"Harbor Business Observer" Huang Yi
Changzhou Ruihua Chemical Engineering Technology Co., Ltd. (hereinafter referred to as "Ruihua Technology", 920099.BJ) was accepted by the Beijing Stock Exchange in March 2023, obtained registration approval on August 29, 2024, and was officially listed on September 25.
It is understood that the issue price of Ruihua Technology was 19 yuan per share, and as of the close of trading on September 30, the stock price closed at 30.14 yuan.
According to the initial prospectus, Ruihua Technology plans to raise 660 million yuan, of which 315 million yuan will be used for the 12,000 tons/year catalyst project and 345 million yuan will be used for the 100,000 tons/year degradable plastic project. In the prospectus on September 6 this year, the company lowered the raised funds to 304 million yuan, of which 240 million yuan was used for the 12,000 tons/year catalyst project, and 64 million yuan was used for the 100,000 tons/year degradable plastic project.
In other words, even if the listing was successful, the amount of funds raised by Ruihua Technology fell by half.
In terms of performance, Ruihua Technology made positive forecasts for revenue and net profit in 2024 and 2025 early, which caused a lot of heated discussions. However, in the first half of this year, only 30% of the above forecast was completed, and whether Ruihua Technology's forecast is reasonable remains to be considered.
01
In the first half of 2024, it will decline year-on-year, and only 30% of the annual target will be completed
From 2021 to 2023 (during the reporting period), Ruihua Technology's operating income will be 142 million, 326 million, and 394 million respectively, up 129.29% and 21.01% year-on-year; the net profit was 36.5729 million, 78.6147 million and 114 million respectively, a year-on-year increase of 114.95% and 44.92%; The gross profit margin was 72.41%, 42.68% and 54.49% respectively; The net profit margin was 25.72%, 24.12% and 28.88% respectively.
This situation also continued into the first half of this year as the growth rate of revenue and net profit gradually reduced during the reporting period. According to the data, in the first half of 2024, Ruihua Technology's revenue will be 194 million, a year-on-year decrease of 6.21%, a net profit of 59.99 million, a year-on-year decrease of 33.81%, a gross profit margin of 49.89%, and a net profit margin of 30.89%.
Interestingly, even if the performance in the first half of this year is not satisfactory, Ruihua Technology has made a very positive and optimistic performance forecast for 2024 and 2025 in the prospectus. Based on the 2023 financial statements, combined with the actual operating results from January to March 2024, and based on the company's best estimation assumptions about the business environment and business plan during the forecast period, Ruihua Technology has prepared the profit forecast statements for 2024 and 2025 in accordance with the company's consistent main accounting policies and accounting estimates, and following the principle of prudence. Lixin Zhonglian Certified Public Accountants (Special General Partnership) issued the "Profit Forecast Audit Report" (Lixin Zhonglian Zhuan Shen Zi [2024] No. D-0239).
According to the profit forecast results, Ruihua Technology is expected to achieve operating income of 620 million yuan in 2024, a year-on-year increase of 57.26%, and is expected to achieve a net profit of 117 million yuan, a year-on-year increase of 2.91%, and in 2025, it is expected to achieve an operating income of 709 million yuan, a year-on-year increase of 14.30%, and is expected to achieve a net profit of 124 million, a year-on-year increase of 5.65%. The growth rate of operating income in 2024 and 2025 is higher than that of net profit, which is mainly closely related to the large difference in revenue composition and gross profit margin of each business.
At present, the company's performance in the first half of the year has only completed about 30% of the performance forecast target. During the reporting period, the company's revenue in the first half of the year accounted for 41.15%, 37.97% and 52.5% respectively, which shows that in the first three years, the company's revenue proportion in the first half of the year has been increasing, and how Ruihua Technology can ensure that the second half of this year can complete the unreached seventy percent of the revenue, it remains to be seen. In addition, with the slowdown of the company's performance growth, Ruihua Technology's performance forecast for the next two years still maintains a high growth rate, which is reflected in where Ruihua Technology needs to be further confirmed.
Ruihua Technology said that the petrochemical industry, as a pillar industry in the development of the national economy, is less affected by seasonality on the whole, but there is a certain seasonality in the production and consumption demand of some specific products. For example, heating in the northern region in winter leads to an increase in gas consumption, and fuel consumption increases during spring ploughing, spring transportation, and autumn harvest. Affected by the seasonal construction characteristics of customers in the downstream petrochemical industry, the company's revenue accounted for a high level in the fourth quarter.
Song Qinghui, a well-known economist, pointed out that "in the context of declining revenue growth, Ruihua Technology still has a very optimistic forecast for revenue in 2024 and 2025, which seems very abnormal." Generally speaking, companies rarely predict the performance of the following year in advance, which may be due to the practical needs of a smooth listing, or the suspicion of exaggerating the performance forecast. It is imperative that Ruihua Technology come up with a strong basis to dispel the doubts of market investors. ”
In terms of business, Ruihua Technology mainly provides petrochemical customers with complete sets of technical integrated solutions based on chemical process package technology, and according to different business types, the company's main business income is divided into process packages and other technical services, chemical equipment and catalysts.
During the reporting period, the revenue from process packages and other technical services accounted for 62.07%, 31.61% and 39.23% respectively; The revenue of chemical equipment accounted for 26.95%, 68.39% and 38.67% respectively; The revenue from catalysts accounted for 10.98%, 0% and 22.10% respectively.
Obviously, the share of revenue from process kits and other technical services has decreased significantly. This business has also been repeatedly mentioned in the three inquiries of the regulatory authorities, mainly including the growth and sustainability of the process package business, the fairness of pricing and the compliance of order acquisition, the large fluctuation of unit price, and the reasonableness of gross profit margin.
02
The level of accounts receivable collection is low, and it is more dependent on the top five customers
Also eye-catching is the accounts receivable situation of Ruihua Technology.
During the reporting period, the book value of the company's notes receivable was 19.1569 million yuan, 15.9295 million yuan and 25.032 million yuan respectively, accounting for 3.72%, 2.74% and 3.98% of current assets respectively, and the balance of accounts receivable was 149.5 million yuan, 158 million yuan and 143 million yuan respectively, and its book balance accounted for 29.08%, 27.17% and 22.69% of current assets respectively. During this period, the accounts receivable turnover ratios were 0.36 times/year, 1.24 times/year, and 1.13 times/year, respectively.
According to the classification of age, those within one year were 59.4806 million, 72.9795 million and 21.9461 million respectively; 81.5735 million, 30.354 million, and 38.9503 million respectively from 1 to 2 years; 5,007,200, 47,682,900, and 24,408,700 respectively from 2 to 3 years; For more than 3 years, they were 3.5162 million, 6.931 million, and 57.4689 million respectively.
At the same time, accounts receivable accounted for 18.21%, 39.10% and 27.46% respectively during the credit period; The accounts receivable outside the credit period accounted for 81.79%, 60.90% and 72.54% respectively.
Ruihua Technology said that the company mainly adopts the method of stage collection, and the specific payment conditions of different business models are different, among which, the general collection ratio of the process package business ranges from 50% to 90% when the final version of the process package is delivered, and the general collection ratio ranges from 60% to 90% when the equipment and catalyst are delivered or accepted. The progress payment of the company's various businesses is more dependent on the completion and start-up of the project, especially the process package business, which takes several years from the delivery of the final version of the process package to the completion and start-up of the production line, resulting in a long collection cycle of the company's accounts receivable, and the company's annual accounts receivable balance is large.
In recent years, public health incidents have broken out in various parts of the country, resulting in the construction cycle of chemical projects is less than expected, the capital turnover pressure of chemical enterprises has increased, and the factors of accidents and production suspension and rectification of individual enterprises in the operation of the project have been superimposed, and it is difficult to recover the receivables of some customers of Ruihua Technology in a timely manner. The proportion of accounts receivable aged more than 1 year increased from 60.23% at the end of 2021 to 84.63% at the end of 2023, and the proportion of bad debt provisions to book balance increased year by year, which ultimately led to large fluctuations in the proportion of accounts receivable to operating income.
According to Ruihua's technical disclosure, Ningbo Keyuan Refining Co., Ltd. (hereinafter referred to as "Ningbo Keyuan") is the company's largest customer in 2020, and its production safety accident in May 2021 led to the suspension of production, and the capital turnover was difficult, and it failed to pay in time, so the company made a provision for bad debts at 30% of its accounts receivable at the end of 2021. In April 2022, Ningbo Keyuan signed a repayment plan with the company and began to repay the loan according to the repayment plan in April 2022, so the company no longer made a separate provision for bad debts for its accounts receivable at the end of 2022, but according to the age. In December 2022, Ningbo Keyuan suffered another safety production accident, which affected it to fail to repay the loan on time according to the repayment plan after May 2023, and at the same time, considering the factor of long account age, it made a provision for bad debts on a 100% individual basis.
During the reporting period, the bad debt provisions for Ningbo Keyuan were 21.4774 million, 0 and 37.8966 million respectively. It is worth noting that the chemical equipment of Ruihua Technology includes two parts: patented proprietary equipment and long-term large-scale equipment, and the long-term large-scale equipment business currently has only one order, which is a cracking furnace system project signed by the company and Ningbo Keyuan, with a contract amount (including tax) of 122 million. Construction of the project began in October 2019 and its main workload was completed in 2020. In 2020, the revenue will be recognized as 89.1212 million yuan according to the completion schedule.
During the same period, the balance of the company's top five accounts receivable customers accounted for 95.16%, 85.50% and 86.77% of the total accounts receivable respectively, accounting for a relatively high proportion, and the main customers changed in each period.
Ruihua Technology explained that the main system of the company to sell process packages, chemical equipment, catalyst products, products and services are mainly used for the customer's fixed assets new construction and upgrading, the frequency of investment in this area is low and large-scale, the company continues to sign new customers and provide old customers to provide later technical services and technical improvements to obtain income, resulting in a high concentration of annual accounts receivable and changes.
In addition to the relatively high balance of the top five accounts receivable customers, Ruihua Technology's dependence on the top five customers is increasing. During the reporting period, the company's transactions with the top five customers accounted for 90.52%, 89.01% and 99.17% respectively.
Ruihua Technology explained that the company's customer concentration is high, but the repetition of the top five customers is not high, which is mainly determined by the company's business characteristics. In response to the statement of the company, can it also be said that the number of customers with whom the company has transactions in a single year is not large?
03
The inventory level has increased, and the asset-liability ratio is higher than the peer average
The limited customer base does not effectively absorb the inventory of Ruihua Technology.
During the reporting period, the book value of the company's inventory was 172 million, 129 million and 182 million respectively, accounting for 33.44%, 22.10% and 28.97% of current assets respectively. Among them, the book value of inventory goods was 23.6657 million, 41.0603 million and 45.8458 million respectively.
According to the company, the inventory is an unconventional inventory, mainly because of the differences in the specifications and uses of the issuer's chemical equipment, the type of catalyst and the output of each batch, and the reproducibility of the design of the process package, resulting in large differences in the production cycle of the same business type, and the company's production cycle is long and the average scale of a single project is large, and the scale, quantity and progress of the projects implemented at the end of each period will affect the balance of the inventory, and it is reasonable for the balance of the inventory to fluctuate greatly.
During the same period, Ruihua Technology's cash flow also showed negative growth, with its net cash flow from operating activities being 11.3372 million yuan, 143 million yuan and 101 million yuan respectively, a year-on-year change of 1157.63% and -29.12%; The balance of cash and cash equivalents at the end of the period was 145 million, 261 million and 237 million, respectively, which also declined in 2023.
During the reporting period, the company's short-term borrowings were 47.3623 million, 62.4082 million and 66.9591 million respectively. The asset-liability ratios were 46.83%, 44.73% and 46.68% respectively; As a comparison, the average values of comparable companies in the same industry are 38.47%, 25.42%, and 30.12% respectively. Obviously, the asset-liability ratio of Ruihua Technology is much higher than the average of its peers.
In addition to the rise in short-term borrowings, Ruihua Technology has not stopped paying dividends. The company said frankly that the steady growth of the company's owner's equity is mainly due to the company's profit accumulation in recent years, and the company actively brings returns to shareholders on the basis of ensuring the funds required for operation and development, with a total of 90 million yuan in cash dividends and 24.2 million yuan in stock dividends during the reporting period. (Produced by Harbour Finance)