Golden ham cross-border "computing power": just raised 1.05 billion yuan to invest 400 million yuan, low capacity utilization, sales decline, but still greatly expand production capacity

Producer: Sina Finance Listed Company Research Institute

Author: Langtou Diet/ Hao Xian

Recently, Golden Ham issued an announcement announcing an investment of 401 million yuan in a computing power company. The company just completed a fixed increase of 1.05 billion yuan in August this year, and the company's book cash was only 527 million yuan before the financing was completed. In the case of insufficient funds, is it reasonable to invest heavily in cross-border funds?

In recent years, Jinzi Ham has fallen into a cycle of continuous decline in revenue and continuous decline in gross profit margin. The company's products have a positive correlation with hog prices, and profitability has continued to decline in recent years due to the low price of pork. What should be noted more is that the company's main business declined sharply in the first three quarters of this year. Among several main businesses, Jinzi Ham chose to bet on the specialty meat products business and raised funds to significantly expand production capacity. The capacity utilization rate of specialty meat products barely reached 65% after the explosive growth under the influence of the epidemic in 2022, and this year the business has fallen off a cliff. In this case, is the expansion of production capacity a blessing or a curse?

Golden Ham has just completed 1.05 billion financing and 400 million to invest in computing power companies

On the evening of December 11, Jinzi Ham issued an announcement on foreign investment, saying that the board of directors deliberated and passed the proposal and agreed that the company signed an agreement with Yindun Cloud Company, Gongqingcheng Liheng Investment Partnership (Limited Partnership), Gongqingcheng Yindun Investment Partnership (Limited Partnership), Li Li, and Zhang Xian to invest in Zhejiang Yindun Cloud Technology Co., Ltd. (hereinafter referred to as "Yindun Cloud Company").

Among them, Jinzi Ham plans to subscribe for the new registered capital of Yindun Cloud Company of 70 million yuan with its own funds of 401 million yuan, accounting for 12.28%.

Founded in September 2021, Yindun Cloud is a cloud computing service provider, providing computing power services integrating GPU server leasing, computing power scheduling and trading, resource sharing, and ecological services for technology and industrial applications. According to the announcement, the company has 1,000 GPU chips, forming a large-scale computing power cluster solution layout.

The actual controller and existing shareholders of Yindun Cloud Company promise that from 2024 to 2026, the non-net profit will not be less than 100 million yuan, 200 million yuan, and 400 million yuan respectively.

In fact, the ultimate purpose of Yindun Cloud Company is to be listed, and the agreement stipulates that if the company (Yindun Cloud Company) submits the application documents for the initial public offering of shares and listing before December 31, 2025, the special rights clauses in this agreement on performance commitments, valuation adjustments, repurchase rights and other special rights will be automatically terminated.

The explosion of the AI track has caused a gap in domestic computing power. The industry believes that computing power leasing is an important way to solve the computing power gap in the short and medium term. This market demand has also attracted many listed companies, and the listed companies that currently deploy AI computing power can be divided into four categories: IaaS cloud service vendors, traditional IDC service vendors, AI computing power users expanding upstream, and companies with a cross-border layout of the second growth curve. Golden ham undoubtedly falls into the fourth category.

According to the estimation of Huatai Securities, the potential income space of the domestic computing power leasing market will exceed 200 billion yuan in 2026. However, there are also thresholds in this market, including capital reserves, order acquisition capabilities, and operation and maintenance service capabilities. In the future, it may also face the impact of factors such as insufficient downstream demand, intensified competition in the industry, and rising chip prices.

According to the announcement, as of July 2023, the total assets of Yindun Cloud Company are only 513 million yuan. In 2022, Yindun Cloud's revenue and net profit will be 14.3394 million yuan and 2.3274 million yuan respectively, and the revenue in the first seven months of 2023 will only be 2.6641 million yuan, and the net profit will be -13.0504 million yuan.

In this case, there is a great deal of uncertainty about whether the company can achieve its performance targets and whether it can succeed in its IPO.

In fact, the Golden Ham itself is not well funded. As of the same month in June this year, the company's book currency funds were only 527 million yuan. In mid-August, the company just completed a non-public offering, raising 1.05 billion yuan for the "annual output of 50,000 tons of meat products digital intelligent industrial base construction project" and "Jinzi Frozen Food City Co., Ltd. digital intelligent three-dimensional cold storage project".

After the completion of 1.05 billion yuan of financing, the company invested 401 million yuan in foreign countries on a large scale, and is there a shortage of money in the golden ham? Is the investment fund related to the raised funds? In the case that the book money is only 527 million yuan, is the company's operating capital guaranteed after the foreign investment? These are all questions that need to be further clarified by the company.

On November 8, the Shanghai and Shenzhen stock exchanges just released specific measures to optimize refinancing, which mentioned that listed companies with a high proportion of financial investment are not allowed to refinance. It is intended to guide listed companies to focus on their main business and avoid blind diversification of investment. It is also mentioned that the refinancing and fund-raising projects of listed companies must be closely related to the existing main business, and there must be obvious synergy with the original business after implementation.

Profitability continues to decline, and the capacity utilization rate is as low as 65%, and the capacity is still significantly expanded

From 2021 to 20232, Golden Ham has experienced a continuous decline in performance, with revenue falling by 28.79% and 12.12% respectively. In the first three quarters of this year, the operating income of Jinzi ham fell by 30.63% year-on-year, and the net profit fell by 48.12%. Judging from the semi-annual report, the revenue of ham and meat products is declining. Compared with the same period last year, the gross profit margin in the first three quarters declined further, coupled with the significant increase in the selling expense ratio and the administrative expense ratio, resulting in a decline in net profit that far exceeded the operating income.

In terms of sales volume, in 2022, the sales volume of golden ham and ham, specialty meat products, and branded meat will increase by 41.8%, 70.09%, and -81.3% respectively compared with 2020. In 2020, ham, specialty meat, and branded meat accounted for 20%, 17%, and 62% of the main business revenue, respectively, and the continuous decline of branded meat, which contributed 60% of revenue, was the main reason for the decline in the company's revenue.

The meat business of Jinzi ham brand is mainly to purchase foreign frozen pork, customize segmentation and quantitative packaging according to customer needs, and sell it in domestic channels.

In 2020, the domestic pork price was higher, and the golden ham was imported from abroad at a lower price, and then sold at a higher price. After entering the third quarter of 2021, domestic pork prices plummeted, resulting in the disappearance of foreign frozen pork price advantages, and in 2022, in the context of falling pig prices, the company's branded meat business was hit, and the sales scale fell off a cliff, and at the same time, due to the high purchase price in the early stage, it led to losses, which pulled down the overall profit.

In essence, the branded meat business that has exploded since 2020 has a strong cyclical nature, and due to the low gross profit margin of the business, the contribution to profit is limited. The company's core business is still ham and specialty meat products, but the growth of these two businesses has also been unstable.

In 2021, the revenue of the ham business increased by 36.88%, and then decreased by 9.33% in 2022. The specialty meat products business decreased by 16.24% in 2021 and increased by 79.59% in 2022. In the first half of this year, the revenue of ham business was the same as that of the same period last year, and the revenue of specialty meat products fell by 71.69%.

Moreover, since 2019, the gross profit margin of the ham and specialty meat products business has continued to decline, with the gross profit margin of the ham business declining from 40.71% in 2019 to 30.31% in 2022, and the gross profit margin of the specialty meat products falling from 56.5% to 31.83%. The root cause is that both ham and meat products are correlated with hog prices.

In 2022, the funds raised will be mainly invested in the "construction project of digital intelligent industrial base with an annual output of 50,000 tons of meat products", and the current design capacity of Jinzi ham special meat products is 3,337 tons, and the design capacity of the fund-raising project is 20,000 tons, which is nearly 6 times the existing production capacity. In 2022, the sales volume of specialty meat products will be 2184.76 tons, and the capacity utilization rate will be 65%, and there is still a large amount of idle capacity. Moreover, the background of high growth in 2022 is the epidemic, and the revenue of specialty meat products in the first half of this year has fallen off a cliff, and the revenue is even lower than the same period in 2020. If the market development cannot keep up, the future production capacity digestion will become a big problem.