Recently, Changzhou Shichuang Energy Co., Ltd. (stock abbreviation: Shichuang Energy; stock code: 688429. SH) has published its first annual report since its listing. In 2023, Shichuang Energy will achieve an operating income of 1730.5903 million yuan, a year-on-year decrease of 27.74%, a net profit attributable to the parent company of 176.9001 million yuan, a year-on-year decrease of 39.66%, and a net profit attributable to the parent company of 136.2752 million yuan, a year-on-year decrease of 48.72%.
Our research found that in addition to the sharp decline in performance after listing, there are contradictions between the annual report of Shichuang Energy and the information of R&D projects and R&D personnel disclosed in its prospectus, and the quality of information disclosure seems to need to be improved. In addition, Shichuang Energy indirectly holds a stake in its largest customer at the beginning of 2024, and the current actual controller of the customer seems to have a close relationship with Shichuang Energy.
Source: Photo.com
Shichuang Energy's performance fell nearly 40% in the first year of listing
According to the prospectus, from 2020 to 2022, the operating income of Shichuang Energy will be 438.0676 million yuan, 712.2033 million yuan and 2394.8015 million yuan respectively, with an annualized compound growth rate of 133.81%, and the net profit attributable to the parent company will be 141.5017 million yuan, 90.7549 million yuan and 292.9323 million yuan respectively, with an annualized compound growth rate of 43.88%.
According to the data of Choice Financial Terminal, from a quarterly point of view, the net profit attributable to the parent company of Shichuang Energy from the first quarter to the fourth quarter of 2023 was 64.251 million yuan, 54.1102 million yuan, 44.1501 million yuan, and 14.3888 million yuan respectively, declining quarter by quarter, and the net profit attributable to the parent company after deducting non-profit in a single quarter was 57.0741 million yuan, 46.4817 million yuan, 37.4544 million yuan, and -4.735 million yuan respectively, declining quarter by quarter, and there was a loss in the fourth quarter. In terms of growth rate, the year-on-year growth rate of net profit attributable to the parent company of Shichuang Energy from the first quarter to the fourth quarter of 2023 was 286.97%, -21.14%, -55.85% and -86.64% respectively.
In terms of profitability, according to the data of Choice Financial Terminal, from 2020 to 2023, the net profit margin of sales of Shichuang Energy will be 32.30%, 12.74%, 12.23%, and 10.22% respectively, declining year by year. From the first quarter to the fourth quarter of 2023, the net profit margin of Shichuang Energy's single-quarter sales was 13.51%, 12.20%, 10.28%, and 3.77% respectively.
In terms of cash flow, in 2023, the net cash flow from operating activities of Shichuang Energy will be -178 million yuan, compared with the net cash flow from its operating activities in 2022 of 614 million yuan. Shichuang Energy said that in 2023, the company's net cash flow from operating activities will decline significantly, mainly due to the decline in the company's revenue, and the increase in the purchase of long-term assets with the endorsement of bills, and the corresponding decrease in cash received from the sale of goods, while the cash paid for the purchase of goods will increase due to the payment of bills issued in 2022 and other reasons.
The main business of Shichuang Energy includes three major sectors: photovoltaic wet process auxiliary products, photovoltaic equipment and photovoltaic cells. Judging from the above explanations of Shichuang Energy, one of the reasons for the sharp decline in net cash flow from its operating activities in 2023 seems to be that its customers are more likely to use note endorsements rather than cash to pay for long-term asset acquisitions in the current period.
In addition, at the end of 2023, Shichuang Energy's contract liabilities were 49 million yuan, a decrease of 60.24% from 124 million yuan at the end of 2022, which Shichuang Energy said was due to the decrease in advance receipts for its equipment products. I don't know if the sales and payment collection of Shichuang Energy's photovoltaic equipment products are under certain pressure?
In terms of photovoltaic cells, according to the annual report, Shichuang Energy's existing 2GW production line is a traditional PERC production line. At the same time, Shichuang Energy's annual report shows that at present, the technical route of solar cells is mainly PERC and TOPCon, and N-type cells have higher conversion efficiency and bifaciality, lower temperature coefficient and attenuation rate than P-type cells. With the further improvement of the advantages of N-type cells in various aspects, PERC cells may face gradual liquidation in the future.
Although Shichuang Energy said that the company's 2GW cell production capacity is different from the traditional PERC capacity, in addition to promoting half-cell cells to the market and further improving the market's recognition of half-cell technology, compared with the traditional PERC line, it has significant advantages in terms of cost and other aspects, but Shichuang Energy also admitted that its PERC route products will have more fierce competition with TOPCon cell production line products in 2024.
In addition, Shichuang Energy said that in 2023, the average conversion efficiency of P-type monocrystalline cells using PERC technology will be further approached to the limit. However, the annual report shows that Shichuang Energy's research projects also include the "high-efficiency battery research and development - ultra-thin and high-efficiency PERC half-cell battery" project, with an estimated total investment of 174.5456 million yuan, a cumulative investment of 48.7296 million yuan, and an investment of 30.7199 million yuan in 2023. I wonder if it is wise for Shichuang Energy to still carry out the research and development of PERC battery projects at this time?
In addition, according to the prospectus, at the end of 2022, Shichuang Energy had 1,453 employees, including 1,042 production personnel. The annual report shows that at the end of 2023, Shichuang Energy will have 1,574 employees, but the number of production personnel has dropped significantly to 772.
In terms of stock price performance, Shichuang Energy was listed on June 29, 2023 with an issue price of 19.2 yuan per share, and the lowest share price after listing touched 13.11 yuan per share, and the closing price as of April 15 was 14.09 yuan per share, down 31.7% and 26.6% respectively from the issue price. According to the announcement, Huatai United Securities Co., Ltd. is the IPO sponsor and underwriter of Shichuang Energy, and Shichuang Energy paid it a sponsorship and underwriting fee of 43.7769 million yuan.
In addition, according to the annual report, as of the end of 2023, Shichuang Energy has monetary funds of 1.068 billion yuan. On April 9, 2024, Shichuang Energy announced that the company's board of directors proposed to the general meeting of shareholders to authorize the board of directors to decide that the company should choose the opportunity to issue shares with a total financing amount of no more than 300 million yuan and no more than 20% of the net assets at the end of the most recent year, and the general meeting of shareholders will be held on April 30, 2024.
Indirect shareholding in the largest customer
According to the "R&D Personnel" section of Shichuang Energy's annual report, at the end of 2022 and 2023, the number of R&D personnel of Shichuang Energy will be 313 and 479 respectively. According to this calculation, at the end of 2023, the number of R&D personnel of Shichuang Energy will increase by 166 compared with the end of 2022, an increase of 53.04%. However, the annual report said that in 2023, the company's R&D personnel will increase by 166, a year-on-year increase of 53.35%.
In addition, Shichuang Energy's annual report said that at the end of 2023, the number of R&D personnel of Shichuang Energy will be 7 doctoral students and 65 master's students, respectively. In other words, by the end of 2023, there will be 72 R&D personnel with a master's degree or above. At the same time, Shichuang Energy said in its annual report that the company's R&D personnel with a master's degree or above increased by 26 by the end of 2023. According to this calculation, at the end of 2022, the number of R&D personnel of Shichuang Energy with a master's degree or above will be 46. However, according to the prospectus, at the end of 2022, the number of R&D personnel of Shichuang Energy with a master's degree or above was 45.
There also seems to be a contradiction between Shichuang Energy's annual report and the status of the projects under research disclosed in its prospectus. The project of "R&D of silicon wafer corrosion auxiliary products - research and development of crystalline silicon alkali polishing auxiliary products PS4" is one of the main research projects of Shichuang Energy, and its 2023 annual report said that the investment amount of the project in 2023 is 6.7877 million yuan, and the cumulative investment amount is 24.6491 million yuan. According to this calculation, the amount of R&D investment of the project from 2020 to 2022 should not be higher than the difference between the two of 17.8614 million yuan.
However, according to Shichuang Energy's prospectus, from 2020 to 2022, the R&D investment of its "R&D of silicon wafer corrosion auxiliary products - R&D of crystalline silicon alkali polishing auxiliary products PS4" project will be 1.7178 million yuan, 9.8702 million yuan, and 7.9913 million yuan respectively, with a total of 19.5793 million yuan.
Coincidentally, the project of "R&D of Wafer Cleaning Auxiliaries - R&D of Wafer Wafer Cleaning Auxiliaries CW1" is also one of the main research projects of Shichuang Energy, and its 2023 annual report said that the investment amount of the project in 2023 will be 2.8371 million yuan, and the cumulative investment amount will be 9.0902 million yuan. According to this calculation, the amount of R&D investment of the project from 2020 to 2022 should not be higher than the difference between the two of 6.2531 million yuan.
However, Shichuang Energy's prospectus said that from 2020 to 2022, the investment amount of its "R&D of silicon wafer cleaning auxiliary products - research and development of silicon wafer cleaning auxiliary products CW1" project was 1.2972 million yuan, 3.2604 million yuan, and 2.9927 million yuan respectively, totaling 7.5503 million yuan.
In addition, we combed through the announcement and found that in January 2024, Shichuang Energy indirectly held shares in its main customer, Ningbo Eureka Solar Energy Co., Ltd. (hereinafter referred to as Eureka), through its shareholding in Shanghai Xintonghui Photovoltaic Technology Co., Ltd. (hereinafter referred to as Xintonghui).
Specifically, Xu Guang originally held 100% of the equity of Xintonghui, and according to the "Equity Transfer Agreement" signed between Shichuang Energy and Xu Guang on November 27, 2023, Shichuang Energy acquired 42% of Xintonghui held by Xu Guang at zero consideration According to the resolution of the extraordinary shareholders' meeting of Xintonghui on November 27, 2023, the company plans to increase its capital by 36 million yuan, of which Xu Guang subscribed 21 million yuan and Shichuang Energy subscribed 15 million yuan. On January 16, 2024, Shichuang Energy paid 36 million yuan to Xintonghui and obtained 41.86% of the company's equity.
According to Xintonghui and Ningbo Shanshan Co., Ltd. (stock abbreviation: Shanshan shares; stock code: 600884. SH), Wang Minglai and others signed the "Acquisition and Equity Transfer Contract" and "Acquisition and Equity Transfer Price Confirmation" in December 2023 and January 2024, and Xintonghui acquired 100% of the shares of Shanshan Co., Ltd. and Wang Minglai held by Eureka at a consideration of 77 million yuan. As of February 4, 2024, Xintonghui has paid all the equity transfer money, and Xu Guang has become the actual controller of Eureka.
According to the "Announcement on the Expected Daily Related Party Transactions in 2024" issued by Shichuang Energy, Shichuang Energy indirectly holds 40.19% of the equity of Eureka through Xintonghui, and appoints its director and deputy general manager Zhao Yan as a director and general manager in Eureka, and appoints its deputy general manager Yang Ligong as a director in Eureka.
According to the announcement, in 2023, the sales amount of Shichuang Energy to Eureka will be 279.876 million yuan, which is the same as the sales amount to the largest customer in 2023 disclosed in Shichuang Energy's annual report. In other words, Eureka is the largest customer of Shichuang Energy in 2023, and the sales amount of Shichuang Energy to Eureka accounts for 16.17% of its total sales.
In addition, the annual report shows that Xu Guang holds 7,291,500 shares of Shixin Energy, which is the original share of the IPO, and the restriction on sale will be lifted on June 29, 2024. Previously, we published an article "Shichuang Energy has customer advantages, but related party disclosure seems to be missing", pointing out that in March 2019, Xu Guang increased the capital of Shichuang Energy at a price of 16.33 yuan/registered capital, corresponding to the post-investment valuation of Shichuang Energy of 400 million yuan. In the reply to the first round of inquiries, Shichuang Energy said that Xu Guang held a 4% stake in Changzhou Shichuang Materials Co., Ltd. (hereinafter referred to as Shichuang Materials), a customer of Shichuang Energy. The corporate mailing address in the 2021 industrial and commercial annual report of Shichuang Materials is Building X, No. X, Wutandu Road, Kunlun Street, Liyang City, and the registered address and main production and operation address of Changzhou Shichuang Power Technology Co., Ltd. and Changzhou Shichuang Energy Storage Technology Co., Ltd., subsidiaries of Shichuang Energy, are also here.