Business Context and Reporting Period
Company: Leishen Energy Holding Co., Ltd. (Nasdaq: LSE)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended September 30, 2025
Business Overview: A Cayman Islands holding company conducting operations primarily through PRC subsidiaries. The company provides clean-energy equipment, oil and gas engineering technical services, new energy production (LNG/CNG), and digitalization/integration equipment for the energy sector.
Recent Corporate Action: In November 2025, shareholders approved a dual-class share structure. Class A shares carry 1 vote, while Class B shares (held by founders) carry 25 votes, consolidating approximately 98.66% of voting power with directors and officers.
Key Financial Metrics (Fiscal Year 2025)
| Metric | 2025 (USD) | 2024 (USD) | Variance |
|---|---|---|---|
| Total Revenue | $48,335,553 | $69,073,374 | (30.0%) |
| Gross Profit | $8,525,671 | $16,034,519 | (46.8%) |
| Gross Margin | 17.6% | 23.2% | -5.6 pts |
| Net Income (Attributable to Leishen) | $1,254,387 | $8,095,871 | (84.5%) |
| Operating Loss | $(1,665,953) | $7,551,893 | N/A |
| Cash and Cash Equivalents | $10,159,656 | $5,811,798 | +74.8% |
| Total Debt (Short-term Loans) | $3,068,046 | $50,899 | N/A |
| Current Ratio | 2.54 | 2.28 | N/A |
Material Changes vs. Prior Period
- Revenue Decline: Revenue dropped 30% to $48.3 million, driven by a 34.7% decrease in clean-energy equipment sales and a 24.3% drop in new energy sales. Management attributes this to reduced domestic market demand, intense price competition (10-40% price reductions), and the expiration of a major client agreement in the new energy segment.
- Profitability Compression: Net income fell 84.5% to $1.25 million. The company reported an operating loss of $1.67 million, compared to an operating profit of $7.55 million in 2024. Gross margin contracted to 17.6% due to unfavorable revenue mix and lower margins on equipment sales.
- Increased Credit Risk: Provision for expected credit losses surged 98.4% to $2.98 million, reflecting a slowdown in the PRC economy and difficult macroeconomic conditions.
- Investment Income: Despite operating losses, the company reported significant "Other Income" of $2.44 million, primarily driven by a $2.31 million gain from short-term investments (fair value increases in public stocks and wealth management products).
- Debt Increase: Short-term bank loans increased significantly to approximately $3.1 million to support working capital, compared to negligible debt in the prior year.
Guidance, Outlook, and Risks
- Outlook: Management plans to rebuild the revenue base by reducing reliance on the PRC market and expanding into international markets (Middle East, Southeast Asia). They intend to increase R&D investment to upgrade product technology to meet international standards.
- Material Weaknesses in ICFR: Management identified two material weaknesses in Internal Control over Financial Reporting (ICFR): (1) lack of sufficient knowledge of U.S. GAAP and SEC reporting requirements, and (2) lack of well-established procedures for timely review and detection of errors. Remediation efforts include hiring qualified accounting personnel and establishing formal internal control policies.
- Regulatory Risks (China): Significant risks exist regarding PRC regulations on overseas listings (CSRC filing requirements), cybersecurity reviews, and data security. The company faces potential delisting risks under the HFCAA if its auditor cannot be inspected by the PCAOB, though its current U.S.-based auditor is subject to inspection.
- Customer Concentration: The three largest customers accounted for 42.6% of total revenue in 2025. Loss of these customers could materially impact operations.
- Related Party Transactions: Significant balances exist due to related parties (founders and former equity investees), totaling $5.76 million in liabilities as of September 30, 2025.
Investor Verification Checklist
- Revenue Quality: Verify the sustainability of revenue recovery plans given the 30% decline and heavy reliance on a few large customers (42.6% concentration).
- Internal Controls: Assess the progress of remediation for the identified material weaknesses in ICFR and the impact on future financial reporting reliability.
- Investment Income Reliance: Analyze the extent to which net income is supported by volatile short-term investment gains ($2.3M) rather than core operating profitability (which was negative).
- Regulatory Compliance: Confirm the status of CSRC filings and cybersecurity review compliance to ensure continued listing eligibility on Nasdaq.
- Related Party Balances: Review the nature and repayment terms of the $5.76 million owed to related parties (founders) and the impact on liquidity.