Hangzhou Reliance Group Co., Ltd. (hereafter "Reliance Group") has submitted updated listing documents to the Hong Kong Stock Exchange for its second attempt at an IPO, with CICC serving as the sole sponsor. The company's massive revenue scale of over RMB 270 billion contrasts sharply with gross margins below 1%, while profits rely heavily on derivative gains, the balance sheet carries elevated leverage, and operating cash flows have remained in net outflow territory for two consecutive years.

High revenue volume, razor-thin margins

Reliance Group focuses on bulk commodity spot trading and supporting industrial services, covering 294 product categories across ferrous metals, iron ore, chemicals, and non-ferrous metals. Operations span over 80 countries and regions, supported by 17 overseas offices. According to consultancy Frost & Sullivan's 2025 trade volume data, the company ranks fifth among domestic bulk commodity service providers, with its steel and iron ore businesses reaching the top four in the domestic industry.

The prospectus reveals that during 2023-2025 (the "reporting period"), revenue stood at RMB 252.132 billion, RMB 270.63 billion, and RMB 270.479 billion respectively, with 2024 growth of 7.34% and a marginal 0.05% decline in 2025. Net profits for the same years were RMB 1.032 billion, RMB 1.431 billion, and RMB 1.435 billion, showing a robust 38.66% jump in 2024 but only a 0.28% uptick in 2025. Overall, 2024 delivered synchronized improvements in both revenue and profitability, while 2025 saw business scale plateau with noticeably weaker profit momentum. For the first five months of 2026, the company recorded revenue of RMB 110.493 billion and net profit of RMB 554 million.

More than 80% of revenue originates from mainland China, with the remaining under 20% drawn primarily from Southeast Asia, East Asia, and West Asia. Among revenue segments, ferrous metals and raw materials (including steel, iron ore, and other inputs) constitute the largest source, accounting for 54.8% of 2025 revenue. Chemicals (polyester, aromatics, rubber, and other products) contributed 37.4% of 2025 revenue, while non-ferrous metals saw their revenue share decline sharply from 14.9% in 2023 to 5.8% in 2025. Gross margins have trended downward across the reporting period, registering 0.9%, 0.7%, and 0.6% for the three years, underscoring limited profitability from spot goods purchase-sale spreads. During the first five months of 2026, however, overall gross margin rebounded from 0.1% in the year-earlier period to 1.9%.

Notably, approximately 70% of transactions employ basis trading, where goods are not priced definitively at sale but rather settled later based on futures market movements. The company scales its business through physical spot trading while using futures instruments to manage price risk. Under accounting treatment, however, futures and spot gains and losses are not offset against each other; futures results are booked separately into current-period profit, becoming a vital supplement to corporate earnings. From 2023 to 2025, this net income stream totaled RMB 890 million, RMB 1.963 billion, and RMB 2.079 billion respectively.

On the liability side, bulk commodity trading is a capital-intensive track, with inventory buildup and derivative margin requirements persistently tying up working capital. As of May 2026, the company's debt-to-asset ratio reached 81.74%, and operating cash flows recorded net outflows of RMB 1.876 billion and RMB 4.822 billion in 2024 and 2025 respectively. Inventory levels have climbed alongside trade volume expansion, creating objective pressure on capital deployment. Professional discussions around this situation converge on two fronts: first, derivative gains fluctuate with commodity cycles, leaving profit stability uncertain; second, the elevated leverage ratio and intermittent operating cash outflows will draw close scrutiny from Hong Kong investors evaluating the company.

Compared with listed supply chain peers such as Wuchan Zhongda, Xiamen ITG, and Zheshang Zhongtuo, Reliance Group's strengths lie in its complete in-house industry research team and mature basis trading framework. Its weaknesses include overall gross margins trailing the industry average and overseas revenue contributing less than 20%, leaving room for improvement in global business contributions.

Diversified use of IPO proceeds

This filing represents the company's second push toward a Hong Kong listing, following its initial prospectus submission on February 9, 2026. Under HKEX filing rules, the first submission carried a six-month acceptance window that expired on August 9; just two days later, the company re-filed with updated financial data. According to the revised prospectus, if the Hong Kong IPO succeeds, net proceeds will be allocated across multiple operational fronts: expanding networks, broadening product categories, strengthening industrial capabilities, and enhancing operations. A portion of funds will extend the global logistics network and improve overseas station trading infrastructure; another portion is earmarked for industry chain project investments and potential acquisition opportunities. The company also plans to widen its bulk commodity offerings and enrich the existing product matrix. Remaining proceeds will upgrade internal digital trading systems, deepen long-term upstream and downstream partnerships, and supplement working capital to match daily trade liquidity needs.

Once listed in Hong Kong, this Hangzhou mixed-ownership-reform-backed commodity service provider can unlock offshore financing channels to support overseas expansion capital requirements. Market watchers will focus on whether the company can balance spot trading and basis trading operations to smooth earnings volatility tied to cyclical swings. In terms of shareholding structure ahead of the listing, Hangshi Group, under the Hangzhou SASAC, holds 51%, while management platform Zhejiang Lianyu owns 44.7%. Both parties operate under a concerted action arrangement, commanding a combined 95.7% voting stake, with two remaining external shareholders holding 2.15% each. During pre-IPO preparations, the company received feedback from the CSRC regarding overseas listing filing, which required supplementary disclosures on state-owned share identification, capital increase pricing, and related-party transactions.