"Harbor Business Observer" Huang Yi
On December 25, 2023, Shengye Electric Co., Ltd. (hereinafter referred to as "Shengye Electric") disclosed a prospectus to be listed on the Beijing Stock Exchange, and the sponsor is Shenwan Hongyuan Securities.
On September 3, 2024, Shengye Electric submitted a response to the second round of inquiry letters.
Combined with the semi-annual report disclosed by Shengye Electric on August 20, it can be seen that Shengye Electric is currently facing a large financial dilemma, and whether this transfer to the Beijing Stock Exchange can give the company practical help is worth paying attention to.
01
Sales continued to decline, and gross profit margin first declined and then recovered
Combined with the prospectus submitted by Shengye Electric and the disclosed financial report, in the first half of 2024, the company will achieve an operating income of 297 million yuan, a net profit of 23.8304 million yuan, a gross profit margin of 25.24%, and a net profit margin of 8.02%.
In 2023, Shengye Electric's revenue will be 573 million, the attributable net profit will be 45.3783 million, the non-attributable net profit will be 44.8605 million, and the gross profit margin will be 27.21%.
From 2020 to 2022 and from January to June 2023 (reporting period), Shengye Electric achieved operating income of 328 million, 446 million, 509.9 million and 274 million respectively; The net profit was 20.0243 million yuan, 21.6364 million yuan, 29.0028 million yuan and 21.0264 million yuan respectively.
During the reporting period, the average gross profit margins of comparable peers were 28.16%, 27.26%, 26.50% and 28.19% respectively; The gross profit margins of Shengye Electric were 27.22%, 21.28%, 20.67% and 26.06% respectively. It can be seen that the gross profit margin in the industry has fluctuated, but the fluctuation range of Shengye Electric is greater and continues to be lower than the average of its peers.
Shengye Electric also admitted that due to factors such as fluctuations in raw material prices, changes in product structure and the overall environment of the industry, the gross profit margin showed a trend of first declining and then rising.
During the reporting period, the revenue from film capacitors accounted for 84.57%, 79.49%, 81.18% and 84.94% respectively; The revenue from power quality management supporting products accounted for 15.43%, 20.51%, 18.82% and 15.06% respectively.
Among them, film capacitors, as the main source of income for Shengye Electric, have seen a decline in sales numbers, which are 63.0195 million pieces, 77.9636 million pieces, 68.0282 million pieces, and 36.8667 million pieces; The average sales price was 4.39 yuan/piece, 4.52 yuan/piece, 6.06 yuan/piece, and 6.30 yuan/piece respectively.
The same situation also occurred in motor capacitor products, during the same period, motor capacitors as the product branch with the highest revenue contribution of film capacitors, accounting for 62.11%, 57.80%, 49.44% and 51.84% of revenue respectively; The sales volume was 62.2801 million pieces, 76.9042 million pieces, 65.7848 million pieces, and 35.611 million pieces; The average sales price was 3.26 yuan/piece, 3.33 yuan/piece, 3.82 yuan/piece, and 3.98 yuan/piece respectively. Although the average price has increased, the sales volume has fluctuated.
It is worth noting that in the second round of inquiry letters, it was mentioned that during the reporting period, the price adjustment of some of the company's products and products for some customers was lower than the increase in raw materials, mainly due to the slowdown in the growth rate of this segment affected by the weakening of domestic and foreign market demand, and the increased operating pressure of major customers, and the company gave certain support on the basis of ensuring reasonable profits.
02
Accounts receivable continue to rise, and the asset-liability ratio is much higher than that of peers
With the decline in sales, Shengye Electric's inventory level gradually fell short and was questioned.
At the end of the reporting period, the book value of the company's inventory was 60.9302 million yuan, 99.4714 million yuan, 113 million yuan and 99.7231 million yuan respectively, accounting for 25.56%, 29.94%, 27.65% and 23.82% of current assets respectively. At the end of 2021 and 2022, the book value of raw materials increased by 98.69% and 29.29% respectively, and the book value of inventory goods increased by 48.84% and 31.20% respectively.
At the same time, the rapid growth of Shengye Electric's accounts receivable is also noteworthy.
During the reporting period, the book value of the company's accounts receivable was 87.1347 million yuan, 111 million yuan, 151 million yuan and 173 million yuan respectively, accounting for 36.56%, 33.31%, 36.76% and 41.30% of the current assets respectively, and the balance of accounts receivable was 91.937 million yuan, 117 million yuan, 159 million yuan and 183 million yuan, accounting for 28.07%, 26.23%, 31.26% and 33.31% of the operating income of each period respectively.
Shengye Electric pointed out that at the end of 2022 and the end of June 2023, the proportion of the company's accounts receivable balance in operating income increased, mainly due to the fact that the company's operating income growth from January to June in 2022 and 2023 mainly came from customers in the new energy field.
During the same period, the accounts receivable turnover ratios were 4.24 times/year, 4.51 times/year, 3.90 times/year, and 3.39 times/year, respectively. At the same time, the average values of comparable peers were 3.16 times/year, 3.78 times/year, 3.93 times/year, and 3.56 times/year, respectively. Obviously, the average value of its peers has surpassed that of Shengye Electric in 2022 and the first half of 2023, and the company's advantage in this area is gradually fading.
It is reported that since 2022, the company has further expanded the market in the new energy field, and the sales revenue to customers in the new energy field such as photovoltaic, wind power, high-voltage SVG, and new energy vehicles has continued to grow.
The situation of accounts receivable has also been noticed by the regulator, so Shengye Electric added that the accounts receivable in 2023 will be 195 million, and the accounts receivable turnover ratio will be 3.42 times/year, which is still lower than the average of 3.60 times/year of peers.
In the case of unsatisfactory payment collection, the balance of short-term borrowings of Shengye Electric rose rapidly, while the balance of cash and cash equivalents at the end of the period continued to decrease. At present, its asset-liability ratio far exceeds the average of its peers.
During the reporting period, the balance of the company's short-term borrowings was 3.00 million yuan, 54.90 million yuan, 91.60 million yuan and 85.60 million yuan respectively, accounting for 2.06%, 20.45%, 30.91% and 27.54% of the current liabilities at the end of the reporting period respectively. During the reporting period, the amount of short-term borrowings of the company showed an upward trend, mainly due to the increase in the company's working capital demand with the expansion of business scale and production scale, and the application for short-term loans from banks for daily production and operation and replenishment of working capital.
During the same period, the net cash flow from operating activities was 32.6703 million, 17.0454 million, -29.1858 million and 10.97998 million respectively; The balance of cash and cash equivalents at the end of the period was 23.5499 million, 40.5175 million, 63.44 million and 39.4478 million respectively.
It is worth noting that the asset-liability ratios of Shengye Electric are 42.19%, 57.28%, 54.73% and 53.31% respectively; The average values of comparable peers were 24.94%, 25.96%, 28.59% and 27.70%, respectively. Shengye Electric's asset-liability ratio maintains a very large gap with the average of its peers, and there is no sign of narrowing the gap.
In the first half of 2024, Shengye Electric's asset-liability ratio was 48.06%.
Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told Harbor Business Observer that "the mounting debt could have a negative impact on investor confidence and enthusiasm. Investors may be concerned about the company's financial health and solvency, especially if the company's cash flow position does not improve significantly. In addition, increasing liabilities may lead to an increase in the company's financial leverage ratio, increasing financial risks. ”
03
In 2023, sales expenses will rise sharply, and the number of patents will be weaker
In 2023, Shengye Electric's sales expenses will be 37.8705 million, a year-on-year increase of 40.38%, and the sales expense ratio will be 6.61%. According to the company, it is mainly due to the increase in operating income and the corresponding increase in sales expenses; In order to further expand the sales scale, the company has increased the salary and travel expenses of sales personnel, as well as the expenses of exhibitions and other related activities.
It is worth noting that from 2022 to 2023, the proportion of R&D personnel in the total number of employees will be 10.94% and 10.28% respectively.
During the reporting period, Shengye Electric's sales expenses were 18.9905 million yuan, 24.9596 million yuan, 26.9774 million yuan and 17.8438 million yuan, accounting for 5.80%, 5.60%, 5.29% and 6.50% of operating income respectively. In addition, the sales expense ratio was 5.80%, 5.60%, 5.29% and 6.50% respectively, which was much higher than the average of 2.66%, 2.28%, 2.18% and 1.99% of the peers.
Among them, business entertainment expenses accounted for 8.55%, 6.06%, 7.03% and 8.29% respectively; travel expenses accounted for 7.64%, 7.25%, 9.77% and 10.88% respectively; Advertising expenses accounted for 3.80%, 3.15%, 3.30% and 4.02% respectively.
Shengye Electric pointed out that the company's sales expense ratio is higher than the average of companies in the same industry, mainly because the company's business involves film capacitors and power quality management business, and the business structure is different from that of listed companies in the same industry. The company's power quality management business is widely distributed in complex electricity consumption scenarios in cities across the country, which requires more sales personnel to sink into the market to obtain cooperation opportunities and maintain business growth, resulting in a large number of sales personnel and a high sales expense rate; The company's overall sales scale is lower than that of comparable companies in the same industry, so the sales expense ratio is higher.
On the other hand, during the reporting period, the company's R&D expense ratios were 3.73%, 3.73%, 3.94% and 4.55%, respectively, compared with the average of its peers of 4.35%, 4.33%, 4.19% and 4.01% respectively. It was not until the first half of 2023 that Shengye Electric's R&D expense ratio was able to catch up with the average of its peers.
According to public information, in 2023, Shengye Electric's R&D expenses will be 968,500, a year-on-year increase of 37.82%, and in the first half of 2024, R&D expenses will be 383,800, a year-on-year increase of 123.40%.
At the same time, from 2022 to 2023, the proportion of R&D personnel in the total number of employees will be 10.94% and 10.28%, respectively, declining.
As of December 31, 2023, the company and its subsidiaries have a total of 68 domestic patents, including 6 invention patents and 4 foreign patents.
However, the patent situation given by Shengye Electric is better than that of its peers. As of the end of 2022, the listed entities of Xiamen Farah Electronics Co., Ltd. have obtained a total of 63 patent authorizations, including 5 invention patents and 58 utility model patents; Anhui Tongfeng Electronics Co., Ltd. has been authorized 112 valid patents, including 20 invention patents; Nantong Jianghai Capacitor Co., Ltd. has been authorized 307 patents, including 73 invention patents.
04
There are flaws in the establishment procedures of Hong Kong Shengye, and the company involves capital occupation
At the level of compliance and legality, the establishment procedures and transfer of Shengye Electric's wholly-owned subsidiaries during the reporting period were questioned by the regulatory authorities.
According to the application documents, Sin Ye Electric (Hong Kong) Co., Ltd. (hereinafter referred to as "Hong Kong Syenye") is a wholly-owned subsidiary of Sin Ye Electric, and Hong Kong Sin Ye holds 100% of the shares of Sin Ye Electric Investment Co., Ltd. (hereinafter referred to as "Sin Ye Investment"), a subsidiary of Sin Ye Electric, and holds a total of 40% of the shares of SY Electric (Thailand) Co., Ltd (hereinafter referred to as "Sin Ye Thailand"). During the reporting period, the film capacitors produced by Shengye in Thailand were mainly sold through Shengye in Hong Kong and eventually sold to the United States. When Shengye Electric established Hong Kong Shengye, it did not perform the filing procedures of the development and reform department, and it is currently unable to supplement the filing procedures.
According to the relevant provisions of Articles 24 and 29 of the Administrative Measures for the Approval and Filing of Overseas Investment Projects in force at that time, the relevant departments shall not go through the relevant formalities and the financial institutions shall not issue loans for overseas investment projects that are not approved or filed by the NDRC in accordance with the prescribed authority and procedures, and the NDRC and relevant departments will have the right to order the implementation of the project to be stopped, and submit or transfer to the relevant authorities to investigate the legal and administrative responsibilities of the relevant responsible persons in accordance with the law.
Shengye Electric said that despite the above provisions, the legal risks faced by the company and Hong Kong Shengye due to this matter or the risk of assuming relevant legal liabilities are low.
At the same time, Hong Kong Shengye is the overseas sales platform of Shengye Electric, the company sells film capacitors to North America and South America through its overseas subsidiary Hong Kong Shengye, Hong Kong Shengye does not have production functions, nor does it have any special business qualifications, it is substitutable, if Hong Kong Shengye is ordered to stop operating or faces penalties in the future, the company can arrange other entities to replace Hong Kong Shengye as an overseas sales platform.
In addition, during the reporting period, the occupation of funds by Shengye Electric was also questioned.
In March 2021, Shengye Electric transferred 100% of its equity interest in Foshan Shunde Shengye Environmental Consulting Co., Ltd. (hereinafter referred to as "Shengye Environment") to its controlling shareholder, Foshan Shunde Shengye Investment Co., Ltd. (hereinafter referred to as "Shengye Investment"), and Shengye Environment and its holding subsidiary, Foshan Shunde Chengxin Environmental Technology Co., Ltd. (hereinafter referred to as "Chengxin Environment"), became related parties under the same control as Shengye Electric.
Due to the change in the scope of the consolidated statements, Shengye Electric and other enterprises controlled by the controlling shareholder Shengye Investment, Shengye Environment and Chengxin Environment, formed a split fund as follows, and the 5 million yuan borrowed by Chengxin Environment from Shengye Electric in July 2020 constituted a related party capital loan, which was used for the start-up expenses, asset purchase, start-up liquidity, etc., and its principal and interest were repaid in December 2021. The RMB1,000 borrowed from Suntech in June 2020 constituted a related party fund loan, which was used for Sunye's payment of the confirmation fee to a third party, and the relevant amount was repaid in December 2021. Due to the small amount involved, Shengye Electric did not sign the relevant loan contract with Shengye Environment, and did not require Shengye Environment to repay the interest. (Produced by Harbour Finance)