Yeti shares cross-border hydrogen fuel cell, is the next Ningde era?

Hydrogen fuel cells will need at least 5-10 years of development to produce market benefits. Today, Snowman has announced a large-scale investment in the field of hydrogen fuel cells, for reasons that are intriguing.

Text/Daily Earnings Report Chen Zhengqing

In 2000, Lin Rujie, who returned from studying at Mitsubishi Heavy Industry Refrigeration Technology College in Japan, founded Changle Snowman Refrigeration Equipment Co., Ltd. (the predecessor of Snowman Shares), at the beginning of its establishment, the main business of Snowman Co., Ltd. was ice making, ice storage, ice delivery equipment, ice making systems, refrigeration related products research and development, production and sales, the main products are ice products, compressors, etc.

After years of deep ploughing in the field of ice making equipment, Snowman Co., Ltd. (002639. SZ) became one of the leaders in ice making and refrigeration equipment, and in December 2011, the company landed on the A shares. After the listing, The Snowman shares seem to be suffering from the "listing syndrome", the operating income has increased significantly, but the net profit has fallen all the way, from 2017 to 2020, its deducted non-net profit has continued to be negative, which is -84.4376 million, -15.6035 million, -36.6996 million, -185 million.

Net profit fell at the same time, snowman shares can frequently speculate on the concept, according to incomplete statistics, in recent years, the concept of snowman shares speculation includes "vaccine cold chain", "carbon neutrality", "Haixi concept", "natural gas concept", "Winter Olympics concept", "hydrogen energy", "hydrogen fuel cell", etc., thanks to this, snowman stock price often has a "magical" performance, this year has been 7 times up and down.

On October 11, Snowman issued an announcement that it intends to raise 670 million yuan for the construction of two major hydrogen energy projects for the non-public issuance of no more than 202.2 million shares, which has been approved by the CSRC. Among them, 450 million yuan will be used for the construction of hydrogen fuel cell system production base, accounting for 67.16%, and 100 million yuan will be used for the construction project of hydrogen energy technology research and development center, accounting for 14.93%. The remaining $120 million was used as supplementary liquidity.

Snowman shares high-profile into the field of hydrogen fuel cells, some outsiders compared it with the Ningde era, which is also a Fujian new energy stock, calling it the Ningde era five years later, but is the truth really so optimistic?

Gamble on the field of hydrogen fuel cells

As early as June 2015, when Snowman entered the compressor industry, it adopted an epitaxial merger and acquisition strategy to acquire core technologies through the acquisition of overseas companies, and the company's acquisition fund invested 400 million yuan to acquire SRM and OES100% of the two subsidiaries of the core business of OPCON in Sweden, of which SRM is the originator of the world's screw compressors, and OES is the founder of global screw expansion generator technology.

While acquiring compressor technology, Snowman unexpectedly found that the technology, brand and R&D personnel related to the world-renowned brand OPCON AUTOROTOR twin screw fuel cell compressor and its system are also owned by SRM and OES. Its fuel cell compressors and fuel cell systems are adapted to high-pressure and extreme vehicle conditions, and have provided fuel cell systems for Ballard canada and many automobile manufacturers such as Chrysler, Mercedes-Benz, GM, Volvo and many other automobile manufacturers. Snowman shares have since stepped into the field of hydrogen fuel cells.

In July 2018, the Yeti hydrogen fuel cell engine project was included in the "2018 Industrial Strong Foundation Project Key Products and Process Demonstration application promotion plan" of the Ministry of Industry and Information Technology of the People's Republic of China, which is one of the two selected projects in Fujian Province. In June 2019, Xiamen Golden Dragon and Xiamen Golden Travel City Bus equipped with snowman SFH series fuel cell engine system were listed in the "Catalogue of Recommended Models for the Promotion and Application of New Energy Vehicles".

Compared with hydrogen fuel cell buses, Snowman's actions in the hydrogen fuel cell industry are more high-profile. Including: 135 million yuan to participate in the Canadian fuel cell and hydrogen production technology company Water Jineng Hydrogenics Company; in 2018, signed an investment of 1.5 billion yuan with Xinxiang, Henan Province to build a new energy industrial park; in 2019 signed an investment of 4.55 billion yuan with the Chongqing Liangjiang New Area Management Committee to invest 4.55 billion yuan to build a fuel cell engine and its core components manufacturing project cooperation intention agreement.

However, the "Daily Financial Report" found that the Snowman share cooperation agreement and strategic agreement signed a bunch, but it was always thunderous and rainy, and it did not end. For example, the Canadian water Jineng Hydrogens company in which it participated was transferred to Cummins; the project of Henan Xinxiang New Energy Equipment Manufacturing Industrial Park, which has been in progress for 3 years; the chongqing fuel cell engine and its core components manufacturing project is due to "changes in circumstances", and the project cannot be promoted according to the agreement.

Until recently, Snowman has issued an announcement to raise funds into the field of hydrogen fuel cells, which really makes the outside world doubt its true intentions.

On the other hand, in fact, there is still a controversy over hydrogen energy vehicles. For example, Volkswagen Group CEO Herbert Diess, Tesla CEO Elon Musk and other auto industry giants have publicly "sung down" hydrogen energy vehicles. The main reason is that the cost of hydrogen energy production is relatively high, and the hydrogen production process also consumes a lot of energy, specifically, the electricity used in the production process of hydrogen fuel cells is 2-14 times that of the production of internal combustion engine models, compared with pure electric vehicles, the energy consumption level of hydrogen fuel cell vehicles is 5 times that of the former.

At present, hydrogen energy has not yet reached the critical point of mainstream energy consumption and use, the industry in the field of hydrogen energy in China has not yet formed, and the hydrogen energy-related products of Snowman shares cannot be commercialized and scaled. Therefore, this also means that Snowman's investment in hydrogen fuel cells cannot be returned accordingly.

Mergers and acquisitions of oil and gas companies are difficult to prevent net profits from falling

In addition to years of exploration in the field of hydrogen fuel cells, Snowman shares are also involved in the field of oil and gas energy. In April 2016, Snowman acquired 100% of the equity of Jiayun Oil & Gas for 525 million yuan. Jiayun Oil & Gas is mainly engaged in natural gas project construction, production and operation of professional and technical services, for oil and gas enterprises in the global natural gas field to provide suitable for different gas sources, working conditions of gas production, collection, transportation, purification and other ground production equipment automation solutions.

After the acquisition of Jiayun Oil and Gas by Snowman Shares, according to the performance commitment, the net profit attributable to the mother after deduction of non-deductions in 2016, 2017 and 2018 was not less than 38.89 million, 44.72 million and 51.42 million yuan respectively, and Jiayun Oil and Gas also successfully completed the performance commitment, significantly enhancing the performance of Snowman Shares. However, in 2019 and 2020, the net profit of Yunjia Oil and Gas also began to decline, at 46.74 million yuan and 41.7 million yuan respectively. This year, in the context of rising natural gas prices, the net profit of Yunjia Oil and Gas in the first half of the year was 9.255 million yuan.

Compared with the merger and acquisition of Jiayun Oil and Gas, the non-net profit of Snowman shares can be described as miserable. From 2017 to 2020, the operating income of Snowman Co., Ltd. was 937 million yuan, 1.303 billion yuan, 1.514 billion yuan and 1.458 billion yuan respectively; while the operating income increased, the non-net profit was -84.4376 million, -15.6035 million, -36.6996 million and -185 million, respectively.

In the first half of 2021, the operating income of Snowman Co., Ltd. was 820 million yuan, an increase of 36.98% year-on-year, and the non-net profit was -37.4921 million, down 0.96% year-on-year.

It can also be seen from the annual report of Snowman shares that the continuous decline in gross profit and the high expense ratio during the period are the main factors that cause the net profit of Snowman shares to continue to decline. From 2017 to 2020, the gross profit of Snowman shares was 23.4%, 23.08%, 22% and 16.99% respectively, while the expense rate during the period was 29%, 21.7%, 22.1% and 25.5%.

The decline in gross profit also means that Snowman's compressor and oil and gas businesses are facing challenges with similar products. Since 2020, due to the epidemic and market environment, the international export business has shrunk, the price of compressor products has declined, the supply chain cycle has been extended, and the cost of materials has risen, resulting in a 5.06% decline in the gross profit margin of ice-making equipment, a 5.86% decline in compressors, and a 4.72% decline in oil and gas technical services.

However, fortunately, the amount of government subsidies received by Snowman shares is larger, with more than 10 million yuan in 2018 and 2019, and increased again in 2020, about 18.73 million yuan. In the long run, if Snowman shares cannot effectively improve the gross profit of products, reduce sales and management expenses, the main business continues to be in a state of loss, cash flow is tight, and the cooperation agreements and strategic agreements signed with the outside world have become a blank piece of paper, then if you want to become the "Ningde era" in the field of hydrogen fuel cells, it is like a mirror.

Major shareholders frequently reduce their holdings and cash out

On June 10, 2021, Snowman issued a shareholder reduction announcement, and the second shareholder, "Bailout No. 1", reduced its holdings by about 7.53 million shares, accounting for 1.11% of the total share capital, in a block transaction on June 9.

It is reported that Fujian Bailout No. 1 Equity Investment Partnership (Limited Partnership) was established in 2018 by "Pingtan Development Fund", "Industrial Securities Innovation", "Fuzhou Overseas Chinese Fund", "Fujian State-owned Asset Management Co., Ltd." and many other jointly established, the main goal is to support listed companies in Fujian Province, alleviate the risk of equity pledge, and help alleviate short-term liquidity dilemma.

According to the semi-annual report, "Bailout No. 1" has reduced its holdings in Snowman shares by 20.2221 million shares this year, accounting for 60% of its total shareholding. State-owned assets have been significantly withdrawn after the release of the fixed increase plan by Snowman Shares, and the market reaction is inevitably a little worried.

Not only that, but the executives of Snowman shares also frequently cash out. Chen Cunzhong, the father of Chen Ling, deputy general manager of the company, has reduced his holdings by 29.158 million shares since 2014, and the cumulative cash has reached at least 280 million yuan. Chen Sheng, the brother-in-law of Lin Rujie, the actual controller of Snowman Shares, has cashed out about 400 million yuan, and the shareholding ratio has dropped from 9.44% in 2014 to 1.71%. In addition, Lin Rujie himself cashed out without any weakness, on June 6, 2016, Lin Rujie reduced his holdings by 18.4 million shares at one time, cashing out 151 million yuan.

According to rough statistics, the cumulative cash amount of Snowman executives is more than 900 million yuan. It is worth mentioning that in the process of reducing holdings, Chen Sheng was punished by the regulatory authorities because he and his brother-in-law Lin Rujie acted in concert, and the cumulative reduction of the two people reached 5% was not disclosed in time and still did not stop reducing their holdings.

Speaking back to this fundraising, although the current controversy over hydrogen fuel cell vehicles is still very large, hydrogen fuel cell vehicles are considered to be the ultimate solution for new energy vehicles, and there are frequent national encouragement policies. In August 2020, the "National Innovation-driven Development Strategy Outline" of the Party Central Committee and the State Council clearly mentioned the need to vigorously develop hydrogen fuel vehicles. By 2030, China will achieve the goal of 2 million hydrogen fuel cell vehicles. In the long run, with the continuous advancement of technologies such as hydrogen manufacturing, transportation and storage, as well as the construction and popularization of infrastructure such as hydrogen refueling stations, hydrogen fuel cell vehicles may become an important technical route that car companies cannot ignore.

For investors, it will take at least 5-10 years to know that hydrogen fuel cells produce market benefits. Today, Snowman shares have invested heavily in the field of hydrogen fuel cells, and the reasons are naturally self-evident. (Produced by per cai net)