Summary of Key Points
The Growth Enterprise Market (GEM) has recently accepted applications from two unprofitable aerospace companies, Chengli Aviation and Tengdun Kechuang, for listing. Both companies have utilized the fourth set of listing criteria introduced in April this year, which are designed for “high-growth but unprofitable” enterprises. To date, three more companies have applied using these criteria, bringing the total number of unprofitable applicants to six. The GEM reform includes four progressively stringent sets of standards that cover a company’s entire lifecycle from profitability to growth to innovation, providing financial support for emerging industries.
I. The Application of the New Rules by Two Unprofitable Aerospace Companies
The key to these two companies’ ability to apply for listing on the GEM is their compliance with the fourth set of listing criteria (1): The criteria require an estimated market value of no less than 3 billion yuan, annual revenue of at least 200 million yuan in the most recent year, and a compound annual growth rate of at least 30% over the past three years.
- Tengdun Kechuang: Its valuation is approximately 12 billion yuan (well above the 3-billion threshold), with revenue increasing from 175 million yuan to 379 million yuan between 2023 and 2025, representing a compound growth rate of 47.35% (exceeding the required 30%). Its annual revenue for the most recent year also meets the 200-million yuan requirement.
- Chengli Aviation: Although its valuation has not been disclosed, its revenue for 2025 is 251 million yuan, which meets the 200-million yuan threshold. The compound annual growth rate over the past three years was around 45% (also exceeding the requirement). It is likely that its market value also meets the criteria.
These criteria target companies that have established a viable business model and are experiencing significant growth, although they are not yet profitable due to substantial initial investment.
II. Unprofitable but with Strong Competence: The Business and Current Situations of the Two Companies
Both companies are leaders in advanced aerospace technology but are currently operating at a loss, which is due to specific reasons and associated risks:
- Chengli Aviation: The company specializes in manufacturing core high-temperature-resistant components for aircraft and rocket engines, serving multiple sectors such as aviation, aerospace, and energy. Its lack of profitability is due to the large initial investment required for research and development (for example, a net loss of over 60 million yuan in 2025 after deducting non-recurring expenses). Additionally, it faces high accounts receivable (212 million yuan in 2025, accounting for 84.67% of revenue) and a high customer concentration (the top five customers account for 86.5% of its revenue).
- Tengdun Kechuang: It focuses on advanced drones and is a significant supplier of military drones in China, benefiting from the growth of the low-altitude economy (e.g., drone logistics and crop protection services). However, its losses are due to high R&D expenses (2023: 207 million yuan in R&D, exceeding annual revenue by 175 million yuan), and it also has a high customer concentration (the top five customers account for 76.55% of its revenue).
Both companies have significant funding needs: Chengli Aviation requires 1.25 billion yuan, while Tengdun Kechuang needs 3.021 billion yuan, primarily for R&D and expansion.
III. The GEM’s Four Sets of Criteria: A Comprehensive Coverage from Profitability to Innovation
The GEM now has four sets of core listing criteria, resembling a “growth ladder” for companies:
1. First set: Focuses on profitability (e.g., positive net profit), suitable for mature companies that are already generating stable income.
2. Second set: Combines market value, net profit, and revenue, placing less emphasis on short-term profitability but considering the quality of the company.
3. Third set: Focuses on market value and revenue, without requiring profitability, suitable for companies with strategic value and potential (e.g., Dapuwei, which was previously listed on the GEM).
4. Fourth set: Comes in two variants: either “market value + revenue + 30% compound growth” (used by Chengli Aviation and Tengdun Kechuang) or “market value + revenue + high R&D investment.” This set was added in April this year to address the needs of “high-growth but unprofitable” or “high-R&D but low-revenue” companies.
In simple terms, the criteria range from requiring profitability to allowing companies to grow without necessarily making a profit, and finally to supporting innovation or high growth, covering all stages of a company’s development.
IV. Why Support Unprofitable Companies? Emerging Industries Need Financial Resources
The addition of the fourth set of criteria this year reflects the needs of emerging industries:
Industries such as aerospace, semiconductors, and drones require substantial initial investment in R&D and production, leading to slow revenue growth. However, once successful, they can be highly valuable. If only profitability were considered, these companies would struggle to enter the market and obtain the funds needed for development. The reform allows the capital market to more accurately support these “potential stocks,” enabling them to expand and accelerate technological breakthroughs. For example, Tengdun Kechuang’s drone R&D requires significant funding, which can be secured through listing.
V. Six Unprofitable Companies Have Applied So Far: Initial Success of the Reform
Currently, six unprofitable companies have applied for listing on the GEM:
- Three are using the third set of criteria: Dapuwei (already listed, the first unprofitable company on the GEM), Yuexin Semiconductor (approved and awaiting registration), and Yuejiang Technology (the first A+H joint-listing in the Shenzhen market, currently under inquiry).
- Three are using the fourth set of criteria: Chengli Aviation, Tengdun Kechuang, and Leju Intelligence.
This indicates that the GEM reform is effectively opening up the capital market for unprofitable companies in emerging industries, providing much-needed funding for hard-tech enterprises to accelerate their development.
In summary, the applications from these two aerospace companies demonstrate the GEM’s support for “high-growth but unprofitable” enterprises. It also reflects the government’s commitment to supporting emerging technologies like aerospace, allowing these companies to thrive despite temporary financial challenges. While these companies face risks such as customer concentration and high accounts receivable, investors should be aware of these factors, as they represent a positive development for the industry as a whole.