reserves. With the main business yet to stabilize, nurturing and integrating new businesses will require continued capital investment. If integration underperforms, the company faces the dual blow of declining core operations and failed M&A.

Target's "Front-Loaded" Performance and Daunting Commitment Pressure

Founded in 2011, Anruike is a data center infrastructure product and solution provider, with core products including server cabinets, PDUs, busways, low-voltage distribution equipment, and modular data center solutions. The company has long focused on the data center infrastructure space, targeting overseas markets, and its products have obtained Uptime Institute TIER III Ready certification. In 2025, Anruike generated revenue of RMB 622 million with net profit attributable to shareholders of RMB 94.0422 million.

However, Q1 2026 figures are disconcerting—revenue of just RMB 37.7088 million and net profit attributable to shareholders of RMB 687,300, with non-GAAP net profit of only RMB 2.4659 million. On a non-GAAP basis, Q1 achieved just 1.90% of the full-year commitment, leaving RMB 127 million to be completed in the remaining three quarters. Comparing to 2025 full-year performance, Anruike achieved revenue of RMB 622 million with non-GAAP net profit as high as RMB 205 million—exceeding any single year of the three-year commitment.

A representative from the company's securities department explained that the target's industry has pronounced seasonality, operating on a project basis with long order delivery and revenue recognition cycles. "The beginning of the year is typically not a peak period for revenue recognition, with profits materializing in the second half. We recommend referencing 2025 full-year data rather than a single quarter to assess the company's true profitability." (Note: Kehua Data, Ke Shida, and Zhongheng Electric are the comparable companies selected in the transaction's valuation report; their businesses also include energy storage segments, which differ to some extent from Anruike's overseas AIDC prefabricated module focus. No valuation method is perfect; the following scenario analysis based on historical quarterly data of this sample group is for reference only.)

But is this really the case? Referencing the three comparable companies from the valuation report—Kehua Data, Ke Shida, and Zhongheng Electric—their Q1 2026 revenue as a share of 2025 full-year revenue was 17.52%, 23.53%, and 19.58% respectively. In contrast, Anruike's Q1 2026 revenue of RMB 37.7088 million represented only 6.06% of last year's total. Even accounting for the company's smaller scale and the amplifying effect of a single large customer's delivery pace on quarterly volatility, Q1 revenue at just 6% of the prior year is significantly out of line with peers' historical quarterly performance. Seasonality alone cannot fully explain this phenomenon.

Using a stricter statistical approach, measuring quarterly revenue as a share of the same-year annual total, Kehua Data, Ke Shida, and Zhongheng Electric posted Q1 shares of 15.26%, 19.98%, and 17.81% in 2024, and 14.91%, 17.90%, and 18.16% in 2025. These industry peers typically see Q1 revenue accounting for 15% to 20% of annual totals—while the data center infrastructure sector has some seasonality, Q1 is not a traditional "absolute off-season." If Anruike's Q1 2026 revenue share reached the industry's lower bound of 15%, full-year revenue would be approximately RMB 251 million; even under the most optimistic average scenario of 17.5%, full-year revenue would be only RMB 215 million. In either case, this is far below 2025's RMB 622 million, making the RMB 130 million net profit commitment for the year highly challenging unless gross margins improve dramatically.

Of course, this projection rests on the assumption that Q1 revenue share aligns with industry comparables. If Anruike's deliveries are indeed heavily concentrated in H2—for instance, Q1 at only 10%—full-year revenue would be RMB 377 million; if the share drops to 6% (implying revenue flat with 2025), it would need RMB 584 million in revenue after Q1, averaging over RMB 65 million per month versus the Q1 monthly average of approximately RMB 12.6 million—a striking contrast that also warrants scrutiny.

More problematic is the risk allocation within the transaction structure. Of the six transferors, four—Ren Liguo, Chen Bo, Wang Zhonghui, and Suanwang Investment—are selling all their stakes in a clean exit; only Ding Zhiyong and Suzhou Ruiyongyong retain partial residual equity. Regarding performance commitment obligations, only Ren Liguo among the four exiting shareholders bears compensation responsibility; Chen Bo, Wang Zhonghui, and Suanwang Investment are not party to the performance commitment. This means a significant portion of the sellers have "washed their hands" of the deal, bearing no liability for future performance shortfalls. This allocation structure undoubtedly weakens the protective effect of the performance commitment for the listed company.

Furthermore, although the installment payment of the transfer price is tied to receivables collection during the performance period, meeting collection targets is not fully equivalent to achieving net profit commitments. If performance falls short but collections remain adequate, the listed company still faces goodwill impairment exposure.

Industry Tailwinds vs. Integration Challenges

From an industry perspective, data center infrastructure is indeed a high-growth sector. According to market research firm Global Market Insights (GMI)'s "Data Center Infrastructure Market Size & Share 2026-2035," the global data center market was valued at USD 256.2 billion in 2025 and is projected to reach approximately USD 789.8 billion by 2035, representing a compound annual growth rate (CAGR) of 12.1%. However, high growth does not mean low barriers to entry. The data center infrastructure space is already dominated by international giants such as Dell, Schneider Electric, and HPE, with the top five players collectively holding approximately 35.6% of the global market share in 2025. Domestically, listed companies like Chindata Group, GDS Holdings, and Sinnet Technology are also actively expanding. While Anruike has accumulated certain technical expertise in prefabricated modular data centers, its scale is limited—with 2025 revenue of RMB 622 million, it remains far behind industry leaders.

Shanghai Longcheer Technology Co.,Ltd. (LONGCHEER), as an ODM-origin company, lacks experience in the data center infrastructure field, and the difficulty of cross-industry integration should not be underestimated. The company stated in its announcement that the move aims to "expand business layout and strengthen customer resources and service capabilities." The vision may be noble, but the history of high-premium acquisitions repeatedly demonstrates that optimistic expectations often diverge significantly from commercial reality. For investors in Shanghai Longcheer Technology Co.,Ltd. (LONGCHEER), the question of when and how the RMB 900 million "Damocles sword" of goodwill will fall represents the most critical financial risk to watch in the coming years.