Shunhao shares (002565. SZ) recently announced that the company received regulatory measures from the Shanghai Securities Regulatory Bureau to order the company to correct the regulatory measures and issue warning letters to relevant personnel.
According to the "Decision on Administrative Supervision Measures", the Shanghai Securities Regulatory Bureau focused on four problems in the information disclosure of Shunhao shares: inaccurate provision for impairment of equity value, failure to disclose changes in investment agreements, inaccurate disclosure of purchase amount and sales amount, and inaccurate financial data of wholly-owned subsidiaries.
It is worth noting that the "hardest hit area" of inaccurate information disclosure points to the company's popular business e-cigarettes, and the internal control problems exposed by this accident have also answered two questions that have attracted much attention from investors: one is that the project that the company planned 4 years ago is expected to become a new growth point in performance has not moved, because the project has died in 2023. The second is that just because of the inaccurate revenue recognition method, the revenue of Shunhao's e-cigarette business will experience a rollercoaster change from a 3-fold increase to a 3-fold shrinkage in 2023.
The project died in secrecy
As a company with packaging and printing business as its core business, Shunhao shares have been in the "leading stock of industrial hemp concept" and e-cigarette concept due to cross-border layout in recent years, and its attention in the capital market has also increased visibly. According to Flush data, since 2019, Shunhao shares have hit the daily limit 67 times. is so hot, it can be called a counterattack. At the end of 2022, the company announced its entry into the new energy sodium-ion battery business, which was popular at that time, adding another fire to its popularity.
In terms of cross-border foundation, its e-cigarette business is undoubtedly the most solid, the company began to establish a project in 2013, and this business is currently the only cross-border business that is listed separately in the company's revenue list. However, at present, this business has become a dense outbreak area of the company's internal control problems, and half of the four problems of inaccurate information disclosure involve the e-cigarette business.
On August 13, 2020, in order to accelerate the company's layout in the field of new tobacco such as heat-not-burn, Shanghai Luxin Electronic Technology Co., Ltd. (hereinafter referred to as "Shanghai Lvxin"), a subsidiary of Shunhao Co., Ltd., signed the "Investment Agreement on the Manufacturing Project with an Annual Output of 200 Million Heat-not-Burn Wake Up Sticks" with the Management Committee of Yangpu Economic Development Zone, Hainan Province, with a planned total investment of about 200 million yuan, and the project products will be sold to China, East Asia, Southeast Asia and Central Asia. According to the company's expectations, the annual sales revenue of the first phase of the project will reach 150 million yuan after it is completed and put into production, which is expected to become a new performance growth point for the company.
Investors naturally paid special attention to the company's important projects, and until April this year, there were still investors on the interactive platform to inquire about the progress of the project.
As early as December 29, 2023, Shanghai Luxin had signed the termination agreement for the project, but the company did not disclose information either when the agreement expired (August 13, 2023) or when the agreement was terminated.
The revenue of the e-cigarette business skyrocketed and then shrank
For the bad news of the hot business, it is understandable that the company has the mentality of "reporting good news but not bad news", but when the performance of e-cigarettes that has finally skyrocketed also has the component of "water injection", it has to make people re-evaluate the company's e-cigarette concept stocks.
According to the "Decision on Administrative Supervision Measures", Shenzhen Lvxinfeng Technology Co., Ltd. (hereinafter referred to as "Lvxinfeng"), a wholly-owned subsidiary of Shunhao Co., Ltd., did not fully assume the main responsibility in some sales business, but used the total amount method to recognize the relevant operating income and operating costs, and did not use the net method of accounting, resulting in the company's over-recognition of revenue of 3.7 million yuan, 14.154 million yuan and 24.3 million yuan in the first quarter, half year and first three quarters of 2023, accounting for 1.3%, 2.5% and 2.4% of the company's revenue respectively.
According to the disclosure, Lvxinfeng's main business is the production and sales of electronic cigarettes, and it has obtained the "Tobacco Monopoly Production Enterprise License" of electronic cigarette processing enterprises. This also means that as a wholly-owned subsidiary, Lvxinfeng's revenue will be directly reflected in the revenue of Shunhao's new tobacco products.
Although purely from the perspective of the proportion of revenue, the revenue confirmed by Lvxin Fengduo is not worth mentioning, if this part of the revenue is put into the company's new tobacco business, the impact is immediate.
Taking the first half of 2023 as an example, in the case of using the total amount method to recognize revenue, the revenue of Shunhao Co., Ltd.'s new tobacco in the current period reached 18.048 million yuan, a year-on-year increase of 361%. In the case of using the net method of accounting, in the whole year of 2023, the revenue of Shunhao's new tobacco products will be immediately returned to its original shape, and the current revenue will shrink to 6.507 million yuan, accounting for less than 0.5% of the total revenue.
In the first half of 2023, Shunhao's e-cigarette product "Yilong" will be listed in many places across the country, which is the company's first self-owned brand e-cigarette launched in China, and the outside world has been waiting for a long time. However, in terms of performance, the impact of this product is limited. In 2023, after adjusting the revenue recognition method of the new tobacco business from the "total amount method" to the "net method", the revenue of the new tobacco business of Shunhao Co., Ltd. will decrease by 36% year-on-year.
Internal control issues have emerged one after another
The receipt of the Shanghai Securities Regulatory Bureau's order to correct the regulatory measures is actually the "second palace" of Shunhao shares on the issue of internal control in the past year or so.
In June 2023, Shunhao shares were investigated by the Chuzhou Municipal Supervision Commission on suspicion of bribery, and there is no further information disclosure at present.
The main products of Shunhao Co., Ltd. are special anti-counterfeiting environmentally friendly paper and printed matter, and the downstream customers are mainly tobacco manufacturers and cigarette box printing enterprises. It is understood that domestic tobacco production enterprises are mainly state-owned enterprises, and the bribery objects involved in the crime of unit bribery are state employees.
Coincidentally, the "Decision on Administrative Supervision Measures" also mentioned that "the company's 2023 annual report on the sales amount of the top five customers and the purchase amount of the top five suppliers are inaccurate", and it remains to be seen whether the two internal control issues are related.
Behind a series of internal control problems exposed, Shunhao shares are not having a good time.
On the one hand, the company's traditional business growth is sluggish, since 2019, the company's revenue has fallen into negative growth, the current revenue hovered around 1.4 billion yuan, and the company's revenue was as high as 2 billion yuan at the peak in 2018. In 2023, the company's revenue will be 1.425 billion yuan, of which the packaging and printing business revenue will be 1.257 billion yuan, accounting for 88%, and the e-cigarette business revenue will account for only 0.45%. In addition, the company's announcement in 2022 of "seizing new energy opportunities to carry out nano battery business" has also become a slogan in 2023, and the company announced the termination of the sodium-ion battery project in the current period, and will no longer list it in the main business introduction. In addition, since the industrial hemp business is not listed separately, there is no way for the outside world to know about this part of the business.
On the other hand, in recent years, Shunhao shares have been plagued by the impairment of goodwill and inventory, and from 2020 to 2023, the proportion of the company's asset impairment losses to the net profit attributable to the parent company in the current period is 250%, 48%, 64% and 122% respectively. (This article was first published in Titanium Media APP, author|Zhang Sun Mingshuo)