Author: Dong Yin
Listing: Insight IPO
Recently, according to the website of the Shanghai Stock Exchange, the application of Wuxi Dekeli Optoelectronic Technology Co., Ltd. (hereinafter referred to as "Dekeli") for the Science and Technology Innovation Board was accepted. The company intends to publicly issue no more than 24.32 million shares, accounting for no less than 25% of the total share capital of the company after the issuance, and intends to raise 1.03 billion yuan for expanding production capacity, research and development projects and supplementing working capital.
According to the prospectus, from 2018 to 2020 and the first half of 2021 (reporting period), Decoli's revenue was 265 million yuan, 387 million yuan, 665 million yuan and 383 million yuan, and the net profit attributable to the mother after deduction was 5.7838 million yuan, 44.7646 million yuan, 135 million yuan and 64.5959 million yuan, respectively. Revenue and net profit have seen rapid growth, of which optical transceiver modules and optical amplifiers are the most important products in the reporting period, and the revenue of optical transmission subsystems has increased significantly in 2020.
Chart of corporate financial data
Image source: Prospectus
Decoli belongs to the optoelectronic devices industry, the main business covers optical transceiver modules, optical amplifiers, optical transmission subsystem research and development, production and sales, the product downstream is mainly used in communication trunk transmission, 5G fronthaul, 5G backhaul, data link acquisition, data center interconnection, UHV communication protection and other fields.
Behind the rapid growth of performance, it is worth noting that most of Decoli's business comes from large customers, and the customer concentration is high. Among them, the major customer ZTE is the company's largest customer, and in 2019 and 2020, it contributed about 55% of the total revenue to Decoli.
ZTE is not only The largest customer of Decolid, but also one of the early shareholders of the company, and then gradually withdrew, and on the eve of Decoli's preparation for listing, it re-entered the shares through subsidiaries. However, during the reporting period, the identity of its major customers has not changed. For Decoli, in addition to the high concentration of customers, the high level of accounts receivable is also one of the potential risks.
The prospectus shows that at present, the company's core products are mainly used in the field of optical communications, the downstream application industry is relatively concentrated, and large customers are also relatively concentrated. During the reporting period, the company's sales to the top five customers were 185 million yuan, 272 million yuan, 474 million yuan and 244 million yuan, accounting for 69.77%, 70.17%, 71.34% and 63.65% of the company's operating income in the same period, respectively, and the customer concentration was high.
Decoli said that if there are adverse changes in the company's future cooperation with such customers and the company cannot effectively develop other customers, or the existing customer demand is significantly reduced by the changes in relevant national industry policies, the higher customer concentration will adversely affect the company's operations.
Top 5 customers as a percentage of revenue
In the top five customers, ZTE is the first major customer, and the proportion is quite high, in 2019, 2020, the sales amount from ZTE accounted for more than 50%, respectively, 55.59% and 54.94%, in the first half of 2021, although the proportion of sales from ZTE decreased, at 43.22%, but it is still the largest customer, far exceeding the second largest customer Tongding Interconnection sales amount of 6.59%.
It is worth mentioning that ZTE is not only the company's largest customer, but also one of the company's early shareholders. According to the data, in November 1999, ZTE, Wu Peichun and Wei Yu jointly invested in the establishment of ZTE Optoelectronics, the predecessor of Dekeli, with a registered capital of 8 million yuan, of which ZTE contributed 5.2 million yuan (3.92 million yuan in cash and 1.28 million yuan in technology), Wu Peichun contributed 1.76 million yuan (480,000 yuan in cash, 1.28 million yuan in technology), and Wei Yu contributed 1.04 million yuan in cash. The first phase of the registered capital is 5.44 million yuan, and the technical shares are 2.56 million yuan.
The company's predecessor ZTE Optoelectronics shareholding structure chart
Since then, the company has experienced dozens of equity changes, and early shareholders have basically withdrawn from the ranks of shareholders. As of the date of signing of the prospectus, Taike Link holds 33.91% of the company's shares and is the controlling shareholder of the company. The actual controllers of the company are Gui Sang, Qu Jianping and Zhang Shao. The three are colleagues for many years, among which the intersection with ZTE is Qu Jianping, who has served as the management cadre of ZTE Kangxun Development Department, Quality Department and Procurement Department from March 2001 to December 2011. From January 2012 to October 2014, he served as the deputy general manager of Decoli, and since November 2014, he has been the director and general manager of Decoli.
Chart of the company's shareholding structure
It is interesting to note that During the reporting period, Decoli carried out a number of capital increases and equity transfers. In particular, the year before the IPO application was submitted, to be precise, in November and December 2020, Shenzhen Venture Capital, Laterite Zhanlu and Unicom CICC successively increased their capital and invested in shares, holding 0.58%, 4.26% and 1.13% of The shares of Decoli respectively before the issuance.
Behind this is the figure of ZTE again, ZTE holds 0.23% of the shares of Shenzhen Venture Capital, holds 40% of the shares of Laterite Zhanlu, and indirectly holds 1.71% of the shares of Decoli through these two companies. In addition, Shenzhen Venture Capital also holds an 18% stake in Laterite Zhanlu.
In addition to the high concentration of customers, Decoli also has the risk that accounts receivable and notes receivable cannot be recovered. Decoli said that the company will give customers a certain payment settlement cycle based on the customer's historical transaction records and sales scale. However, its accounts receivable and notes receivable account for a relatively high proportion.
According to the data, from 2018 to 2020 and the first half of 2021, the book value of the company's accounts receivable was 82.7724 million yuan, 74.4652 million yuan, 134 million yuan and 225 million yuan, the book value of the company's notes receivable was 64.4713 million yuan, 140 million yuan, 189 million yuan and 144 million yuan, and the total proportion of accounts receivable and notes receivable in the current assets of each period was 50.3%, 54.41%, 46.21% and 51.87% respectively.
Decoli also said that due to the large proportion of accounts receivable and notes receivable in the company's current assets, the balance of accounts receivable and notes receivable will increase in the future with the expansion of the company's operating scale. If the financial situation of major customers suddenly deteriorates, it will bring the risk that the company's accounts receivable and notes receivable will not be recovered in a timely manner.
The company's former early shareholder, now the largest customer ZTE, is also the company's "largest debtor". As of June 30 this year, the company's accounts receivable balance from ZTE was 53.862 million yuan, accounting for 23.37% of the book balance of accounts receivable at the end of the current period.
The company's accounts receivable balance is in the top five
However, Decoli said in the prospectus that during the reporting period, there was no situation in which the company's directors, supervisors, senior management, shareholders holding more than 5% of the company's equity or other major related parties held interests in the company's top 5 customers.
In addition, Decoli also has the risk of large inventory size. From 2018 to 2020 and the first half of 2021, the carrying amount of the Company's inventory was RMB88.2475 million, RMB143 million, RMB303 million and RMB295 million, accounting for 30.14%, 36.12%, 43.32% and 41.51% of the current assets respectively, and the proportion of the Company's inventory book value to current assets remained at a high level.
The company maintains a certain inventory scale to ensure the stability of production and operation, but if the price of raw materials and inventory commodities falls sharply or the sales of products are not smooth, and the company fails to respond in a timely and effective manner and make corresponding adjustments, the company will face the risk of inventory price decline.
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