US IPO Analysis | Neng Technology (NENG.US): The "middleman" in the short-video advertising wavehow much longer can the long-tail traffic dividend last?

Title context: US IPO Analysis | Neng Technology (NENG.US): The "middleman" in the short-video advertising wavehow much longer can the long-tail traffic dividend last? The rise of short video has reshaped the placement landscape of China's advertising industry. Data shows that as advertisers' budgets systematically migrate toward video feed ads, the short-video advertising market had surpassed RMB520 billion by 2025, accounting for more than a quarter of online advertising. Juneng Technology, which has already initiated its US IPO, is precisely a short-video digital marketing solutions provider that has grown by riding this trend. It has been observed that, following its confidential filing on February 11, 2025, and the public release of its first prospectus on June 27 of the same year, the F-1/A filed on June 25 this year marks the company's third amendment to its prospectus. According to the prospectus, Juneng Technology is applying to list on Nasdaq under the ticker "NENG." The company plans to issue 6.25 million shares in this IPO at a price of US$4-5 per share, raising between US$25 million and US$31.25 million. Even at the lower bound of the price range, it already meets Nasdaq's minimum US$25 million threshold for Chinese IPOs. This offering plan represents a notable upward revision compared with before. In the previous prospectus, Juneng Technology stated it would issue 2 million shares at US$4-5 per share, raising at most only US$10 million. After this increase in fundraising size, Juneng Technology's valuation has risen by approximately 13%. Three major factors drive high performance growth, with economies of scale simultaneously realized on both the revenue and cost sides According to the prospectus, Juneng Technology's domestic operating entity is Chongqing Haoyu Qin Culture Media Co., Ltd., which was established in August 2020. Since its inception, the company has focused on the short-video performance advertising track, placing short-video ads on media platforms such as WeChat and Douyin to achieve clients' marketing goals and improve their return on investment. A typical marketing project that Juneng Technology serves for clients usually includes five steps: understanding advertiser goals, formulating marketing strategy, campaign placement, optimization after continuous placement, and performance monitoring. What connects these five steps is the company's self-developed proprietary "Lucky short-video intelligent data analysis system." This system can examine the efficiency of different visual elements in ads and how various scripts, content choices, actors, stories, and styles affect ad performance. By systematically analyzing the performance data of short-video ads, Juneng Technology can optimize its strategy, make data-driven decisions to improve ad placement effectiveness, and customize marketing campaigns based on evolving audience preferences and market trends. From the perspective of industry coverage, Juneng Technology initially built volume with the medical and health sector as its base, then extended its service capabilities outward along the industry chain, gradually expanding into areas such as franchise recruitment, education, gaming, novels, and home decoration, with its client structure evolving from a single vertical to a diversified multi-industry mix. The diversified industry expansion has driven the rapid accumulation of the company's client count. From its founding in 2020 through fiscal year 2025 (the 12 months ended March 31), Juneng Technology has cumulatively served approximately 1,000 clients. In terms of business structure and revenue model, Juneng Technology's revenue all comes from short-video ad placement services. The company signs annual framework agreements with clients, recognizes revenue based on ad performance data and charges by results, with the core pricing model being CPM (cost per thousand impressions); revenue is recognized each time cumulative impressions in the media platform's backend reach one thousand. In terms of performance, in fiscal year 2025, Juneng Technology's revenue grew 75% to US$13.2845 million, while net profit surged 473% to US$826,000. Clearly, this is a standout result of high revenue growth and profit explosion. Specifically, the core driver of Juneng Technology's revenue growth in fiscal year 2025 was the jump in client base driven by industry coverage expansion. The number of active clients during the reporting period increased from 138 to 377, an increase of approximately 173%, directly amplifying the scale of CPM billings. The net profit growth rate being far higher than revenue growth is mainly due to two reasons. First, gross margin improved significantly. As the growth in client count pushed up demand for media resource procurement, and as procurement volume rose, the bargaining space for agency rebates improved at the margin, strengthening the offsetting effect of rebates on service costs. This drove gross margin during the reporting period to recover from 3.85% to 10.03%, an increase of more than 6 percentage points. Second, operating expenses were effectively controlled, and operating leverage amplified profit elasticity. During the reporting period, Juneng Technology's total operating expenses were approximately US$206,900, up only 26% year over year, with expense growth far below revenue growth, significantly increasing profit release elasticity. It can thus be seen that Juneng Technology's outstanding performance in fiscal year 2025 was the result of three factors working together: "client base expansion driving revenue volume, procurement scale growth improving rebates and thereby lifting gross margin, and low expense growth releasing operating leverage." This is the result of economies of scale being simultaneously realized on both the revenue and cost sides. Grasping structural traffic dividends, the secret behind the surge in client count After analyzing Juneng Technology's performance in fiscal year 2025, a question arises: Juneng Technology is still a micro-enterprise in scale, so why could its client count soar 173% to 377 in fiscal year 2025? This is truly astonishing. In our view, the surge in Juneng Technology's clients is because there are still many long-tail clients in the short-video marketing field whose needs remain unmet, and Juneng Technology has precisely tapped the demand potential of this client group in a suitable way. Data shows that in 2025, China's short-video users numbered 1.074 billion, with average daily time spent per person at 163 minutes. Such a massive user base and strong user stickiness have made short-video marketing one of the fastest-growing segments in the advertising industry over the past few years. According to iResearch data, China's internet advertising market was approximately RMB725.7 billion in 2025, up 11.5% year over year; among this, the narrow-caliber short-video advertising market was approximately RMB374.8 billion, with growth of 27%, the fastest-growing segment among all advertising formats. If live-commerce internal circulation ad spending and short-video closed-loop transactions are combined into a broad caliber, the market size has surpassed RMB520 billion. The continued expansion of the short-video advertising market has made the budget spillover of long-tail small and medium advertisers a tail-end increment of the traffic dividend. Through multi-dimensional arrangements, Juneng Technology has begun to benefit from this industry dividend. First, Juneng Technology signs annual framework agreements with clients that only specify service scope and settlement rules, do not lock in specific placement amounts, and are settled on a rolling basis according to actual consumption. This agreement model is very practical for small and medium advertisers. The logic behind this is that most small advertisers have relatively volatile businesses, making annual marketing spending difficult to plan in advance, and among them there are even low-renewal clients who simply try ad spending once to test the results. The convenience of "use as needed, spend as you go" under annual framework agreements precisely addresses the pain points of small advertisers. Second, while continuing to deepen its medical and health base, Juneng Technology is accelerating horizontal replication across industries. Novel promotion, franchise recruitment, and home-decoration leadsadvertisers in these industries are extremely fragmented, have small per-client budgets, and are highly dependent on agency placement, making it easy to rapidly build volume. In addition, Juneng Technology adopts an asset-light model. It does not shoot videos or maintain a large production team; clients bring their own materials or only make light modifications. Therefore, a sharp increase in order volume does not require simultaneous team expansion, and marginal delivery costs are extremely low. This is also a key reason why Juneng Technology's total operating expenses grew only 26% in fiscal year 2025, far below revenue growth. The key metric of average revenue per client also corroborates that the high growth in Juneng Technology's client volume lies in tapping small advertisers. In fiscal year 2024, Juneng Technology's 138 clients generated revenue of US$7.5937 million, with average revenue per client of approximately RMB396,000; by fiscal year 2025, 377 clients generated revenue of US$13.2845 million, with average revenue per client of approximately RMB250,000, down nearly 40% year over year. It can thus be seen that the core essence behind Juneng Technology's high performance growth in fiscal year 2025 is that it fully tapped the potential market demand of long-tail clients through annual framework agreements, diversified industry expansion, and an asset-light model. But this is in fact capturing a structural long-tail traffic dividend; the company has not established an obvious competitive moat. In particular, long-tail clients have a relatively high churn rate, and in subsequent fiscal years there may be a potential risk of "rapid client growth but low renewal rate"; at the same time, under the current trend of widespread AI-generated materials, intelligent bidding, and platform-managed placement, the value of a middleman like Juneng Technology's Lucky systemwhich "does not use AI/ML" and only implements data aggregation and statistical dashboard functions, requiring purely manual work plus statistical reviewmay continue to be squeezed. Therefore, once the structural long-tail traffic dividend disappears, Juneng Technology will face a real operating challenge. Whether this US listing can establish a competitive moat before that happens will become the key factor determining the company's long-term value.