On April 21, Longsys (301308. SZ) disclosed its 2023 annual report, during the reporting period, the company achieved operating income of 10.125 billion yuan, a year-on-year increase of 21.55%. The company's net profit attributable to the parent company was -828 million yuan, and the net profit after deducting non-profit was -882 million yuan, and the net profit before and after deducting non-profit turned from profit to loss year-on-year.
The company said that the performance loss was mainly due to the weak demand in the end market, especially due to the sluggish demand in important markets such as mobile phones and PCs, which led to a decline in demand for semiconductor storage products. In addition to industry factors, the decline in the company's net profit was related to the increase in expenses during the period. In 2023, the company's expenses during the period will be 1.586 billion yuan, an increase of 718 million yuan, or 82.64%, over the same period of the previous year, of which the company's R&D expenses will reach 594 million yuan, a year-on-year increase of 66.74%.
It should be noted that Longsys landed on the A-share market in August 2022, and the company's profits fell in the year of listing. In 2023, the company's profitability has not improved, but has suffered losses. Not only that, the company also has problems such as high inventory, declining gross profit margin, and a significant increase in the asset-liability ratio.
In the secondary market, the company's share price bottomed out after hitting a new intraday low of 65.52 yuan on February 5. As of the close of trading on April 22, the company's share price closed at 95.9 yuan, down 3.1%, and the current total market value is 39.59 billion yuan.
Inventories are high and the debt-to-asset ratio has risen significantly
According to public information, Longsys' main business is the R&D, design and sales of semiconductor storage products, and the company's main products are embedded storage, solid-state drives, mobile storage, and memory modules, and it has two major brands: FORESEE and Lexar.
Starting from the end of 2023, the semiconductor storage industry has gradually entered an upward cycle, and the company achieved operating income of 3.546 billion yuan in the fourth quarter, driving the company's annual revenue to exceed 10 billion yuan for the first time in history, and also achieving profitability in the current quarter, avoiding further expansion of losses.
In terms of quarters, from Q1 to Q4 of 2023, Longsys' operating income will be 1.482 billion yuan, 2.226 billion yuan, 2.872 billion yuan, and 3.546 billion yuan respectively, and the net profit attributable to the parent company will be -281 million yuan, -315 million yuan, -287 million yuan, and 55.0174 million yuan respectively, which shows that the company suffered losses in the first quarter of last year and continued to the third quarter, and turned losses into profits in the fourth quarter.
At the same time as the release of the annual report, the company also released the first quarter report of 2024. In the first quarter of 2024, the company achieved operating income of 4.453 billion yuan, an increase of 200.54% year-on-year, net profit attributable to the parent company of 384 million yuan, an increase of 236.93% year-on-year, and non-net profit of 363 million yuan, an increase of 228.44% year-on-year, showing improved performance.
In terms of products, in 2023, the revenue of the company's four major products, embedded storage, mobile storage, solid-state drives, and memory modules, will all achieve varying degrees of growth. During the reporting period, the revenue of the above three products was 4.423 billion yuan, 2.328 billion yuan, 2.802 billion yuan and 513 million yuan respectively, an increase of 1.31%, 14.18%, 86.33% and 23.1% year-on-year, respectively, of which the growth rate of solid-state drive products was larger.
Despite the increase in revenue, the company's gross margin declined. In 2023, the company's gross sales margin will be 8.19%, a year-on-year decrease of 4.22 percentage points. Among them, the gross profit margin of embedded storage products, the company's main revenue force, fell by 12.27 percentage points year-on-year to 3.11%. In fact, the company's gross profit margin has declined for two consecutive years. In 2022, the company's gross sales margin was 12.4%, a decrease of 7.57 percentage points from 2021.
Titanium Media APP noticed that before the listing, the problem of Longsys' large inventory scale has been criticized by the market and has not been improved so far. As of December 31, 2023, the carrying value of the company's inventory was 5.893 billion yuan, a year-on-year increase of 57.4%, accounting for 65.01% of current assets. From 2020 to 2022, the company's inventory will be 2.246 billion yuan, 3.592 billion yuan, and 3.744 billion yuan respectively, an increase of 23.04%, 59.95%, and 4.22% year-on-year, respectively, increasing year by year.
The high inventory level put pressure on Longsys' cash flow. From 2021 to 2023, the company's net cash flow from operating activities will be -811 million yuan, -326 million yuan, and -2.798 billion yuan respectively, which will always be negative.
In addition, the company's accounts receivable are also increasing year by year. From 2020 to 2023, the company's accounts receivable will be 616 million yuan, 914 million yuan, and 1.345 billion yuan respectively, an increase of 59.86%, 48.42%, and 47.23% year-on-year, respectively. It is worth noting that in 2023, the growth of the company's accounts receivable and inventory will be higher than the growth of operating income.
Under the loss, Longsys' asset-liability ratio increased significantly, from 25.94% at the beginning of 2023 to 52.85% at the end of the year, an increase of 26.91 percentage points year-on-year. From the perspective of liabilities, the company's short-term borrowings and long-term borrowings have changed greatly. In 2023, Longsys' short-term and long-term borrowings will be 2.916 billion yuan and 2.092 billion yuan, respectively, a year-on-year increase of 171.21% and 736.14%, respectively. Among them, the seven-fold increase in long-term borrowings was mainly due to the increase in financing borrowings.
Suffered a major shareholder reduction holdings
In August 2023, Longsys, which has been listed for one year, ushered in the lifting of the ban period. According to the announcement disclosed by the company on August 2, 2023, Longsys has a total of 78.902 million restricted shares of the original shareholders of the initial offering and the initial strategic placement shares listed and circulated, and the number of restricted shares released accounts for 19.11% of the company's total share capital.
It is reported that a total of 17 shareholders were involved in the lifting of the ban, including the second largest shareholder, the National Integrated Circuit Industry Investment Fund, the seventh largest shareholder, Jiangsu Qiquan Yuanhe Puhua Equity Investment Partnership (Limited Partnership) (hereinafter referred to as Oriza Puhua), Shanghai Juyuan Juxin Integrated Circuit Industry Equity Investment Fund, etc.
Titanium Media APP noticed that the company's shareholder Oriza Puhua began to reduce its holdings of the company's shares as soon as the ban period expired. As of the end of June 2023, Oriza Puhua held 17.14 million shares, with a shareholding ratio of 4.15%, making it the seventh largest shareholder of the company. As of March 31, 2024, the number of shares held by Oriza Puhua has been reduced to 11,131,100 shares, and the cumulative reduction of shares has been reduced by 5,944,700 shares, reducing the shareholding ratio to 2.7%.
During the period from August 2023 to the end of March 2024, the lowest value of the company's stock price is 65.52 yuan, based on this calculation, Oriza Puhua will cash out at least 300 million yuan. (This article was first published on Titanium Media APP, author | Li Ruohan)