In the era of the great prosperity of Internet entrepreneurship, Lei Jun, the founder of Xiaomi, has a sentence that is deeply rooted in the hearts of the people: "Standing on the tuyere, pigs can fly". This famous sentence emphasizes seizing good opportunities, even ordinary individuals have a great chance of entrepreneurial success.
Hangzhou Yugu Technology is a lucky person who has risen by taking advantage of the Internet sharing economy. In 2020, Hangzhou Yugu Technology entered the two-wheeled electric vehicle battery swap service business, and took off in the next two years, and applied for an IPO on the GEM in June 2023. On March 14, 2024, Yugu Technology updated its response to the second round of inquiries. In the two rounds of inquiry, the exchange's questions mainly focused on the sustainability of Yugu Technology's performance and technological innovation. However, judging from the content of Yugu Technology's reply, many questions still need to be solved. According to the website of the Shenzhen Stock Exchange, the review process of Yugu Technology was displayed as "suspended" on March 31 because the financial information recorded in the IPO application documents had expired and needed to be supplemented.
The rapid rise is difficult to hide the financial risks behind it
The Yugu Technology plans to land on the GEM, with no more than 10 million shares to be issued, accounting for no more than 25% of the total share capital after the issuance, and the planned fund-raising amount is 1.094 billion yuan. Among them, it is planned to invest 824 million yuan in the production and operation center project of intelligent battery swap products, 69.8843 million yuan in the construction project of the R&D center, and 200 million yuan in supplementary working capital. According to this estimate, the IPO valuation of Yugu Technology is about 4.4 billion yuan. Dolphin Finance noticed that the average increase in the first day of new shares in 2023 will exceed 60%, and it is estimated that the market value of Yugu Technology is expected to reach 6 billion to 7 billion yuan after listing.
According to Yugu Technology's net profit in 2022, its PE is as high as 80 times. Even at an IPO valuation of 4.4 billion, its PE is 54 times. This level of valuation is much higher than that of comparable companies. Taking the U.S.-listed monster charging as an example, its market value is only 155 million US dollars (about 1.1 billion yuan), and the corresponding PE multiple is 13 times.
They are also battery swap companies, why can the valuation of Yugu Technology reach 4 times that of Monster Charging?
Yugu Technology mainly provides two-wheeled electric vehicle battery swap services for users such as takeaway riders and delivery workers in the same city, and end users operate through mobile apps and other applications to realize offline self-service battery replacement. It has three wholly-owned subsidiaries, namely the lithium technology, the lithium technology, and the Hong Kong Express technology, of which the first two are engaged in the battery swapping business of two-wheeled electric vehicles, and the latter is responsible for technology development and services.
The take-off of Yugu Technology benefited from the interaction of multiple tuyeres. Among them, the rise of the sharing economy and the rapid increase in the size of the food delivery rider group have provided it with the impetus for development. At the same time, from time to time, the two-wheeled electric vehicle lithium battery caused by the fire caused by the charging fire and other problems have also prompted governments at all levels to introduce relevant safety regulations, which clearly mentioned the priority to promote the "replacement charging" mode.
In fact, the entry of state-owned enterprise China Tower in 2019 accelerated the development of the electric vehicle battery swap service industry. In 2021, the battery swap service industry entered a large-scale development and exploded, and the revenue of China Tower Energy (a subsidiary of China Tower) exceeded 1 billion yuan that year, a year-on-year increase of 239.6%. According to the data released by Tower Energy, its market share exceeds 50%, including CATL, China Southern Power Grid, Ant Financial and other well-known companies have joined the investor army, and the electric vehicle battery swap service industry is also known as the "100 billion blue ocean" new outlet, and the rise of Yugu Technology is the product of this background.
The revenue trend of Yugu Technology is in line with the overall development trajectory of the industry. According to the prospectus, from 2020 to 2022, Yugu Technology achieved operating income of 93.8357 million yuan, 229 million yuan, and 559 million yuan respectively, and the net profit attributable to the parent company in the same period was 15.2569 million yuan, 33.0473 million yuan, and 81.3426 million yuan respectively. In the past three years, the two data have increased by about 5.95 times and 5.4 times respectively at the beginning and end of the period. In the first half of 2023, Yugu Technology's revenue and net profit will be 407 million yuan and 59.4404 million yuan respectively, both of which will increase by 7% compared with 2022.
Although the scale of revenue and net profit of Yugu Technology has grown rapidly, it is still difficult to hide the serious problems of profitability, operational efficiency and stability behind it.
According to the data, from 2020 to the first half of 2023, the comprehensive gross profit margin of Yugu Technology was 44.58%, 33.82%, 28.54% and 26.58% respectively, of which the gross profit margin of the main business battery swap service was 37.86%, 31.58%, 27.55% and 25.91% respectively, a decline of 18 percentage points in the three-and-a-half-year period, which reflects the fierce competition in the battery swap service industry and the difficulty of maintaining a high gross profit margin.
At the same time, the scale of Yugu Technology's debt has increased significantly, indicating that the main driving force for its rapid expansion comes from a large amount of debt.
According to the prospectus, from 2020 to the first half of 2023, Yugu Technology's current liabilities will be 107 million yuan, 319 million yuan, 516 million yuan and 461 million yuan respectively. Among them, the notes payable were 15.0816 million yuan, 127 million yuan, 264 million yuan and 189 million yuan, and the accounts payable were 27.3151 million yuan, 60.7405 million yuan, 86.8374 million yuan and 80.373 million yuan respectively.
Generally speaking, the healthy indicators of corporate current ratio and quick ratio are measured by more than 2x and 1x. However, the current ratio and quick ratio of Yugu Technology were almost below the health line throughout the reporting period. According to the prospectus, from 2020 to the first half of 2023, the current ratios of Yugu Technology are 0.41 times, 0.65 times, 1.15 times and 1.03 times, and the quick ratios are 0.24 times, 0.53 times, 0.92 times and 0.87 times, respectively. Both indicators peaked in 2022, but they are still far from the health line. Moreover, in the first half of 2023, these two indicators will go bad again.
The purpose of corporate borrowing is more to increase financial leverage and leverage higher profit returns through more capital investment. Dolphin Finance noticed that Yugu Technology did not bring positive financial results because of the debt, and its operating yield fell sharply during the reporting period.
According to the prospectus, from 2020 to the first half of 2023, the weighted average return on equity of Yugu Technology will be 164.40%, 64.84%, 20.12%, and 8.67% respectively, falling directly from the top of the mountain to the bottom. According to this calculation, when the weighted average return on equity is 164.40%, every 1 yuan of net assets can generate about 1.644 yuan of profit, and when it is reduced to 8.67%, every 1 yuan of net assets can only generate about 0.0867 yuan of profit. In layman's terms, it is the profit that Yugu Technology can generate by investing one dollar 4 years ago, and now it needs to invest about 19 yuan.
In addition, the significant increase in notes payable and accounts payable during the reporting period means that it has adopted a strategy of delaying payments, which should have brought positive cash flow performance to the company. But that's not the case. According to the prospectus, from 2020 to the first half of 2023, the net cash flow per share of Yugu Technology will be 0.0002 yuan, 1.54 yuan, 10.75 yuan, and -0.99 yuan respectively. In addition to reflecting the huge pressure on Yugu Technology's cash flow, these data also mean that there are certain problems with the company's business stability.
It should also be pointed out that the concentration of the top five suppliers of Yugu Technology is too high.
From 2020 to the first half of 2023, the proportion of the procurement amount of the top five suppliers of Yugu Technology to the overall procurement amount is 51.44%, 58.04%, 62.38% and 61.85% respectively. From 2020 to the first half of 2023, the purchase amount of Funeng Technology from Yugu Technology was 46.5948 million yuan, 145.1032 million yuan, 254.7836 million yuan and 134.3408 million yuan respectively, accounting for 99.90%, 94.08%, 76.56% and 90.82% of the procurement amount of similar raw materials , accounting for 41.03%, 39.33%, 35.21% and 36.13% of the total procurement of Yugu Technology, respectively.
The domestic lithium battery manufacturing industry is developed, and the suppliers can choose from a wide range, but Yugu Technology mainly relies on Funeng Technology, which makes it bear some uncertain risks.
For example, the reply letter shows that there have been many safety and quality problems with the batteries supplied by Funeng Technology. From March to May 2020, Yugu Technology purchased a batch of battery cells from Funeng Technology for battery production, and after the batteries were put into market operation, some of them were bulging and leaking, and from September to December 2021, Yugu Technology purchased new model 32B battery cells from Funeng Technology. After the battery was put into operation, some batteries encountered problems such as high internal resistance and cell misalignment after violent impact during the use of the rider, and finally 1,844 batteries could not be repaired and were scrapped.
Dolphin Finance noticed that during the reporting period, there were 5 safety accidents related to Yugu Technology's battery swap service. Yugu Technology said that the company has not received any penalties for these accidents.
Self-classified as a lithium battery manufacturing industry is suspected of gaining popularity
In the prospectus, Yugu Technology stated that it has the advantages of the whole industry chain from the research and development, production to launch and operation of battery swapping equipment, and at the same time produces battery swapping equipment such as lithium batteries and battery swapping cabinets, it will also put battery swapping equipment into operation to provide customers with battery swap services, which has the dual attributes of manufacturing and service industry.
Based on this, in the first version of the prospectus, Yugu Technology attributed its own industry to "lithium-ion battery manufacturing" of "electrical machinery and equipment manufacturing industry", based on the provisions of the "National Economic Industry Classification", and specifically judged the main activities and industries according to the higher added value.
The initial custom industry attribution of Yugu Technology comes from the first version of the prospectus.
However, the Shenzhen Stock Exchange questioned this in the first round of inquiries, requiring Yugu Technology to "fully explain the specific calculation process and basis for classification according to the value-added caliber, the accuracy and basis of the industry classification of the issuer, and whether it conforms to the company's business substance and industry practices in accordance with the provisions of the National Economic Industry Classification and the Guidelines for the Statistical Classification of Listed Companies of the China Association of Listed Companies (2023)".
In fact, the value-added caliber is more used in the relevant statistics at the national macro level, and the "Guidelines for the Statistical Classification of Listed Companies by Industry of the China Association of Listed Companies" is actually formulated in more detail according to the "Industrial Classification of the National Economy", which is not only the regulatory standard for IPOs, but also the industry and market practice, in which the guidelines clearly stipulate that "when the proportion of operating income of a certain type of business of a listed company is greater than or equal to 50%, in principle, it will be classified into the corresponding industry of the business".
In fact, the revenue composition of Yugu Technology is indisputable, and the battery swap service is almost the main source of its income. From 2020 to the first half of 2023, the battery swap service revenue of Yugu Technology will be 40 million yuan, 199 million yuan, 542 million yuan and 401 million yuan respectively, accounting for 45.93%, 87.60%, 97.62% and 98.63% of the total revenue in the same period.
After receiving the first round of inquiries from the exchange, Yugu Technology made changes in the updated prospectus to classify the company in the "other Internet services" industry of "Internet and related services". So what is the motivation for Yugu Technology's efforts to classify the company as "lithium-ion battery manufacturing"?
It is well known that at the time of an IPO, different industries have different levels of valuation and popularity with secondary market investors. A hot industry can be a great help for companies to increase their IPO valuations and raise more capital. The lithium battery manufacturing industry in the new energy industry is the tuyere industry in the past few years, and Yugu Technology has forced itself into the lithium battery manufacturing industry, which is obviously suspected of rubbing the heat.
The quality of technology has been the focus of inquiries by the exchange
In addition to the popularity of the new energy industry, Yugu Technology has many doubts, one of which is the "technology" attribute that Yugu Technology keeps repeating in the prospectus. Dolphin Finance found that Yugu Technology's R&D rate has continued to decline in the past few years, which is inconsistent with its claimed positioning as a technology company. In addition, at the business level, Yugu Technology does not have a high threshold for technology and innovation in terms of hardware and software.
R&D investment is the most important criterion to measure a company's technological performance, and Yugu Technology lags behind comparable companies in this regard.
According to the prospectus, from 2020 to the first half of 2023, the R&D expenses of Yugu Technology were 9.2113 million yuan, 10.93 million yuan, 18.4365 million yuan and 12.7354 million yuan, and the total R&D expenses for three years were only 38.5778 million, and the R&D rates were 9.96%, 4.85%, 3.34% and 3.13% respectively in the same period. During the same period, the average R&D rates of comparable companies in the same industry disclosed by Yugu Technology were 4.83%, 5.16%, 5.21% and 7.59%, respectively. The R&D rate of Yugu Technology is not only lower than that of peer companies, but also continues to decline, which is contrary to comparable companies in the same industry.
The comparison of the average R&D rate after excluding Zhilai Technology comes from the second round of inquiry responses.
According to the reply letter, the Shenzhen Stock Exchange is particularly concerned about the core technology and innovation of Yugu Technology's two-wheeled vehicle battery swap. Following the first round of inquiry, the Shenzhen Stock Exchange further required Yugu Technology in the second round of inquiry to "objectively describe the issuer's core technology and the specific correspondence with the product and business in accordance with the principle of 'concise, clear and easy to understand', avoid exaggeration, publicity and obscure language, and explain the main content and calculation method of the core technology corresponding to the main business income, and the accuracy of the core technology identification". Not only that, the Shenzhen Stock Exchange also asked Yugu Technology to answer whether its technology can form a high barrier. Obviously, the Shenzhen Stock Exchange was not satisfied with the reply to the first round of inquiries of Yugu Technology.
In the reply letter, Yugu Technology listed the core technology performance of its hardware and software. In terms of hardware, Yugu Technology believes that its core technology is reflected in "the detachability, shock resistance, waterproof and high temperature resistance of lithium batteries", as well as the "anti-theft effect" of lithium batteries.
In terms of software, the technological advancement performance given by Yugu Technology is "device-cloud collaboration technology, AI technology", etc., and two of the practical uses that are easy to understand are "early warning of abnormal conditions of the battery" and "battery capacity estimation accuracy". It is worth noting that Yugu Technology emphasizes that in terms of battery residual capacity, the company's technology can achieve a capacity estimation accuracy of 3%, which is better than the industry's mainstream 5%-10%.
In fact, delivery riders usually buy a monthly package service when using the battery swapping service, and considering the risk of power outage, they rarely use less than 10% of the battery before replacing the battery. Therefore, the so-called "3% remaining power estimation accuracy" of Yugu Technology does not have much significance for customers. This technology does not establish a significant advantage over competitors.
Dolphin Finance noticed that Yugu Technology and Shanghai Hello Puhui Technology Co., Ltd. have a number of patent dispute lawsuits. According to the prospectus, Hello filed a lawsuit against Yugu Technology on the grounds of infringement of utility model patent rights and invention patent disputes, requiring it to immediately stop infringing two utility model patents and one invention patent of Hello Company, including but not limited to stopping the operation and implementation of the battery, battery monitoring system and switch lock and its switch lock method involved in the implementation of the battery swapping cabinet, and reserved the right to compensate Hello Company for additional economic losses suffered by Hello Company in the course of the litigation. At present, the latest developments in patent litigation are one withdrawal, one awaiting trial, and one awaiting filing.
These lawsuits reflect from the side that the technological innovation level of Yugu Technology is limited, but it is more manifested in the homogeneous technology of the industry.
Source: Dolphin Finance