Recently, Shaanxi Lite Optoelectronic Materials Co., Ltd. (hereinafter referred to as "Lite Optoelectronics" or the "Company") issued a prospectus for the initial public offering (filing draft), and the company intends to publicly issue no more than 40,243,759 shares on the Science and Technology Innovation Board, with CITIC Securities as the sponsor.
Lite Optoelectronics intends to use the raised funds for OLED terminal material research and development and industrialization projects and supplementary working capital. The listing criteria selected by the Company are "the estimated market value is not less than RMB1 billion, the net profit in the last two years is positive and the cumulative net profit is not less than RMB50 million".
The revenue of Wright Optoelectronics relies on OLED terminal materials, and the concentration of BOE, the largest customer, is high. In addition, the prospectus shows that in addition to the Korean scientist Kim Young-kook, the other 5 core technical personnel of Wright Optoelectronics are treated lower than their peers, and the company's research and development investment is insufficient.
Net losses of several subsidiaries in 2020 there is a risk of VAM agreements
Lite Optoelectronics is mainly engaged in the research and development, production and sales of OLED organic materials, the main products include OLED terminal materials and OLED intermediates. Among them, the customers of OLED terminal materials are BOE, Huaxing Optoelectronics, Hehui Optoelectronics and other display panel manufacturers.
In January 2016, the shares of Lite Optoelectronics were listed on the New Third Board for public transfer, and the listing was terminated on October 20, 2017.
The shareholding structure of Wright Optoelectronics is relatively concentrated. As of June 15, 2021, Wang Yalong, the controlling shareholder and actual controller of the Company, directly held 54.85% of the Company's shares, xi'an Qilin, Gongqingcheng Qilin and Gongqingcheng Qinghe held a total of 6.75% of the company's shares, and Wang Yalong controlled a total of 61.60% of the company's shares through direct and indirect means.
According to the prospectus, in 2020, the total assets of the parent company of Wright Optoelectronics were 949 million yuan, the total assets of the consolidated statement were 810 million yuan, and the total assets of the parent company were 139 million yuan higher than the value of the consolidated statement, which is worthy of attention. The reasons for this may be related to the loss of the subsidiary and the contingent creditor-debtor relationship within the parent and subsidiary.
From 2018 to 2020, the undistributed profit of the parent company was 31.7516 million yuan, 99.3752 million yuan and 132.1104 million yuan, respectively, and the undistributed profit in the consolidated statements was -27.3406 million yuan, 30.972 million yuan and 98.0125 million yuan, respectively.
The study found that in 2020, the parent company of Wright Optoelectronics invested more in its subsidiaries. The parent company's long-term equity investment account was 382 million yuan, an increase of 133.21% year-on-year, and the company acquired 49% of the equity of Litemax held by MS for 204 million yuan in the current period. In addition, the other receivables of the parent company in the current year were 99.755 million yuan, while the amount of this account in the consolidated statement was only 145,500 yuan, indicating that there may be a creditor-debtor relationship within the parent and subsidiary.
Figure 1: The current situation of the subsidiary of Wright Optoelectronics Holdings
In addition, some shareholders of Wright Optoelectronics agreed on the VAM clause on share repurchase when investing in or transferring the company's equity. In the future, if the company's IPO application is withdrawn or the review is not approved, there is a risk of triggering the repurchase obligation of Wang Yalong, the controlling shareholder and actual controller, resulting in a change in the controlling ratio of the actual controller of the company.
The source of income is more concentrated and relies on the first largest customer, BOE
More than 70% of the main revenue of Lite Optoelectronics comes from OLED terminal materials, and the source of income is relatively concentrated, and it may face the risk of falling prices and intensified competition in the future.
From 2019 to 2020, the company's OLED terminal material revenue increased by 147.37% and 24.24% year-on-year, respectively, and the growth rate was significantly downward. From 2018 to 2020, the sales unit price of the company's OLED terminal materials was 190,900 yuan / kg, 174,700 yuan / kg and 146,700 yuan / kg, showing a downward trend. In addition, the same OLED terminal materials provider, Olaide's 2020 annual report shows that its annual output of 10,000 kilograms of high-performance luminescent materials for AMOLED is under construction, and the future may have an impact on the company's competitive position.
Figure 2: Composition of the main business income of Wright Optoelectronics from 2018 to 2020
From 2018 to 2020, Wright Optoelectronics' revenue continued to rely on BOE. During the period, the company's revenue from BOE was 62.5924 million yuan, 154.6075 million yuan and 182.1058 million yuan, accounting for 75.81%, 86.16% and 74.22% of the main revenue of the current period, respectively. BOE's performance has a greater impact on the company, according to BOE's 2020 annual report, the company's revenue increased by 16.80% year-on-year in the current period, and the year-on-year growth rate declined. In addition, Lite Optoelectronics is not one of the top 5 suppliers of BOE, and the company's bargaining power for this important customer may be low.
Most core technical personnel are paid less and investment in research and development is insufficient
In January 2020, Lite Optoelectronics set up six new core technical personnel, all of whom had previously been employed in the company, and the company said that the new core technical personnel were set up to improve the company's research and development structure.
Figure 3: The core technical personnel of Wright Optoelectronics
In addition to the Korean scientist Kim Young-kook, the other 5 core technical personnel of Wright Optoelectronics are treated less than their peers, or there is a risk of brain drain. The company is located in Shaanxi Province, according to the Shaanxi Provincial Bureau of Statistics, in 2020, the average annual salary of employed personnel in urban private units is about 47,700 yuan, and Yang Lei, whose salary is at the bottom of the core technical personnel, is 261.43% higher than the provincial average. Compared with Olaide, a comparable listed company in the same industry, the company is located in Jilin Province, and according to the data of the Provincial Bureau of Statistics, the average annual salary of employed personnel in urban private units in the same period is about 42,100 yuan. Wang Kang, the lowest-paid of the company's core technical personnel, has an annual salary of 246,200 yuan, which is 484.90% higher than the provincial average.
The R&D investment of Wright Optoelectronics is slightly insufficient. In 2020, the company's R & D expense ratio is 10.72%, slightly lower than the average value of listed companies in the same industry of 11.16%, the company is in the OLED industry iteration speed is faster, such as the company's R & D investment is insufficient, or will lead to a decline in its innovation ability and thus affect the performance.
It is planned to raise 1 billion yuan for the main use of OLED terminal materials
The prospectus (filing draft) shows that Lite Optoelectronics intends to raise 1 billion yuan, of which the OLED terminal material research and development and industrialization project has passed the project filing and environmental impact assessment.
Figure 4: The total amount of funds raised and investment projects of Wright Optoelectronics
Among them, the construction period of OLED terminal material research and development and industrialization project is 3 years, and 15 tons of OLED terminal material production capacity will be added after completion. In 2020, the production capacity of OLED terminal materials of Lite Optoelectronics will be 1862 kg, and if the project reaches production, the company's OLED terminal material production capacity will increase significantly. However, from 2018 to 2020, the company's capacity utilization rate of this product was 15.92%, 54.31% and 73.23%, respectively, and continued to fail to reach full production. Considering the expansion projects under construction by competitor Olaide in the same industry, the company may face the risk of overcapacity, intensified competition and other performance difficulties in the future.
In addition, Wright Optoelectronics intends to use 300 million yuan of raised funds to supplement working capital. From 2018 to 2021, Wang Yalong, the company's controlling shareholder and actual controller, has made several share transfers and introduced new shareholders through capital increase to obtain funds. The company said that the project will help promote the subsequent development of production and operation.
This article originated from Bread Finance