Ninety percent of the revenue of Ligong shares depends on the growth of tangerine peel, and there are hidden worries about the sales rate of 20%, the dividend is 142 million, and another 30 million is raised

Yangtze River Business Daily News ● Yangtze River Business Daily reporter Zhang Lu

Jiangmen Ligong International Food Co., Ltd. (hereinafter referred to as "Ligong Shares"), an operating enterprise in the tangerine peel industry, sprinted to "the first share of tangerine peel", and recently, the official website of the Beijing Stock Exchange showed that its review status was changed to "inquired".

It is reported that Ligong Co., Ltd. was established in 2004, and its main products include Xinhui tangerine peel, as well as peripheral products such as citrus tea, tangerine peel pastries and tangerine peel prefabricated dishes. The proportion of tangerine peel products in the revenue of Ligong shares is on the rise, accounting for 94.12% in the first half of 2023.

According to the prospectus, from 2020 to the first half of 2023 (hereinafter referred to as the "reporting period"), the unit price of tangerine peel products of Ligong Co., Ltd. increased rapidly, from 471.41 yuan/jin to 669.76 yuan/jin, driving the company's performance growth.

However, from the perspective of the industry, the current tangerine peel market is still in the stage of decentralization, regionalization and extensive operation, and there is uncertainty about whether the business model of Ligong shares, which is "dependent on large single products", has high growth, and the price fluctuations of tangerine peel will have a direct impact on the company's performance. The company's gross profit margin exceeded 50% in the reporting period, but it was still lower than that of comparable peers.

In addition, the Yangtze River Business Daily reporter noted that in this IPO, Ligong shares plan to raise 150 million yuan, of which 30 million yuan will be used to supplement liquidity, and the company has accumulated cash dividends of 140 million yuan in the past three years, which does not seem to be "short of money".

The gross profit margin of more than 50% is still lower than that of peers

Recently, Ligong shares disclosed a prospectus on the Beijing Stock Exchange, and the sponsor was Minmetals Securities. If the IPO goes well, Ligong shares will wear the crown of "the first share of tangerine peel".

It is understood that Ligong Co., Ltd. was established in 2004, is a collection of product development, production and sales in one of the tangerine peel industry operating enterprises, the company's main products include Xinhui tangerine peel, as well as citrus tea, tangerine peel pastries and tangerine peel prefabricated dishes and other peripheral products. At the same time, the company also provides customers with entrusted processing of citrus tea and tangerine peel brewing services. In fact, the controller is Ou Baixian, who holds 74.38% of the company's shares.

According to the prospectus, from 2020 to the first half of 2023, Ligong Co., Ltd. achieved operating income of 149 million yuan, 295 million yuan, 271 million yuan and 152 million yuan respectively, and net profit of 21.624 million yuan, 65.047 million yuan, 68.223 million yuan and 42.434 million yuan respectively.

The Yangtze River Business Daily reporter noted that during the reporting period, the revenue and proportion of Ligong shares from tangerine peel products showed an overall upward trend, and the business achieved revenue of 92.5622 million yuan, 236 million yuan, 206 million yuan and 143 million yuan respectively, accounting for 62.34%, 80.00%, 76.02% and 94.12% of the main business income in the current period.

When the company's main business is highly concentrated, the risk of raw material price fluctuations and core competitiveness will also increase greatly.

According to the prospectus, during the reporting period, the unit price of tangerine peel products of Ligong Co., Ltd. increased rapidly, from 471.41 yuan/jin in 2020 to 669.76 yuan/jin in the first half of 2023, an increase of 42.08%.

Ligong explained that the company's tangerine peel purchase price has shown an upward trend in the past three years, which is mainly related to the rapid growth of the current tangerine peel market demand, and the strong market demand has driven the market price to increase.

The high average unit price has also brought a lot of profits to Ligong shares. During the reporting period, the gross profit margin of Ligong's tangerine peel products business was 47.66%, 50.79%, 54.34% and 57.41% respectively, and the company's comprehensive gross profit margin was 46.57%, 49.43%, 52.75% and 56.99% respectively.

However, at present, the gross profit margin of Ligong shares is still lower than the industry average, and it is also inferior to tea brands such as Lancang Ancient Tea. According to the prospectus, during the reporting period, the average gross profit margin of comparable companies in the same industry reached 58.85%, 58.00%, 56.92% and 60.03% respectively.

In addition, the tangerine peel track that Ligong Co., Ltd. focuses on in terms of the industrial chain model, which is also similar to the tea track, and there are pain points such as difficulty in scale, and the market share of the head enterprises only accounts for a small share.

It is reported that the Xinhui area, where Ligong shares are located, is a well-known tangerine peel production area, with more than 1,700 local tangerine peel enterprises. Although Ligong has grown into a leading local enterprise, its market share is only about 1% of the local output value (19 billion yuan) according to the relevant data of Ligong in 2022.

R&D expense ratio declined

"One tael of tangerine peel and one tael of gold, a hundred years of tangerine peel is better than gold" is a common saying in Guangdong.

In the prospectus, Ligong emphasized that it has mastered a series of core technologies for the production of tangerine peel and is one of the leaders in the industrialization and standardization of tangerine peel in Xinhui. As of the signing date of the latest prospectus, Ligong has obtained a total of 22 patents, including 9 invention patents.

However, the characteristics of "heavy marketing and light research and development" of Ligong shares are obvious. During the reporting period, the company's sales expenses were 25.29 million yuan, 44.94 million yuan, 42.2 million yuan and 30.54 million yuan respectively, accounting for 17.04%, 15.23%, 15.26% and 20.09% of the current operating income respectively.

During the same period, the company's R&D expenses were 6.15 million yuan, 9.8 million yuan, 11.13 million yuan and 2.91 million yuan respectively, accounting for 4.14%, 3.32%, 4.11% and 1.92% of the current operating income respectively.

The competitive barriers of Ligong shares in the industry have also been concerned by the regulatory authorities. In the audit inquiry letter issued by the Beijing Stock Exchange in January, the company was required to explain whether the main products were "homogeneous" compared with competing products in terms of product quality, product price, nutritional value, etc., and whether there was a risk of being replaced by competing products.

On the other hand, the Yangtze River Business Daily reporter noticed that although Ligong is a Guangdong enterprise, its market is mainly concentrated in East China. From 2020 to the first half of 2023, the sales of Ligong in East China were 36.2881 million yuan, 94.1454 million yuan, 103 million yuan and 81.9391 million yuan, accounting for 24.44%, 31.91%, 38.11% and 53.91% respectively.

Ligong explained that with the improvement of the company's product brand awareness and the expansion of the sales network in East China, the sales and proportion of the East China market have increased year by year in recent years.

As a traditional enterprise, inventory has always accounted for the majority of the current assets of Li Gong shares. During the reporting period, the carrying value of its inventory was 71.5484 million yuan, 178 million yuan, 161 million yuan and 178 million yuan, accounting for 32.21%, 55.66%, 52.21% and 43.16% of current assets.

Ligong shares said that tangerine peel can be stored for a long time, the shelf life of tea is 3 years, the company on tangerine peel, tea according to the sales price after the period as the net realizable value of the calculation standard to calculate the price of the decline in price, there is no sign of impairment, no provision for inventory price decline.

In this IPO, Ligong shares plan to issue no more than 20 million shares to the public, and plans to raise 150 million yuan, of which 120 million yuan will be used for the construction project of Xinhui tangerine peel manufacturing center and R&D center, and 30 million yuan will be used to supplement liquidity.

It is worth noting that Ligong shares have paid frequent cash dividends in the past few years. From 2020 to 2022, the company's cash dividends will be 26.10 million yuan, 52.4146 million yuan, and 63.3683 million yuan respectively, with a total cash dividend of 142 million yuan in three years.

From the perspective of the industry, the entire tangerine peel industry is mostly in a small and scattered state, and the product quality is mixed.