21st Century Business Herald reporter Han Yongxian reported in Beijing
The results of the 80th review meeting of the Listing Committee of the Science and Technology Innovation Board of the Shanghai Stock Exchange this year were released, Shaanxi Lite Optoelectronics (hereinafter referred to as "Lite Optoelectronics") and Suzhou Nanocore Microelectronics both passed the meeting, both companies are upstream companies in the supply chain of the electronics industry, market expansion and operation are subject to changes in downstream large customers, especially Lite Optoelectronics as a material supplier of the panel giant BOE, and is highly dependent on the first major customer BOE.
Since the submission of the draft declaration on June 16 this year, Lite Optoelectronics has experienced two rounds of inquiries from the Shanghai Stock Exchange, and the company's scientific and technological attributes and the company's dependence on large customers BOE have always been the focus of attention. On November 1, the Listing Committee of the Science and Technology Innovation Board inquired on the spot, and Wright Optoelectronics still needed to implement the explanation, whether the company and its related parties had common suppliers or customers, and whether there were issues such as profit transmission.
"In recent years, Chinese panel companies such as BOE have gradually mastered the global pricing power of some panel products, which has led to the rapid growth of a large number of local enterprises in the upstream and downstream of the industrial chain." However, the panel industry has its particularity, after a round of cruel cycles, the industry is generally left with a few enterprises, the 'big customer dependence' of industrial chain enterprises is difficult to avoid, and the high dependence on large customers may become an important uncertainty factor affecting the ability of enterprises to continue to operate and valuation. Some people in the display industry told the 21st Century Business Herald reporter.
Lite Optoelectronics is mainly engaged in the research and development, production and sales of OLED organic materials, the company OLED organic materials, products include OLED terminal materials and OLED intermediates, the main customers include BOE, Huaxing Optoelectronics, Hehui Optoelectronics and other world-renowned display panel manufacturers.
According to the draft of the meeting, from 2018 to 2020 and 2021, the revenue of Wright Optoelectronics was 112 million yuan, 202 million yuan, 275 million yuan and 163 million yuan, and the net profit attributable to the mother was -8.8368 million yuan, 65.8263 million yuan, 70.6777 million yuan and 54.666 million yuan, respectively.
Thanks to the growth of the company's panel core manufacturer BOE order volume and the successful entry of the company's products into the supply chain system of Hehui Optoelectronics, Huaxing Optoelectronics and other companies, Lite Optoelectronics turned around losses during the reporting period and achieved rapid growth in performance. Through the deliberation of the Listing Committee of the Science and Technology Innovation Board, if the csrcisode can be successfully registered with the CSRC, Lite Optoelectronics will become another listed company in the upstream industry of the panel supply chain.
According to the preliminary statistics of the 21st Century Business Herald reporter, since the beginning of this year, the core manufacturer of the panel BOE supply chain company system has been born in the Aurora Borealis, Shenzhen Keda two listed companies, respectively, listed on the ChiNext board and the science and technology innovation board, the supply chain companies that are still applying for listing are also Wright Optoelectronics, Fengsheng Optoelectronics and Lingyunguang, respectively, intend to be listed on the Science and Technology Innovation Board and the ChiNext Board, in addition to Wright Optoelectronics has passed, the other two are in the inquiry stage.
(Picture: Wright Optoelectronics, picture source: Shanghai Stock Exchange official website)
Coupled with Olaide, which was listed on the Science and Technology Innovation Board in July 2020, there have been 6 or 7 listed and proposed listed companies in the upstream of the industrial chain of the Jingdong board supply chain from screen production evaporation source equipment to optical plates and OLED organic luminescent materials.
Market analysts pointed out that the centralized listing of panel industry chain companies confirms that the panel industry chain, especially the OLED high-end panel industry chain, is accelerating the transfer to the Chinese market, and breakthroughs have been made in the research and development of core technologies in the domestic related industry chain.
However, 21st Century Business Herald noted that in the panel supply chain IPO companies, the revenue of their main business is closely related to the downstream large customers, and the proportion of the above-mentioned BOE supply chain companies relying on large customer revenue is more prominent, especially the Wright Optoelectronics that has passed the meeting, and its revenue proportion of RELYing on BOE is the highest in the reporting period or even reached more than 75%.
The previously exposed crisis of Apple's supply chain companies has also made investors re-examine the independence of the operations of these upstream supply chain companies, and whether they can get rid of their dependence on downstream concentrated large customers after listing has attracted wide attention.
In May this year, Apple announced the list of global suppliers in 2020, of which 34 Chinese suppliers were eliminated, the relevant Listed Companies in China after the exclusion suffered a revenue crisis, and the domestic touch screen giant OFILM was kicked out of the supply chain by Apple, and even suffered huge losses this year.
In 2020, after BOE successfully entered its supply chain through Apple testing, its revenue increased by 16.80% year-on-year, and the net profit attributable to the mother increased by 162.46% year-on-year. Companies that are suppliers of BOE's upstream supply chain also profit from this.
It is worth noting that whether this dependent supply chain relationship can be stable and sustainable, and whether it has market independence, it is inevitable that investors will be worried.
According to the draft, the core products of Lright Optoelectronics, which has just successfully passed the meeting, have two major OLED organic material core products in the reporting period, which are OLED terminal materials and OLED intermediates, and the company's two major products are dependent on centralized customer marketing.
During the reporting period, the revenue of OLED organic materials of Lite Optoelectronics was 82.5597 million yuan, 178 million yuan, 234 million yuan and 148 million yuan respectively, accounting for 100%, 99.19%, 95.31% and 100% of the company's main business revenue, respectively. Wright Optoelectronics said that the first major customer in the reporting period was BOE, and its sales revenue accounted for 75.81%, 86.16%, 74.22% and 62.88% of the company's main business revenue in each period, respectively.
The 21st Century Business Herald reporter analyzed the data of its last draft and found that the main source of income of Wright Optoelectronics is the company's OLED terminal materials, olED terminal material product sales revenue accounted for more than 75% of the company's main business revenue, in the first half of this year, this proportion is as high as 81.01%, and another product OLED intermediates account for about 20%.
In 2018 and 2019, more than 99% of the company's OLED terminal material sales relied on BOE, and in 2020, after the company entered the supplier system of Hehui Optoelectronics and Huaxing Optoelectronics, the sales proportion of the product to BOE was still as high as 94.66%. In the first half of 2021, Lite Optoelectronics OLED terminal material products only had three major BOE, Hehui Optoelectronics and Huaxing Optoelectronics customers, accounting for 77.62%, 17.45% and 4.93% of sales respectively.
(Pictured: The top five customers of Wright Optoelectronics in the first half of this year, picture source prospectus)
During the reporting period, more than 98% of the sales of Lite Optoelectronics OLED intermediate products were dependent on the top five customers, and the sales of SGS and its affiliates, the largest customer of the product, accounted for 64.95% in the first half of 2021.
In addition, the company's mass-produced OLED terminal material products are mainly Red Prime materials and hole transport layer materials in the luminescent layer materials, of which the reporting period, Red Prime material revenue accounted for 89.99%, 95.18%, 97.35% and 99.36% of the company's OLED terminal material revenue, respectively. Since 2018, the OLED terminal materials supplied by Lite Optoelectronics to BOE are mainly Red Prime materials in the luminous layer.
This means that Lite Optoelectronics not only faces customer concentration, but also has a single sales product for large customers. In this regard, Wright Optoelectronics believes that the downstream customer BOE is the world's first leading panel manufacturer in display panel shipments, Huaxing Optoelectronics is the second largest global display panel shipments, and Hui Optoelectronics is a rigid OLED panel leader, all of which are world-renowned display panel companies.
In the prospectus, the company conveyed information that the market share and rapid expansion of major customers can ensure the sales of the company's products, will not lead to significant uncertainty in the issuer's ability to continue to operate, and will not have a material adverse impact on the conditions of the offering.
Wright Optoelectronics also reminded that if the company cannot maintain its advantage in BOE's material suppliers in the future, cannot maintain the supply of Red Prime products, or cannot continue to maintain its cooperative relationship with BOE, the company's operating performance will be greatly affected.
However, according to the 21st Century Business Herald reporter, the dependence on large customers has made Lite Optoelectronics actually lose the pricing power of the product. The prospectus shows that during the reporting period, the framework agreement signed by Lite Optoelectronics and BOE has been stipulated that the sales price of the company's same contract product should be reduced by a certain amount every year, and the sales price of the same product sold by the company to BOE needs to decrease year by year after the initial pricing.
In addition, the 21st Century Business Herald reporter noted that the cooperation and development agreement signed by Lite Optoelectronics with BOE and Huaxing Optoelectronics has an exclusive clause, and the products developed by the company need to be sold according to the arrangements of cooperative research and development customers. This means that the new products developed by Lite Optoelectronics in the future must also rely on the sales of large customers.
The continuity and independence of Wright Optoelectronics continue to attract the attention of regulators, and the company claims to have the ability to independently obtain business for the market, but analysts pointed out that its sales composition and performance data performance during the reporting period have fully demonstrated the company's difficulty in getting rid of the dependence on large customers.
It is not difficult to find that in addition to the problem of supply chain dependence, the regulator has also questioned the core technology research and development capabilities of Lite Optoelectronics many times.
In the prospectus, Wright Optoelectronics said that the company's development has gone through multiple stages, after the establishment of the company in 2010, the main business is to engage in special chemicals, electronic chemicals trading, since 2013 began to enter the field of display materials, began to develop, produce and sell OLED intermediates and liquid crystal materials.
In 2016, Lite Optoelectronics established a development strategy with OLED organic materials as the core, and began to enter the olED terminal material field, the core of OLED organic materials. In January 2016, Lite Optoelectronics was listed on the New Third Board, and in October 2017, the company's shares were terminated.
The 21st Century Business Herald reporter reviewed the report during its listing period and found that before 2017, the company's relevant research rarely saw research information on OLED terminal material products.
It was not until 2016 that Lite Optoelectronics and MS, a Korean company specializing in the research and development, production, sales and service of OLED materials, established a joint venture with MS, which caused MS to invest in six proprietary technologies, and Lite Optoelectronics officially began to engage in the development of OLED terminal materials.
Wright Optoelectronics disclosed that in the early days of the establishment of Litemax, the technology came from MS. After years of development, Litemax R & D, production team through digestion, absorption and innovation, on the basis of MS original technology, breakthrough in the original results, the formation of its own characteristics of the core technology system, the company's subsequent products and technology development are independent of MS.
In June 2020, the Company acquired a 49% stake in WrightMax held by MS. After MS withdrew from Litemax, the company is continuously improving product performance and expanding different application areas with its own research and development capabilities, developing a new generation of Materials such as Red Prime. In the first half of 2020, the company's self-developed OLED terminal material product revenue accounted for more than 95% of olED terminal material product revenue.
According to the prospectus, in the early days of the establishment of Litemax, the 6 proprietary technologies from MS were the company's technical foundation, and the company sent major technical personnel to Korea for further training after obtaining the above proprietary technologies to obtain OLED terminal material research and development and production capabilities.
Benefiting from MS's technology investment, in the second half of 2017, the terminal material production base of Lite Optoelectronics was completed and passed the BOE audit. Since 2018, the company has begun to supply its own products to BOE.
In 2020, Wright Optoelectronics acquired all the equity of Litemax held by MS, and the company's cooperation with MS business came to an end. However, the termination of the cooperative relationship between the two sides was not smooth, according to the 21st Century Business Herald reporter, MS had sued Wright Optoelectronics to court, and then reached a settlement of 200 million yuan purchase price after consultation between the two sides.
(Pictured: Wright Optoelectronics R&D team, picture source prospectus)
The 21st Century Business Herald reporter noted that in the prospectus until the eve of applying for listing, Lite Optoelectronics disclosed a team of 6 core technical personnel, of which Xue Zhen, Feng Zhen, Ma Tiantian, Yang Lei, Gao Changxuan and others were already serving in the company at the beginning of the reporting period, and the company's chief scientist Jin Rongguo only joined the company in September 2019.
Lite Optoelectronics said that during the reporting period, the company's core technical personnel did not undergo major changes, which means that the main technical personnel sent by the company to Korea for further training are the existing core technical team, so whether the company really has the ability to break through key core technologies has been questioned.
Therefore, the SSE directly inquired whether the company's relevant core technologies have technical thresholds, whether there is a possibility of being easily imitated and replaced, whether they are common technologies in the industry, whether there is a risk of rapid iteration, and require the company to further explain the sources of the current main technologies.
It is worth noting that Lite Optoelectronics raised 1 billion yuan in this listing, of which 718 million yuan will be used for "OLED terminal material research and development and industrialization projects", and the remaining 300 million yuan will be used to supplement working capital. In the previous reporting period, the company's annual investment in research and development expenses was only 10.9999 million yuan, 18.3801, 29.4509 million yuan and 14.2855 million yuan, respectively.
Compared with the amount of funds to be invested in research and development projects, from the data disclosed in the prospectus alone, the company's investment in the early core technology is very limited, and its current claim that the company's core products and own patents have broken the patent blockade of foreign manufacturers, of which the real level of technology and whether the research and development capabilities can continue to break through, which will be a problem of market concern.
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