The decline in performance was also forced to "environmental protection", and the IPO of "mom-and-pop shop" Yuxing shares was suspended!

"Electric Eel Finance" text / Gao Wei

As of September 19, Yuxing Fasteners (Jiaxing) Co., Ltd. (hereinafter referred to as "Yuxing shares") IPO on the Beijing Stock Exchange has been nearly 8 months since it announced its submission of registration (January 24), but there is still no movement. "Electric Eel Finance" discovered the secret of the stagnation of Yuxing's IPO, one is the decline in performance, the other is forced to "environmental protection", and the third is that the husband and wife are highly controlled.

For the verification letter sent by this website, Yuxing shares were silent, as if they were avoiding something. This makes the market even more suspicious, can Yuxing shares land in the capital market as desired?

Unlisted performance has declined

According to the prospectus, from 2020 to 2022, the operating income of Yuxing shares will be 410 million yuan, 454 million yuan, and 457 million yuan respectively, and the overall growth will be slightly increased; The net profit deducted from the non-attributable to the parent company was 48.2154 million yuan, 43.3982 million yuan and 44.1059 million yuan respectively, showing a downward trend as a whole, and there was a situation of increasing income but not increasing profits.

However, in 2023, Yuxing shares will have a decline in revenue and net profit deducted from non-attributable to the parent company. In the first half of 2023, Yuxing Co., Ltd. achieved operating income of 186 million yuan, a year-on-year decrease of 20.79%; The net profit deducted from the non-attributable parent was 11.9306 million yuan, a year-on-year decrease of 41.17%.

According to the annual report disclosed by Yuxing shares on the New Third Board, in 2023, Yuxing shares will achieve operating income of 376 million yuan, a year-on-year decrease of 17.76%; the net profit was 34.0084 million yuan, a year-on-year decrease of 28.76%; The net profit deducted from the non-attributable parent company was 33.9473 million yuan, a year-on-year decrease of 22.78%.

From the perspective of gross profit margin, from 2020 to the first half of 2023 (hereinafter referred to as the "reporting period"), the gross profit margin of Yuxing's sales was 22.67%, 19.26%, 19.60%, and 16.06% respectively, and the overall trend was also a significant decline.

In response to the risk of declining performance, the Beijing Stock Exchange issued a third round of inquiry letters, all of which are related to the decline in performance, and the Beijing Stock Exchange asked Yuxing to explain the reasons and reasonableness of the sharp decline in performance in 2023, and whether it will continue to decline as a whole.

In this regard, in the reply to the third round of audit inquiry letter, Yuxing shares said that the factors affecting the company's performance mainly include operating income and gross profit margin, on the one hand, it is attributed to the sluggish demand in overseas market, and on the other hand, the lack of production and sales has led to a large decline in product sales unit price.

According to industry insiders, there is a decline in performance before listing, which is a taboo for companies to be listed.

It is "forced" to produce environmentally friendly

"Lucid waters and lush mountains are invaluable assets", and protecting the ecology is the development of productive forces, and it is also the unshirkable responsibility of enterprises.

However, Yuxing shares turned a deaf ear to this, and even repeatedly were punished for poor environmental protection in production.

On March 28, 2023, the Haiyan County Ecological Environment Branch issued the "Notice on the Implementation of Mandatory Cleaner Production Audit in 2023" (hereinafter referred to as the "Mandatory Audit Notice"), which shows that the bureau has implemented mandatory cleaner production audits for 8 enterprises. Among them, Yuxing shares were included in the list of mandatory cleaner production audit enterprises in 2023.

According to the Zhejiang Huanhan [2023] No. 129 document issued by the Zhejiang Provincial Department of Ecology and Environment, in 2023, Yuxing shares will also be included in the "Zhejiang Province Mandatory Cleaner Production Audit Enterprise Plan List" disclosed as a key enterprise in water pollution prevention and control.

According to the "Mandatory Audit Notice", there are two situations in which the scope of mandatory cleaner production audit is implemented: the first category is enterprises that have exceeded the validity period of the mandatory cleaner production audit, and the second category is the heavily polluting and high-energy consumption enterprises that have not implemented the cleaner production audit.

According to the public information of the Haiyan County Government, from 2020 to 2022, Yuxing shares are not in the list of mandatory cleaner production audit enterprises. Therefore, there is no situation that has exceeded the validity period of the mandatory cleaner production audit, and it does not belong to the first category. In 2023, Yuxing Co., Ltd. will be included in the list or belong to the heavily polluting and high-energy consumption enterprises that have not implemented cleaner production audits, that is, the second category.

It is worth recalling that Yuxing shares did not mention its inclusion in the list of mandatory cleaner production audit enterprises in the prospectus and reply to the inquiry document.

In addition, Yuxing's outsourcing suppliers also have excessive emissions. For example, Caton Environmental Protection Technology (Jiaxing) Co., Ltd. (hereinafter referred to as "Caton Environmental Protection"), a galvanizing outsourcing supplier of Yuxing Co., Ltd., has excessive pollution discharge from 2021 to 2023; Jiaxing Xingxin Environmental Protection Technology Co., Ltd. (hereinafter referred to as "Xingxin Environmental Protection") was listed as a key soil pollution supervision unit from 2019 to 2022; Jiaxing Sino-French Metal Surface Treatment Co., Ltd. (hereinafter referred to as "Sino-French Metal") has been punished for excessive exhaust gas emissions many times.

Family holding is harmful

"Electric Eel Finance" noted that Shen Jiahua, Li Jinxiu, and Shen Ting, the actual controllers of Yuxing shares, control a total of 85.37% of the company's shares through direct and indirect shareholdings and concerted actors. Shen Jiahua and Li Jinxiu are husband and wife, and Shen Ting is the daughter of the two. Shen Ting's spouse Yuan Ming holds 40.00% of the property share of Yuxing Management, directly holds 2.2119% of the company's shares (direct and indirect holding ratio of more than 5%), and has served as the director and general manager of Yuxing since December 2019, and has not been recognized as the actual controller of the company.

In addition, the company has a total of 6 non-independent directors, 5 of whom are members of the actual controller's family, namely Chairman Shen Jiahua, directors Yuan Ming, Shen Hua, Shen Liming, and Huang Fei, among them, Shen Hua and Shen Liming are Shen Jiahua's brothers, holding 1.65% and 1.80% of the company's shares respectively, and Huang Fei is Shen Hua's son-in-law. Among the 3 executives, 2 are members of the actual controller's family, namely General Manager Yuan Ming and Deputy General Manager Shen Hua; The actual controller, Shen Ting, is the assistant general manager of the company.

It is worth noting that the company has a VAM agreement: in the relevant agreements signed by the company's controlling shareholder Yuxing Holdings, the actual controllers Shen Jiahua, Li Jinxiu and Shen Ting, Yuxing Management and the company's shareholders Jiaxing Junke and Haiyan Zhihuiwan, the VAM clause with Yuxing Holdings, Yuxing Management, Shen Jiahua, Li Jinxiu and Shen Ting as the obligatory entities is stipulated. If Jiaxing Junke and Haiyan Zhihuiwan claim that Yuxing Holdings, Yuxing Management, Shen Jiahua, Li Jinxiu and Shen Ting perform VAM obligations in accordance with the agreement, the controlling shareholder and actual controller of the company will need to undertake relevant obligations such as repurchasing the shares of the company held by Jiaxing Junke and Haiyan Zhihuiwan.

Family holding and dominance often lead to unbalanced, incomplete and imperfect corporate governance structure. Major shareholders may almost completely dominate the board of directors and the board of supervisors of the company through an absolute or relative controlling position, forming a hall of words, resulting in a one-handed cover in daily operations, and it is easy to produce insider control. According to industry insiders, the independent director system is designed to protect the interests of small and medium-sized shareholders and restrict the rights of large shareholders, but in the case of a dominant share, independent directors may be difficult to get rid of the influence of major shareholders, resulting in the failure of board governance.

The chairman has a high school education and thousands of risks

According to the prospectus, Shen Jiahua, chairman of the company, has a high school education, and has served as a projectionist of the Haitang Township Film Team and the sales section chief of the second branch of Haiyan Nut Factory. According to Tianyancha, Chairman Shen Jiahua currently has 10 pieces of information, 3 as shareholders, 5 as executives, and actually controls 5 companies.

In particular, there are as many as 2,339 surrounding risks and 157 early warning reminders. Haiyan Huating Trading Co., Ltd., of which he was an executive, was simply deregistered; Haiyan Xincheng Fastener Financing Guarantee Co., Ltd., which has served as the legal representative, has cancellation filing information; Haiyan Xinxin Fastener Financing Guarantee Co., Ltd., which has served as the legal representative, has liquidation information; Part of the equity of Zhejiang Haiyan Rural Commercial Bank Co., Ltd., which is a shareholder, is in a pledged state; The equity of the shareholders of Haiyan New Chengxin Fastener Financing Guarantee Co., Ltd., which once served as the legal representative, was frozen; Information on the bankruptcy of Zhejiang Haiyan Rural Commercial Bank Co., Ltd., as a shareholder, in applying for bankruptcy of other companies.

In terms of litigation, Zhejiang Haiyan Rural Commercial Bank Co., Ltd., of which it is a shareholder, was sued for an objection to execution by an outsider, Zhejiang Haiyan Rural Commercial Bank Co., Ltd., which was a shareholder, was sued for a dispute over a financial loan contract, Zhejiang Haiyan Rural Commercial Bank Co., Ltd., which was a shareholder, was sued for a dispute over the right to claim for the return of interest in bills, and Zhejiang Haiyan Rural Commercial Bank Co., Ltd., which was a shareholder, was sued for a dispute over a loan contract.

In addition, Zhejiang Haiyan Rural Commercial Bank Co., Ltd., of which it is a shareholder, has been subject to administrative penalties for other reasons, and Yuxing Fastener (Jiaxing) Co., Ltd., which is the legal representative, has movable assets that are in a state of mortgage.

How to protect the interests of investors and how to proceed smoothly of the company's IPO are issues that Shen Jiahua needs to consider.

"Electric Eel Finance" will continue to pay attention to the progress of Yuxing's IPO, and also closely track the concerns of investors.