Analysis of Fuen Co., Ltd.'s Accounts Payable: Interpretation of Supply Chain Strategies

Based on the collected prospectus data of Fuen Co., Ltd., I will provide an in-depth analysis of its supply chain strategies reflected in its accounts payable situation.

According to the prospectus data of Hangzhou Fuen Co., Ltd., the company’s supplier-related liabilities are as follows [1]:

Time Point	Accounts Payable (RMB ten thousand)	Notes Payable (RMB ten thousand)	Total (RMB hundred million)
2025/6/30	19,283.39	52,410.92	7.17
2024/12/31	19,925.35	52,694.94	7.26
2023/12/31	9,092.75	40,543.35	4.96
2022/12/31	14,648.67	54,561.20	6.92

: The combined amount of accounts payable and notes payable of Fuen Co., Ltd. indeed exceeds RMB 700 million, and this data profoundly reflects the company’s supply chain financial management strategies.

---

Fuen Co., Ltd. adopts bank acceptance bills as its main payment method (notes payable account for more than 70%), which is a typical

:

• Advantage Analysis
  : Through bank acceptance bills, the company can complete procurement without occupying its own funds, which is equivalent to obtaining interest-free financing provided by suppliers
• Capital Efficiency
  : Convert short-term cash outflows into forward payments to improve working capital turnover efficiency
• Data Show
  : As of the end of 2024, notes payable reached RMB 527 million, accounting for a considerable proportion of total liabilities [1]

It can be seen from the procurement situation of the top five suppliers that the company adopts a centralized supplier strategy:

Supplier Name	Procurement Content
Tianhong Group	Yarn
Hangmin Co., Ltd.	Outsourcing of fabric dyeing and finishing, outsourcing of grey fabric, grey fabric, etc.
Shaoxing Weisheng Color Spinning Co., Ltd.	Yarn
Dezhou Huayuan Ecological Technology Co., Ltd.	Yarn
Zhejiang Beilingda Knitting Co., Ltd.	Grey fabric, etc.

This strategy brings the following advantages:

• Scale Effect
  : Centralized procurement volume enhances bargaining power
• Advantage in Payment Term Negotiation
  : Its status as a major customer enables it to secure longer payment cycles
• Supply Stability
  : Establish long-term cooperative relationships with core suppliers [1]

Fuen Co., Ltd. optimizes capital occupation through a combined mode of self-production + outsourcing processing:

• Self-Production Capacity
  : Three production bases in Hangzhou, Nantong, and Vietnam
• Outsourcing Processing
  : Cooperate with related parties such as Zhengkai Textile and third-party outsourcing manufacturers
• Capital Optimization
  : Extend some production links, reduce fixed asset investment, and reduce working capital pressure [1]

From the financial indicators disclosed in the prospectus:

Indicator	2025/6/30	2024/12/31	2023/12/31	2022/12/31
Current Ratio (times)	1.44	1.23	1.43	1.17
Consolidated Asset-Liability Ratio	41.47%	43.29%	41.35%	58.94%

The company maintains a reasonable current ratio, indicating that while utilizing supplier credit, it still maintains good short-term solvency [1].

---

The main customers of Fuen Co., Ltd. are internationally renowned brands such as H&M and ZARA, and this customer structure determines that:

• High Order Certainty
  : Brand customers have strong order stability and predictability
• Relatively Controllable Collection Cycle
  : Brand customers have good credit, and accounts receivable turnover is relatively stable
• Provides Support for Securing Upstream Payment Terms
  : Stable downstream cash flow gives it the confidence to extend upstream payment cycles

As a “Product Development Base for Recycled Fiber Fashion Fabrics”, the company’s products have high added value:

• Technical Barriers
  : R&D investment in environmentally friendly fabrics accounts for 3.41%-3.80%
• Premium Capacity
  : High value-added products bring better gross margin space
• Supports Credit Expansion
  : Its technical and market position enables it to enjoy better payment terms from upstream suppliers [1]

---

Although the current ratio is maintained at 1.2-1.4 times, if downstream customer collections are delayed, it may affect the ability to pay suppliers.

Accounts payable to the top five suppliers account for 35%-47%. If major suppliers adjust their credit policies, it may have an impact on the company’s cash flow.

The company’s international layout of the Vietnam base involves foreign currency settlement, and accounts payable management needs to consider the impact of exchange rate fluctuations.

---

The financial data of Fuen Co., Ltd.'s accounts payable exceeding RMB 700 million essentially reflects a set of mature

of the company:

1. Trade Credit Financing
   : Make full use of tools such as bank acceptance bills to extend payment cycles
2. Centralized Procurement Management
   : Secure payment term advantages through large-scale procurement
3. Flexible Production Mode
   : Combine self-production + outsourcing to optimize capital allocation efficiency
4. Industrial Chain Collaboration
   : Establish stable credit cooperative relationships with upstream and downstream parties

Against the background of relatively high capital turnover pressure in the textile industry, this strategy has helped Fuen Co., Ltd. achieve relatively healthy cash flow management, providing financial support for its capacity expansion and international layout after IPO listing.

---

[1] Prospectus (Application Draft) for the Initial Public Offering of Shares and Listing on the Main Board by Hangzhou Fuen Co., Ltd. (2025). PDF Document from Eastmoney.com. http://pdf.dfcfw.com/pdf/H2_AN202512171802371563_1.pdf