Hikvision and Xiaomi supplier Ailian Technology sprint IPO Last year, the revenue scale of WAN products increased significantly

Per reporter: Fan Qianqian Per editor: Chen Junjie

Sichuan Ailian Technology Co., Ltd. (hereinafter referred to as Ailian Technology) intends to be listed on the Growth Enterprise Market of the Shenzhen Stock Exchange, and the company has completed a round of inquiry responses.

The controlling shareholder of Ailian Technology is Sichuan Changhong Electronic Holding Group Co., Ltd. (hereinafter referred to as Changhong Group), with a direct shareholding ratio of 71.91%, and the five major customers in the past three years include Hikvision (002415. SZ), Xiaomi Group, Changhong Group, Jimi Technology (688696. SH) and other leading enterprises in the industry.

From the perspective of main business, the main products of Ailian Technology are wireless LAN module products, wireless WAN module products, system integration components or products and storage modules based on the Internet of Things module, of which the revenue scale of WAN module products has increased significantly in recent years, but the gross profit margin has declined in recent years.

Backed by Changhong, customers include Hikvision and Xiaomi

Ailian Technology is a subsidiary of Changhong Group, and its predecessor, Sichuan Ailian Technology Co., Ltd., was jointly funded and established by Sichuan Changhong Electric Appliance Co., Ltd. (hereinafter referred to as Sichuan Changhong), Sichuan Changhong Device Technology Co., Ltd. (hereinafter referred to as Changhong Device) and 39 natural persons. In 2017, Changhong Group acquired 80% of the shares of Ailian Technology held by Sichuan Changhong and Changhong Devices. After several equity transfers and capital increases, as of the date of signing of the prospectus, Changhong Group's direct shareholding ratio is 71.91%, which is the controlling shareholder of Ailian Technology.

The actual controller of Changhong Group is the State-owned Assets Supervision and Administration Commission of Mianyang City. Backed by Changhong Group, the customers of Ailian Technology are also well-known enterprises in the industry, and the five major customers in the past three years include Hikvision, Changhong Group, Jimi Technology, Xiaomi Group, etc. In addition, according to the prospectus (filing draft), the customers of Ailian Technology also include Huawei, Midea Group, China Telecom, Microsoft, Panasonic and so on.

It is worth noting that ailian technology has overlapping customers with suppliers and competitors. Ailian Technology disclosed in the prospectus (filing draft) that the overlap between customers and suppliers is divided into two situations. One is to buy raw materials from some customers, process the above raw materials into finished products, and then sell to the customer, mainly to control costs, ensure product quality, improve supply efficiency, the company only recognizes revenue from processing fees; the other is to purchase special chips, blocking parts and other raw materials from customers, but also sell products to them.

On May 15, Ailian Technology told the "Daily Economic News" reporter in writing through email that in the second case of overlapping customers and suppliers, the raw materials sold to the company by the relevant customers cannot be used to produce the products purchased by the customer from the company. The sales business and the purchasing business are determined according to the respective business needs of both parties.

The first case is also called the "feed processing" mode by Ailian Technology, which is a kind of entrusted processing mode. In a round of inquiries, the Shenzhen Stock Exchange focused on the gross profit margin of related business models. In the LAN and WAN business, because the chip cost accounts for more than 70% of the module cost, and the chip is provided by the customer, there is no chip procurement cost in the product quotation and cost composition, so the gross profit margin of the entrusted processing model is higher than that of the non-commissioned processing model.

However, in the case of system integration, the opposite is true. In this regard, Ailian Technology explained that because the system integration business is mainly entrusted processing, the customization scale of non-commissioned processing system integration products is extremely small, considering the economy of scale production, the profit margin corresponding to the quotation of related products is relatively high.

The overlap between the customers of Ailian Technology and competitors refers to the customer Shenzhen Bilian Electronics Co., Ltd. (hereinafter referred to as Bilian Electronics), whose main business exists in the production and sales of Internet of Things modules, and is a competitor of the company. In this regard, Ailian Technology explained in the prospectus (declaration draft) that at the beginning of the establishment of the company and Bilian Electronics cooperation to expand the field of security, due to the limited production capacity of Bilian Electronics can not meet the order requirements, entrusted to the company to produce some products, the company's proportion of its sales amount is also declining year by year. From 2019 to 2021, this data is 7.86%, 6.52% and 4.05% respectively.

WAN product revenue climbed

From the main business point of view, the company is mainly engaged in the design, manufacture and sales of Internet of Things modules and module-based system integration components or products, the main products are wireless LAN module products, wireless WAN module products, Internet of Things-based module system integration components or products and storage modules, business areas covering smart home, smart city, industrial Internet of Things, smart retail, smart medical, Internet of Vehicles and other subdivision applications.

Among them, wireless LAN module products include WiFi series modules, Bluetooth series modules, etc., which is also the main source of revenue of Ailian Technology, with revenues of 614 million yuan, 652 million yuan and 770 million yuan respectively from 2019 to 2021, accounting for 75.31%, 75.1% and 66.96%.

Wireless WAN module products include 4G series modules, 5G intelligent series modules, etc., which is the largest revenue growth of Ailian Technology in recent years. Revenue from 2019 to 2021 was 1.5496 million yuan, 8.1248 million yuan and 61.5132 million yuan, respectively.

Ailian Technology revealed in the prospectus (declaration draft) that in 2019, the company fully entered the WAN communication module market, related products began to be applied and promoted, in 2020, 4G modules were shipped in batches, 5G modules were sampled with more than 50 customers, and in 2021, through the early customer development and verification, the WAN modules achieved batch shipments.

The reporter noted that although the revenue scale of WAN module products increased significantly last year, the gross profit margin of the product has declined in the past three years. In 2019, 2020 and 2021, the gross profit margin of ailian technology's WAN module business was 27.19%, 22.94% and 15.08%, respectively.

In this regard, Ailian Technology explained in the prospectus (filing draft) that the reason for the decline in the gross profit margin of WAN module products in 2020 is that, on the one hand, the MK-TMYYMK voice module sold by the company to Qingdao Haidayuan Procurement Service Co., Ltd. (hereinafter referred to as Qingdao Haidayuan) has a lower gross profit margin, which reduces the overall gross profit margin of the WAN business; on the other hand, Mianyang Telecom and China Telecom cancel the relevant subsidies and rebate policies for some products. The reason for the decline in the gross profit margin of WAN module products in 2021 is that in order to promote 4G modules, the company has implemented a competitive pricing strategy, while the company's MK-TMYYMK voice module with lower gross margin sales to Qingdao Haidayuan has further increased its revenue scale.

The reporter noted that the price of WAN module products in 2021 fell by 16.32% year-on-year, from 61.02 yuan / piece in the previous year to 51.06 yuan / piece last year.

In addition, the storage module is a newly expanded business area of Ailian Technology, which only began production and sales in the second half of last year, and achieved revenue of 33.3753 million yuan last year. Ailian Technology said in the prospectus (filing draft) that the company plans to further develop the wireless storage business on the basis of the standard storage module in the future by using its own Internet of Things technology advantages, and the storage module business is expected to become a new growth point for the company's sales revenue.

Ailian Technology told reporters that the company's WAN module has not yet been shipped on a large scale. (In the future) As the company's WAN production scale continues to expand and WAN customer orders gradually increase, the scale benefit of bulk shipments will promote the improvement of the company's gross profit margin level.

For future planning, Ailian Technology said that based on the rich application scenarios of the Internet of Things itself, the company's marketing plan will also take "multi-application scenario integration" as the main line, and deeply cultivate application fields such as smart home and smart city construction. At the same time, the company will also accelerate the global certification layout of products, and strive to develop overseas market highlands such as North America and Europe. In addition, in order to reduce resource investment and accelerate market expansion, in the future, for overseas operator markets and new important product lines of 4G/5G, the company will consider increasing the agent distribution model to achieve rapid growth in overseas markets and WAN markets.

Daily economic news