Red Weekly | Chen Wen
Recently, Tesla and NIO's supplier Shanghai Yousheng Aluminum Co., Ltd. (hereinafter referred to as "Yousheng Shares") declared that they would be listed on the main board of the Shanghai Stock Exchange and intend to issue 44.60 million shares, not exceeding 25% of the total share capital after the issuance.
Yousheng Co., Ltd. is a collection of design, development, production, sales and service in one of the aluminum alloy auto parts manufacturers, its main products for automotive body structure parts, can be divided into bumper series, threshold beam series, subframe series, battery tray series, shock absorption series and so on.
After reviewing its prospectus, the reporter of "Red Weekly" found that there were many problems in the company. Yousheng shares have a high customer concentration and weak bargaining power, so even if the price of upstream raw materials increases, it is difficult for the company to transfer costs to the downstream. In addition, due to the long settlement cycle of downstream customers, the company's accounts receivable have been high, resulting in poor liquidity.
Weak cost pass-through ability
Rising material prices affect profitability
The aluminum alloy auto parts industry where Yousheng shares are located is in the middle of the entire automotive industry chain, and its upstream industry is the aluminum, accessories and other raw materials industry, and the downstream is the vehicle manufacturers and their parts supporting suppliers. For Yousheng shares, which are in the middle zone, they are facing double pressure from upstream and downstream.
Figure 1: Industrial chain situation
Image source: Prospectus
In the upstream, Yousheng shares are facing the pressure of rising prices of raw materials. The raw materials purchased by Yousheng Co., Ltd. are mainly aluminum water, aluminum rods, aluminum profiles, etc. In recent years, due to the continuous supply-side structural reform of China's aluminum industry and the strict implementation of the capacity replacement policy, aluminum prices have fluctuated during the reporting period.
According to the prospectus, during the reporting period, the total amount of aluminum water, aluminum rod and aluminum profile purchased by Yousheng Co., Ltd. was 321 million yuan, 291 million yuan, 404 million yuan and 295 million yuan respectively, and the purchase unit price was 12841.80 yuan / ton, 12776.43 yuan / ton, 13570.94 yuan / ton and 15963.07 yuan / ton, respectively. Among them, in 2020 and the first half of 2021, the unit price of its raw materials increased by 6.22% and 17.63% respectively, obviously, the purchase price of raw materials of Yousheng shares has increased significantly in recent years, which means that its production costs have increased.
Of course, if the price of the product can also be greatly improved, the cost increase pressure is passed on to the downstream, then for the enterprise, the raw material price increase is not a big problem, but this is a problem for Yousheng shares.
The downstream customers of Yousheng Co., Ltd. are mainly vehicle manufacturers and first-tier suppliers, and according to the disclosure, its main customers are OEMs such as WEILAI Automobile, GUANGZHOU AUTOMOBILE Group, Tesla and first-tier suppliers such as Huayu Automobile and Lingyun Co., Ltd.
The data shows that from 2018 to the first half of 2021, the total sales of Yousheng shares to the top five customers totaled 380 million yuan, 325 million yuan, 405 million yuan and 268 million yuan, accounting for 65.11%, 57.14%, 54.70% and 52.76% of the total sales of the current period, accounting for more than half, so There is a certain degree of dependence on these large customers.
Behind the dependence on large customers, it is often the weak bargaining power of enterprises, and Yousheng shares are no exception, which can be seen from the sales price of its products.
According to the prospectus, in 2020 and the first half of 2021, the average unit sales price of Yousheng shares was 30,600 yuan / ton and 32,000 yuan / ton, respectively. As mentioned earlier, in the first half of 2021, the purchase unit price of Yousheng shares increased by 17.63%, but in the first half of 2021, the company's average sales unit price increased by only 4.58%, far lower than the increase in the purchase unit price, and its cost pass-through ability was significantly weak.
The price of upstream raw materials has risen, but it is difficult for the company to transfer all the new costs generated by it to the downstream, so that the profit space of the company has been squeezed, so that its gross profit margin level has not been high.
The data shows that from 2018 to the first half of 2021, the gross profit margin of Yousheng shares was 23.44%, 21.93%, 20.10% and 19.50%, respectively, while the average gross profit margins of comparable companies in the same industry in the same period were 29.07%, 26.85%, 26.19% and 24.21%, respectively, and Yousheng shares have been about 5 points below the industry average.
Figure 2: Gross margin comparison with comparable companies in the same industry
In view of this, if the fluctuation of aluminum prices further intensifies in the future, it may have a greater impact on the company's revenue and profits.
The scale of revenue is low
Lack of competitive advantage
In addition to the pressure of the upstream and downstream industrial chains, in the horizontal market, Yousheng shares are also facing fierce competition, and its products themselves even have the risk of being replaced.
During the reporting period, the average gross profit margin of the aluminum alloy auto parts industry showed a downward trend, mainly due to the decline in the overall production and sales of the automotive industry, which was transmitted to the auto parts industry, resulting in a decline in the entire market size and intensified competition.
At present, in the market of China's auto parts industry, a small number of strong parts manufacturers occupy most of the vehicle supporting market, while most parts manufacturers, due to factors such as production scale, technical strength and brand recognition, can only rely on price and cost advantages to win part of the market. Compared with internationally renowned suppliers such as Magna and Gestamp, small-scale companies have no advantage in terms of operating scale and technical strength.
From the perspective of revenue scale, in 2020, the operating income of Yousheng shares was only 813 million yuan, while among the comparable companies in the same industry, the operating income of Hesheng shares was 1.484 billion yuan, Icodi was 2.591 billion yuan, Xusheng shares were 1.628 billion yuan, and Wencan shares were 2.603 billion yuan. In contrast, Yousheng shares have the smallest operating income scale and the lowest market share. Obviously, from this point of view, it has already lost one set first.
In addition, according to the prospectus, Since March 2018, Yousheng has received documents such as the U.S. Customs and Border Protection Information Questionnaire, administrative notices, and fines, determining that some of the company's exports to the United States belong to the scope of anti-dumping and countervailing duties on aluminum profiles originating in China in the United States, and requiring the company to pay double counter-taxes.
In response to this matter, Yousheng shares had to pay a double reverse tax deposit, made a provision for possible follow-up payments, and stopped exporting to the United States in the second half of 2018.
The data shows that from 2018 to the first half of 2021, the overseas income of Yousheng shares was 56.0481 million yuan, 10.3365 million yuan, 8.0530 million yuan and 6.1654 million yuan, accounting for 9.59%, 1.82%, 1.09% and 1.21% of the main business income of the current period, which shows that it seems that it is difficult to make a difference in the overseas market.
More importantly, Yousheng shares are mainly based on aluminum alloy parts and components products, but there is still a risk that its products will be replaced.
In terms of material costs, in the second quarter of 2021, the average aluminum price of the Yangtze River nonferrous market was 18565.33 yuan / ton, while the price of rebar in the same period was only about one-third of that of aluminum; in terms of technical applications, there are also certain restrictions on the scope of application of aluminum alloy materials, which are more suitable for some parts that require high energy absorption, shock absorption and high lightweight requirements, and the applicability in a certain range is not as wide as that of steel. In addition, other alternative lightweight materials such as carbon fiber and high-strength plastics are also in a stage of rapid development, and if there is a breakthrough in future application technology, it may hinder the application of aluminum alloys in automotive lightweight.
Due to the decline in market size, fierce competition in the market, and many unfavorable factors, there are many uncertainties in the future performance and development of Yousheng shares.
Accounts receivable are on the high side
Insufficient liquidity
Due to the greater dependence on large customers, the right to speak of Yousheng shares is not high, so the settlement cycle of downstream customers in the later period is also longer, resulting in slower turnover of accounts receivable.
During the reporting period, the accounts receivable turnover rate of Yousheng shares was 3.68 times/year, 3.20 times/year, 3.32 times/year and 3.94 times/year, respectively, while the average of comparable companies in the same industry in the same period was 4.68 times/year, 4.42 times/year, 4.29 times/year and 4.53 times/year, respectively, and the turnover rate of accounts receivable of Yousheng shares was lower than that of peers.
In the case of slower turnover, the accounts receivable of Yousheng shares are relatively high. At the end of each reporting period, the net accounts receivable of Yousheng Co., Ltd. were 163 million yuan, 218 million yuan, 271 million yuan and 295 million yuan respectively, accounting for 57.29%, 58.09%, 54.43% and 53.28% of the current assets at the end of each period, respectively, and its accounts receivable not only accounted for a high proportion, but also the amount was not low.
If the accounts receivable are high and cannot be paid back for a long time, then the income of the enterprise is only "rich on paper".
In 2020 and the first half of 2021, the net profit of Yousheng shares was 60.421 million yuan and 40.3976 million yuan respectively, but the net cash inflow generated by operating activities was only 12.0554 million yuan and 10.2803 million yuan, which could not cover the profit, indicating that its payment collection situation was not excellent.
At the same time, at the end of the first half of 2020 and 2021, the balance of monetary funds on the company's account was 52.8507 million yuan and 55.6056 million yuan, respectively, while the purchase amount of the main raw materials of Yousheng shares in each period of the reporting period reached 321 million yuan, 291 million yuan, 404 million yuan and 295 million yuan, respectively. The company's monetary funds are really a bit stretched compared to the purchase of major raw materials in each period.
Under such circumstances, it is not difficult to understand why Yousheng shares frequently injected funds into its controlling shareholder Zesheng Trading during the reporting period. According to the prospectus, in order to solve the liquidity problems required for production and operation, in 2019 and 2020, Yousheng shares repeatedly invested funds into its controlling shareholder Zesheng Trading, totaling 18.9 million yuan, and due to the short term of each loan, the two sides did not accrue any interest.
As mentioned earlier, compared with comparable companies in the same industry, Yousheng shares have lower operating income, smaller volume and lack of scale advantages. But as things stand, it's still difficult to maintain the company's cash flow position, let alone increase production. Moreover, the automotive aluminum alloy parts industry is a capital-intensive industry, in the early stage need to spend a high cost of research and development and purchase of production equipment and production equipment used in supporting production, without funds, it must be difficult to move.
If Yousheng shares have been in a state of "lack of money" and cannot improve their production scale, it is difficult to win in the market competition, so whether it can be successfully listed and raised has a significant impact on it.
(The individual stocks mentioned in the article are only examples and are not recommended for trading.) ）