Under the tightening of policies and the increase in supervision, the wave of IPO termination and cancellation continues to ferment. Jiangsu Yihejie Automotive Technology Co., Ltd. (hereinafter referred to as "Yihejie") continues to promote its listing process. A few days ago, Yihejie updated and disclosed the first round of inquiry responses.
Benefiting from the development of overseas markets, the revenue scale of Yihejie, which is based on export sales, is growing rapidly, but its market share is less than 5%, and overseas sales profits are largely guaranteed by export tax rebates and tax incentives.
On the eve of breaking through, Yihejie distributed cash dividends of nearly 176 million yuan to shareholders, nearly ninety percent of which flowed into the pockets of the actual controller's family. In this listing, Yihejie has a lot of appetite, and plans to raise more than 700 million, exceeding its entire "volume". In response to the low market share, the re-raising of funds after large dividends, and the digestion of new production capacity, Yihejie responded one by one.
Ninety percent of the revenue comes from overseas, and nearly half of the profit comes from export tax rebates and tax incentives
According to the prospectus, Yihejie has been committed to the auto parts industry, mainly engaged in the research and development, production and sales of turbocharger machines and parts, the main products are turbochargers and movements, mainly for the overseas automotive aftermarket.
Benefiting from the continuous growth of global car ownership in the past 10 years, the rapid increase in the assembly rate of turbochargers and the significant increase in the replacement rate of turbochargers due to the increase in vehicle age, Yihejie's operating income has shown a rapid growth trend.
From 2020 to 2022 and from January to June 2023 (hereinafter referred to as the "reporting period"), Yihejie's operating income was 322.4022 million yuan, 499.1375 million yuan, 542.7566 million yuan and 276.6297 million yuan respectively, with a compound growth rate of 29.75% from 2020 to 2022.
For a long time, Yihejie has been focusing on overseas sales, and its products are mainly exported to Europe, the United States and South America. During the reporting period, the company's main business export income was 299.7858 million yuan, 457.1658 million yuan, 491.349 million yuan and 250.8825 million yuan respectively, accounting for 93.2%, 91.73%, 90.71% and 90.85% of the main business income respectively. Among them, Europe and North America are the main sales regions of the company's products, accounting for more than 70% in each year.
Table of sales by region
In view of the reason that long-term export sales account for more than 90%, Yihejie said in the prospectus that the company's products are mainly oriented to the automotive turbocharger aftermarket at this stage, and the European and American markets have a long history of development of the automobile industry.
Titanium media APP noticed that a large part of Yihejie's overseas sales profits rely on export tax rebates and tax incentives, which has become one of the important guarantees for the company's profits.
According to the prospectus, as a general taxpayer, Yihejie's export business enjoys the relevant policies of "exemption, credit and refund" of value-added tax. During the reporting period, the company received tax refunds of 21.3491 million yuan, 40.2769 million yuan, 40.4556 million yuan and 16.3518 million yuan respectively, accounting for 25.45%, 50.3%, 43.84% and 35.7% of the total profit of the current period respectively.
In addition to export tax rebates, it also enjoys a preferential corporate income tax rate of 15% for state-level high-tech enterprises, and its subsidiary, Shanghai Yihejie, enjoys preferential tax exemption for small and micro enterprises. In each period of the reporting period, the preferential amount of enterprise income tax enjoyed by the company and its subsidiaries was 9.005 million yuan, 7.4472 million yuan, 8.218 million yuan and 4.7175 million yuan respectively, accounting for 10.73%, 9.3%, 8.9% and 10.3% of the total profit of the current period respectively. Calculations show that during the reporting period, export tax rebates and income tax incentives accounted for 36.18%, 59.6%, 52.74% and 46% of the company's total profits, respectively.
This also means that once the national export tax rebate policy and the preferential tax policy for high-tech enterprises change, it will have a big impact on the overall operation of Yihejie.
The receivables turnover rate has plummeted, and the market share is not high
On the other side of the increase in revenue, the scale of credit sales is on the rise as a whole.
According to the prospectus, at the end of the reporting period, the book balance of accounts receivable of Yihejie was 35.534 million yuan, 88.7838 million yuan, 82.9997 million yuan and 95.6456 million yuan respectively, accounting for 22.1%, 33.38%, 22.51% and 24.02% of the current assets in the current period.
Due to the increase in the proportion of ODM customer revenue with a relatively long credit period year by year, the turnover rate of accounts receivable during the reporting period showed a downward trend, which were 8.65 times, 8.03 times, 6.32 times and 3.1 times, respectively.
Yihejie said that compared with peer companies, the company's accounts receivable turnover rate is higher than the average of comparable companies in the same industry, mainly due to the company's shorter credit period for dealers in order to prevent credit risks.
Receivables turnover ratio peer comparison
Yihejie said frankly in the prospectus that although the company's main customers have good credit, the aging of accounts receivable at the end of the reporting period is mainly within 1 year, and the company has also made sufficient provision for bad debts on accounts receivable, but due to the large amount of accounts receivable at the end of each period, if the production and operation of major customers in the future changes adversely, the possibility of bad debts in accounts receivable will increase significantly, which will have an adverse impact on the company's operating results.
However, the "right to speak" in the market is not high. According to the reply to the inquiry, according to Yihejie's calculation data, its global turbocharger market share in 2022 will be about 4.36%.
Talking about the reasons behind it, Yihejie told the titanium media APP that the turbocharger manufacturing industry is in the stage of large-scale development and oligopoly competition, and the market share is relatively stable and concentrated.
In the letter of inquiry, the Shenzhen Stock Exchange further asked: Is there an obvious incremental market for the issuer's overseas market space, and whether there is a risk of limited market space?
Yihejie mentioned in the reply letter that the market size of turbochargers is expected to increase from 12.42 billion yuan in 2022 to 18.25 billion yuan in 2027, with a large market space and significant growth. Due to the relatively large proportion of the overseas turbocharger front-loading market and the high average age of vehicles in the European Union and the United States, it is expected that the overseas market will be the main market for the turbocharger aftermarket in the next few years. Issuers have a large room for growth, and there is no risk of limited market space.
Generous dividends before the submission of the statement, and the amount of funds raised exceeds the total assets
Yihejie made a large dividend before applying for the IPO, and most of this cash flowed into the pockets of the actual controller's family.
According to the prospectus, on September 1, 2020, Yihejie held the first extraordinary general meeting of shareholders in 2020 and resolved to distribute cash dividends of 130 million yuan (tax included), on June 10, 2022, the company held the 2021 annual general meeting of shareholders and resolved to distribute cash dividends of 34 million yuan (tax included), and on June 15, 2023, the company held the 2022 annual general meeting of shareholders and resolved to distribute cash dividends of 11.6705 million yuan (tax included). Yihejie distributed a total of 175,670,500 yuan in cash dividends to shareholders three times. On June 28, 2023, Yihejie submitted an IPO application to the Shenzhen Stock Exchange and was accepted.
Where did the nearly $176 million in cash go?
For the two dividends on September 1, 2020 and June 10, 2022, the shareholding structure of Yihejie is: Jinlang Investment, Fang Youling, and Cai Yongjun hold 84%, 10%, and 6% of the shares respectively. The shareholders of Jinlang Investment are Liu Quan, Xiong Xinyuan and Cai Yongjun, with shareholding ratios of 56.5%, 27.8% and 15.7% respectively. Liu Quan is the actual controller of the company, Xiong Xinyuan is Liu Quan's brother-in-law, Cai Yongjun is Liu Quan's brother-in-law, and Xiong Xinyuan and Cai Yongjun are all members of Liu Quan's family. Of the 164 million yuan in dividends, the Liu family shared a total of 90% (147.6 million yuan) of cash.
The shareholding structure of the first two dividends
By the time of the 2023 dividend, the shareholding structure of Yihejie has changed. According to the proportion of 80.72% of the direct and indirect shares held by the Liu family, the Liu family received 9.4204 million yuan in the dividend of 11.6705 million yuan. In the three dividends, the Liu family shared a total of 157 million yuan, accounting for 89.38% of the sum of the three dividends. The first dividend in 2020 exceeded the attributable net profit of 71.0019 million yuan in the current period.
Titanium Media APP noted that as of the end of June 2023, Yihejie's total assets were 506 million yuan. The IPO plans to raise 712 million yuan, which is more than its own volume. What are the considerations for raising large sums of money after dividends?
Yihejie told Titanium Media APP that in order to repay shareholders and enhance the enthusiasm of employees, the company shares the company's operating results, and the company's cash dividends during the reporting period are reasonable. The main flow of cash dividends for shareholders is the purchase of office buildings and bank wealth management products, the payment of corresponding taxes and fees, and there is no flow to major customers, suppliers and related parties, and there is no commercial bribery or disbursement of costs and expenses through external funds.
According to the fundraising plan, 452 million yuan will be used for the expansion project of turbocharger and core components, 107 million yuan will be used for the industrialization construction project of hydrogen fuel cell BOP system parts, 105 million yuan will be used for the construction project of R&D center, and 48.372 million yuan will be used for the construction project of marketing network.
As the largest investment project, the expansion project of supercharger and core components has a construction period of 2 years, with an additional production capacity of 600,000 superchargers and 1 million sets of movements.
From the perspective of capacity utilization, from 2020 to 2022, the capacity utilization rate of Yihejie supercharger machine was 86.82%, 92.5% and 71.88%, respectively, and further decreased to 58.23% in the first half of 2023, and the capacity utilization rate of the movement was 81.2%, 98.58% and 88.54%, respectively, and decreased to 69.99% in the first half of 2023. The capacity utilization rate of both types of products has decreased significantly since 2022.
Compared with 2022, the new production capacity of the supercharger is about 1.66 times. In the context of declining capacity utilization, is there enough market to absorb the new capacity?
Yihejie responded that during the reporting period, the company's capacity utilization rate was at a high level as a whole. In 2022, the capacity utilization rate of the whole turbocharger machine decreased, mainly due to the company's new two turbocharger assembly lines in 2022, and the production capacity of the turbocharger machine increased by 36.52%, and the production capacity needs to be gradually digested, and there is no waste of resources.
"After the completion of the expansion project of supercharger and core components, the company's supercharger and core movement production capacity has been improved, which can further meet the needs of downstream customers and improve the company's profitability and market share of products. According to available public market data, the global turbocharger aftermarket size is expected to be 12.42 billion yuan in 2022. From 2013 to 2019, the global light vehicle turbocharger production continued to grow, with a compound growth rate of more than 8%, because the turbocharger aftermarket changes will lag behind the front-loading market by 8-10 years, assuming that the growth rate of the turbocharger aftermarket is 8% from 2023 to 2027, the global turbocharger aftermarket market is expected to increase from 12.42 billion yuan in 2022 to 18.25 billion yuan in 2027. After the company's fund-raising project reaches production, the new production capacity has enough room for market digestion," said Yihejie. (This article was first published in Titanium Media APP, author|Liu Fengru)