"Harbor Business Observer" Shi Zifu
On January 12, Shanghai Shengtong Information Technology Co., Ltd. (hereinafter referred to as Shengtong Technology) submitted its second application to the Hong Kong Stock Exchange to be listed on the main board, sponsored by CICC.
According to public information, the first submission of Shengtong Technology took place on June 27, 2023, and then ended due to the invalidation of listing application materials. Behind the choice to continue to impact the listing, it is self-evident that Shengtong Technology's net profit has turned from profit to loss, cash flow continues to flow out, and it is under VAM agreements.
01
R&D investment was high, and net profit was in the red
Soundtone is an enterprise-level information technology solution provider, committed to providing convenient and diverse standardized solutions that can effectively improve the convenience and intelligence of enterprise-level user information exchange and business interaction. The company provides solutions to four major end-customer industries, namely urban management and administration, automotive and transportation, communications and finance.
In terms of revenue in 2022, Soundtone ranked second in China's enterprise full-stack interactive AI solution market with a market share of 2.7%, of which the largest solution provider had a market share of 14.4%. According to the same source and by the same metrics, Soundtone ranks seventh in the Chinese enterprise interactive AI solutions market, with a market share of 0.9%.
During the Track Record Period, Soundtone's revenue was primarily derived from the provision of enterprise-level solutions to customers, primarily implemented by the Company's converged communications and artificial intelligence technologies.
By customer type, Soundtone provides solutions to system integrators and enterprise-level users.
From 2020 to 2022 and the first nine months of 2023 (hereinafter referred to as the reporting period), the revenue from system integrators of Shengtong Technology was relatively high, with revenue of 308 million yuan, 381 million yuan, 379 million yuan and 374 million yuan in each period, accounting for 88.8%, 83.4%, 77.1% and 78.3% of the total revenue of the current period, respectively.
During the same period, the revenue from enterprise-level users was 38.866 million yuan, 75.770 million yuan, 113 million yuan and 104 million yuan respectively, accounting for 11.2%, 16.6%, 22.9% and 21.7% of the total revenue of the current period.
According to the end customer industry, the revenue from the urban management and administrative industry accounted for the highest proportion in each period of the reporting period, with 159 million yuan, 165 million yuan, 193 million yuan and 237 million yuan respectively, accounting for 45.8%, 36.1%, 39.2% and 49.5% of the total revenue of the current period.
With the growth of the main business, the operating income of Shengtong Technology has also increased. During the reporting period, Shengtong Technology achieved revenue of 347 million yuan, 460 million yuan, 515 million yuan and 4.88 yuan respectively, with a compound annual growth rate of 21.8% from 2020 to 2022. The gross profit of the company in each period was 112 million yuan, 152 million yuan, 201 million yuan and 201 million yuan respectively, and the gross profit margin was 32.2%, 33.1%, 39.1% and 41.1% respectively.
However, it should be noted that Soundcom recorded a net profit in the first nine months of 2022 and 2023. During the reporting period, the net profit of Shengtong Technology was 34.987 million yuan, 36.300 million yuan, -85.774 million yuan and -61.200 million yuan respectively. As for the reason for the loss, Shengtong Technology said that it was mainly due to the change in the fair value of the redeemable capital injection, which offset the increase in the company's revenue and gross profit.
After adjustment, the net profit of Shengtong Technology in each period was 59.805 million yuan, 62.334 million yuan, 71.693 million yuan and 80.796 million yuan respectively, and the adjusted net profit margin was 17.2%, 13.6%, 13.9% and 16.6% respectively.
In addition, the increase in R&D expenses and administrative and other expenses also contributed to the fluctuation in Soundtone's net profit.
During the reporting period, the R&D expenses of Shengtong Technology were 13.720 million yuan, 36.310 million yuan, 63.983 million yuan and 75.634 million yuan respectively, accounting for 4.0%, 7.9%, 12.4% and 15.5% of the total revenue of the current period, and the administrative and other operating expenses were 13.787 million yuan, 24.552 million yuan, 31.486 million yuan and 44.621 million yuan respectively.
Soundtone said in the prospectus that as the company expects to continue to develop new solutions and enhance existing ones, it is critical to maintain sufficient R&D personnel and resources to meet market demand for the company's business growth. It is expected that the company's R&D expenditure will continue to increase in the future. Due to the inherent uncertainties in R&D activities, practical difficulties may be encountered in the commercialization of R&D results, and any significant expenditure by the Company on R&D may not yield corresponding benefits and adversely affect the Company's financial performance.
02
Accounts receivable are high, and turnover days are soaring
In the course of its day-to-day business, Soundcom also stores inventory in advance, which also results in the company's inventory being at a high level. During the reporting period, the company's inventory was 103 million yuan, 113 million yuan, 95.269 million yuan and 99.980 million yuan respectively.
On the other hand, the accounts receivable from downstream customers of Shengtong Technology have also increased year by year.
During the Track Record Period, Soundtone's trade receivables consisted mainly of outstanding fees receivable from customers for solution-related transactions. Driven by the overall growth of revenue generated by solutions, as of the end of the reporting period, the trade receivables of Shengtong Technology were 97.565 million yuan, 248 million yuan, 379 million yuan and 457 million yuan, respectively, and the net trade receivables were 82.641 million yuan, 216 million yuan, 313 million yuan and 379 million yuan, respectively.
Not only is the book amount increasing year by year, but the number of days of turnover has also increased. During the reporting period, the turnover days of trade receivables of Shengtong Technology were 98 days, 137 days, 222 days and 231 days respectively, with a total increase of 133 days during the period.
As of the end of the reporting period, the provisions for trade receivables losses of Shengtong Technology were 14.9 million yuan, 32.4 million yuan, 66.5 million yuan and 78.2 million yuan respectively, accounting for 15.3%, 13.0%, 17.5% and 17.1% of the current trade receivables respectively.
Under the pressure of high accounts receivable and inventory, the company's cash flow is also under pressure. At the end of the reporting period, the net cash used in the operating activities of Shengtong Technology was -33.409 million yuan, -75.078 million yuan, -31.114 million yuan and -33.880 million yuan respectively.
03
The pressure of the VAM agreement is far from that of iFLYTEK
Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told Harbor Business Observer, "When cash flow is negative, companies need to rely on borrowing to support their daily operations, which increases their debt burden. At the same time, businesses may face more financial problems if they are unable to repay their borrowings on time. ”
In addition, it should be noted that Shengtong Technology also has a high debt situation.
According to the prospectus, at the end of the reporting period, the bank loans and other borrowings of Shengtong Technology were 85.838 million yuan, 151 million yuan, 212 million yuan and 282 million yuan respectively. As of November 30, 2023, Soundtone's bank loans and other borrowings amounted to RMB342 million.
As of September 30, 2023, the ending cash of Shengtong Technology recorded 32.625 million yuan. Obviously, Shengtong Technology, which is tight on books, undoubtedly hopes to go public to raise funds to ease the company's cash flow pressure.
However, what is more urgent at the moment is that Shengtong Technology, which has hit the Hong Kong Stock Exchange for the second time, is still burdened with a VAM agreement.
According to the Prospectus, certain investors are entitled to certain customary special rights, including guarantee of financial performance, right of redemption, right to know, right to follow-up, right of anti-dilution, right of liquidation first refusal, right to nominate directors and the right to obtain prior consent for certain actions of the Company.
In the Prospectus, Soundcom mentioned that, in respect of the above, pursuant to the Supplemental Agreement entered into between the Investor and Soundtone, all Special Rights have been automatically terminated upon the submission of the listing application for the listing of H Shares on the Stock Exchange by Soundtone, but all such Special Rights will be automatically reinstated upon the earliest occurrence of any of the following events, including: failure to be realized before December 31, 2024, withdrawal of the application by the Company, and rejection of the application.
In addition, in terms of market advantages, the outside world generally compares Shengtong Technology with iFLYTEK, and the business overlap between the two is quite high. In the field of urban management and administration, in 2022, Soundcom ranked first with a market share of 9.4%, while iFLYTEK ranked second with a market share of 7%. However, in the automotive and transportation sectors, iFLYTEK has a market share of 20.4% and Soundcom Technology has a market share of 2.5%, in the communications field, iFLYTEK has a market share of 12.2% and Soundcom Technology has only 2%, and in the financial sector, iFLYTEK has a market share of 5.1% and Soundcom Technology has a market share of 3.7%.
In general, in terms of scale and market influence, iFLYTEK can be described as a leader in China. In the first nine months of 2023, iFLYTEK achieved an operating income of 12.614 billion yuan and a net profit attributable to the parent company of 99.3621 million yuan. In terms of revenue alone, the gap between Shengtong Technology and iFLYTEK is more than 20 times.
In this IPO, Soundcom plans to use the proceeds mainly for basic research of key technologies, expansion of the solutions offered, strategic investment and acquisition opportunities at home and abroad, and general corporate purposes. (Produced by Harbour Finance)