Abstract: On the evening of April 29, the website of the Shanghai Stock Exchange disclosed that Huaqin Technology Co., Ltd. (hereinafter referred to as "Huaqin Technology") decided to terminate the review of its initial public offering of shares and listing on the Science and Technology Innovation Board due to the withdrawal of the issuer's application for issuance and listing or the withdrawal of the sponsor's sponsorship.
On the evening of April 29, the website of the Shanghai Stock Exchange disclosed that Huaqin Technology Co., Ltd. (hereinafter referred to as "Huaqin Technology") decided to terminate the review of its initial public offering of shares and listing on the Science and Technology Innovation Board due to the issuer's withdrawal of the application for issuance and listing or the withdrawal of the sponsor's sponsorship.
According to the data, in June 2021, Huaqin Technology submitted an application for an IPO on the Science and Technology Innovation Board, and intends to raise up to 7.5 billion yuan, mainly invested in intelligent terminal manufacturing, notebook production line reconstruction and expansion, R&D center construction, Huaqin Silk Road headquarters and other projects and scientific and technological development reserve funds.
According to the prospectus, Huaqin Technology mainly serves well-known smart hardware brand manufacturers and Internet companies at home and abroad. Samsung, OPPO, Xiaomi, vivo, Amazon, Lenovo, LG, Acer, Asus, Sony, etc. are its customers, and the product line covers smart phones, laptops, tablets, smart wearables (including smart watches, TWS headsets, smart bracelets, etc.), AIoT products (including smart POS machines, automotive electronics, smart speakers, etc.) and servers and other smart hardware products.
According to counterpoint data, according to the statistics of shipment caliber, the company's smartphone ODM/IDH shipments in 2020 accounted for 34% of the global market share, ranking first in the smartphone ODM/IDH industry; in 2020, the company's laptop shipments accounted for about 5% of the global notebook ODM/EMS industry market share, ranking sixth in the industry; 2020 The company's tablet shipments account for about 29% of the global tablet ODM industry market share, ranking first in the industry; in 2020, the company's smartwatch shipments accounted for about 13% of the global smart watch ODM/EMS market share, ranking third in the industry.
As one of the head ODM manufacturers, Huaqin Technology's impact on the science and technology innovation board this time can be described as painstaking, the prospectus has done a lot of work on the indicators related to the attributes of science and technology such as research and development personnel, but a terminal sales price of about 1,000 yuan of smart phone Huaqin technology only sells more than 200 yuan, as low as 6.51% of the gross profit margin, research and development proportion is relatively low, but also let people doubt how much science and technology has gold content.
It is worth noting that before that, Huaqin Technology has been continuously reviewed and inquired by the Science and Technology Innovation Board Development review committee. Among them, in the first round of inquiries, "the sponsor institution is required to verify and issue a clear opinion on the advanced nature of the above-mentioned issuer's core technology." In the second round of inquiries, "the sponsor institution continues to require "the sponsor institution to further verify whether the issuer meets the positioning of the science and technology innovation board and whether the core technology has advanced nature, and issue a clear verification opinion." In the third round of inquiries, it is again required to "ask the sponsoring institution to further verify whether the issuer meets the support direction of the science and technology innovation board and whether the company's technology is advanced in light of the above matters, explain the basis for verification, and issue a clear verification opinion." ”
Obviously, the Science and Technology Innovation Board Development review committee believes that huaqin technology's science and technology innovation attributes are insufficient and are not suitable for the positioning of the science and technology innovation board.
For the active withdrawal of the listing application of the Science and Technology Innovation Board, Huaqin Technology responded that the withdrawal of the IPO application materials is the result of the company's prudent and comprehensive consideration of the current situation and future strategic development, and the company's operation is still in a stage of rapid growth, the scale continues to expand, and this adjustment will not adversely affect the company's normal business activities. This time, Huaqin Technology actively adjusts the capital market path, is considering the feasibility of listing on the main board, and will restart the listing process in the near future.
Revenue and net profit increased significantly, but investment income accounted for a relatively high proportion
According to the prospectus, in 2018-2020, Huaqin Technology's revenue was 30.889 billion yuan, 35.3 billion yuan and 59.865 billion yuan, and its net profit was 182 million yuan, 505 million yuan and 2.19 billion yuan, respectively. It can be seen that in the past three years, Huaqin Technology's revenue and net profit have shown a rapid growth trend, and the overall situation is still very beautiful.
However, it should be pointed out that among the profits of Huaqin Technology, investment income accounts for a relatively high proportion. During the Reporting Period, huaqin technology's investment income from overseas investment was 15.3122 million yuan, 104.6502 million yuan and 185.3722 million yuan, and the fair value change profit and loss was 119.7046 million yuan, 15.7227 million yuan and 208.9602 million yuan, respectively, and the total proportion of the two to the total profit was 85.58%, 22.20% and 15.94% respectively.
Huaqin Technology also said that if it cannot continue to achieve higher investment returns in the future, or if there are large fluctuations in the sustainability and stability of investment returns, it will have a negative impact on the company's overall profit level.
At the end of March this year, Huaqin Technology disclosed its financial position for the year 2021. According to the data, Huaqin Technology broke through the annual revenue mark of 80 billion yuan in 2021, and the operating income in 2021 was 83.759 billion yuan, a substantial increase year-on-year, with an average annual compound revenue growth rate of 54.04% and a net profit of 1.875 billion yuan, a year-on-year decline.
The gross profit margin was as low as 6.51%, and a mobile phone only sold for 252 yuan
According to the prospectus, smart phones, notebook computers and tablet PCs are the most important product categories of Huaqin Technology, from 2018 to 2020, the total main business income of Huaqin Technology's smart phones, laptops and tablets was 29.778 billion yuan, 33.059 billion yuan and 54.208 billion yuan, accounting for 99.55%, 95.38% and 93.01% of the current main business income.
The mobile phone models supplied by Huaqin Technology to the downstream are mainly smart machines of about 1,000 yuan, but the gross profit margin is not high, and the pricing power of the smart phone market is insufficient. During the reporting period, the comprehensive gross profit margin of Huaqin Technology was 6.51%, 7.87% and 9.90%, respectively, less than 10%, and the overall gross profit level was meager. In addition, there was a large downward trend in the unit price of smart phones during the reporting period, from 413.50 yuan / unit in 2018 to 252.29 yuan / unit in 2020.
Although Huaqin Technology has actively laid out the high-margin smart wearable, AIOT products and server markets in recent years, the results achieved so far are still limited. In 2020, its revenue of smart wearables, AIOT products and server products was 2.68 billion yuan, 900 million yuan and 492 million yuan respectively, accounting for 4.60%, 1.54% and 0.84% of the total revenue of the main business, accounting for a relatively low proportion, so the impact on the overall gross profit margin is also small.
High dependence on head customers
In the traditional three major pieces of intelligent hardware, the concentration of head brands is very high, and the current customers of Huaqin Technology are mainly Samsung, OPPO, Xiaomi, vivo, Amazon, Lenovo, LG, Acer, Asus, Sony and other downstream head brands.
From 2018 to 2020, the average 80% of Huaqin Technology's revenue comes from major customers including Samsung, Lenovo, OPPO, Acer, Group A customers, Amazon, LG and so on, and the concentration of the five major customers is relatively high.
In 2020, Samsung began to release a large number of ODM business, so Samsung also became the largest customer of Huaqin Technology in 2020, and the sales revenue to Samsung alone accounted for 29.4% of the company's operating income, while Lenovo was in the position of the top two customers throughout the reporting period, and the sales revenue accounted for 30% at the highest.
Overall, the contribution of the top five customers to huaqin technology performance is very high, and the top five customers from 2018 to 2020 contributed 88.23%, 81.7% and 72.21% of huaqin technology's revenue respectively. In recent years, the company's dependence on major customers has decreased, and compared with other companies in the same industry, the corresponding proportion of Huaqin Technology has finally dropped below the average last year.
In addition, as an ODM enterprise, Huaqin Technology also purchases screens, main chips, cameras, battery function ICs and other content from some major customers Lenovo, Acer, Samsung, and ASUS. Huaqin Technology explained in the prospectus that brand manufacturers will adopt the method of customer supply for some materials for the purpose of purchasing scale effect and improving the quality control of important materials. During the reporting period, with the increase in the proportion of customer supplies, the unit price of the company's mobile phone products has declined.
From 2018 to 2020, Huaqin Technology's procurement from the top five suppliers accounted for 38.33%, 32.52% and 35.15% of the total procurement in the current period, respectively, and remained stable overall. Taking 2020 as an example, the top five customers of Huaqin Technology are Lenovo, Acer, Samsung and Asus, etc., and in the customer-supply procurement model, the profit margin of Huaqin Technology has also been affected to a certain extent.
Switching to the position of downstream brand customers, usually for the sake of stable supply and reduced dependence, the brand side will not choose only a single supplier. In contrast, the proportion of the brand's procurement of Huaqin Technology is higher in the field of mobile phones, as far as Samsung, the company's largest customer in 2020, Huaqin Technology and Wingtech Technology accounted for 54% and 46% of Samsung's ODM procurement ratio respectively.
Accounts receivable are high, and many provisions for bad debts are made
With the expansion of the scale of operation, the balance of accounts receivable of Huaqin Technology is also increasing year by year. According to the prospectus, at the end of each reporting period, the balance of the company's accounts receivable was 6.391 billion yuan, 7.666 billion yuan and 14.371 billion yuan, accounting for 20.70%, 21.72% and 24.01% of the operating income, respectively.
Huaqin Technical explained that the main reason is that some of the company's export customers have a relatively long account period, and the proportion of the company's export revenue during the reporting period has continued to increase. The prospectus disclosed that during the reporting period, the company's accounts receivable turnover ratio was 5.73, 5.07 and 5.47, respectively.
At the same time, at the end of each reporting period, the balance of accounts receivable of the company's provision for bad debts by individual items was 155 million yuan, 159 million yuan and 0.66 billion yuan respectively. The main reason is that the company's customers LeEco Mobile Intelligent Information Technology (Beijing) Co., Ltd. and OPTIMUS ELECTRONICS LIMITED have difficulties in operating, and it is expected that their receivables will be difficult to recover.
The proportion of R&D investment is not high, and the proportion of R&D personnel with high academic qualifications is relatively low
The company's cumulative R&D investment in the three years from 2018 to 2020 was 5.196 billion yuan. However, in the past three years, R&D investment accounted for 3.98%, 4.35% and 4.06% of the total revenue. Of course, for ODM companies, the proportion of R&D is usually not very high.
As of December 31, 2020, the company has a total of 8,294 R&D personnel, accounting for 25.46% of the total number of employees. Meet the requirements of "the proportion of R&D personnel in the total number of employees in the current year is not less than 10%" stipulated by the Science and Technology Innovation Board.
However, according to the prospectus, as of December 31, 2020, Huaqin Technology has 804 people with master's degree or above, accounting for only 2.47%, undergraduate employees 5708, accounting for 17.52%, while college and below 26,062 people, accounting for more than 80%. It can also be inferred that among the 8294 R&D personnel of Huaqin Technology, at least 1782 employees have academic qualifications in college, technical secondary school and below.
In addition, Huaqin Technology's prospectus identified Wu Zhenhai, Wang Haiyang, Cai Zhe, Ren Huabin, Yang Sichuang, Zhang Ke and Li Jun as the company's core technical personnel. However, Zhang Ke's position is the marketing manager of the marketing system, and the prospectus shows that the core technical personnel involved in the representative research and development projects have only appeared Li Jun and Yang Sichuang.
In December 2020, Xuyu Optoelectronics, which was accepted by the Science and Technology Innovation Board, was inquired because 81.7% of the total number of employees at high school and below were asked, and the Shanghai Stock Exchange required Xuyu Optoelectronics to combine the company's employees' academic qualifications to explain how to maintain continuous research and development capabilities, how to achieve technological leadership, whether there is insufficient research and development capabilities and talent reserves, and whether the situation of employee education structure matches the company's core technology level. In May this year, Xuyu Optoelectronics and the sponsor Huaan Securities respectively applied to the Shanghai Stock Exchange to withdraw the application documents, and the IPO review was terminated, the specific reasons are still unclear.
As of February 28, 2021, there are 604 domestic invention patents registered under the name of Huaqin Technology and its holding subsidiaries, in addition, the company also has 3 overseas invention patents, of which 579 are related to the main business products.
Editor: Xin ZhiXun - Langke Sword
Source: Huaqin Technology Prospectus