Financial reporter Zhang Tingwang
Recently, Rongta Hezhong (Xiamen) Technology Group Co., Ltd. (hereinafter referred to as "Rongta Hezhong") submitted a listing application to be listed on the main board of the Hong Kong Stock Exchange.
The reporter noticed that in the past three years, Rongta Hezhong's operating performance has not been stable, especially last year, due to the general price increase of the company's products, resulting in a sharp decline in its performance. In 2023, Rongta Hezhong's revenue will be 349 million yuan, a year-on-year decrease of 11.2%, and its net profit will be 27.603 million yuan, a year-on-year decrease of 26.29%. At the same time, the company's capacity utilization rate has plummeted, and the capacity utilization rate of some product lines has been halved.
For the sharp decline in net profit and the decline in production capacity, the reporter tried to contact Rongta Hezhong to understand the situation. As of press time, the reporter has repeatedly called the company's official website and the company's annual report contact number.
Interestingly, although Rongta Hezhong's profits are not high and unstable, the actual controller of the company does not forget to continue to pay dividends to himself. The company's dividend in 2023 before the "submission of the table" will reach 35 million yuan, a significant increase from 2022 (5 million), and it will also exceed the scale of net profit in the same period.
The price increase and the volume shrinked
Net profit in 2023 decreased by 26.29%
Founded in December 2010, Rongta Hezhong is a global supplier of Automatic Identification Data Collection (AIDC) devices and solutions, engaged in the design, R&D, manufacturing and marketing of printing equipment, scales, POS terminals and PDAs. The main products are shown in the figure below:
The reporter observed that in the past three years, Rongta Hezhong's business performance was not stable.
According to the prospectus, from 2021 to 2023, Rongta Hezhong's revenue will be 380 million yuan, 393 million yuan and 349 million yuan respectively, and the gross profit will be 89.214 million yuan, 89.861 million yuan and 85.464 million yuan respectively. In the same period, the net profit was 29.276 million yuan, 37.447 million yuan and 27.603 million yuan respectively.
It is worth noting that in 2023, Rongta Hezhong's revenue will decrease by 11.2% year-on-year, and its net profit will decrease by 26.29% year-on-year. What happened?
It turned out that in the past two years, Rongta Hezhong has raised the price of its products, resulting in a significant decline in the sales of the company's products in 2023.
According to the prospectus, Rongta Hezhong's main source of income is printing equipment. From 2021 to 2023, the company's printing equipment revenue will be 284 million yuan, 304 million yuan and 261 million yuan respectively, accounting for 74.7%, 77.4% and 74.9% of the total revenue.
In 2023, the average selling price of the company's printing equipment will be 210 yuan/piece, an increase of 12.3% from the previous year, while the sales volume will decrease from 1.631 million pieces in 2022 to 1.241 million pieces in 2023, a decrease of 23.9%.
In addition, the average selling price of the company's weighing products increased by 16.7% in 2023, and although the price of POS terminals and PDAs did not increase in 2023, the price of this product has increased by 27.2% in 2022.
Under the "price increase" strategy, the sales volume of all Rongta Hezhong products plummeted from 3.139 million pieces in 2022 to 2.147 million pieces in 2023, an overall decrease of 31.6%.
However, the "price increase" does not seem to be the original intention of Rongda Hezhong, because the cost of the company's products is also rising. Taking printing equipment as an example, based on the simple calculation of cost of sales ÷ sales volume, the unit sales cost of printing equipment will increase from 144.48 yuan/piece in 2022 to 165.64 yuan/piece in 2023, an increase of 14.65%, which is basically consistent with the average selling price increase.
Rongta Hezhong said in the prospectus that "we have been committed to developing competitive advantages in terms of production capacity", but the reality is obviously not a small gap.
Due to the decline in sales, the company's capacity utilization rate has plummeted in the past two years. From 2021 to 2023, the capacity utilization rate of printing equipment will be 88.8%, 49.6% and 43.5%, the capacity utilization rate of weighing instruments will be 76.4%, 52.6% and 58.7%, and the capacity utilization rate of POS terminal and PDA will be 72.0%, 51.3% and 34.6% respectively.
That is to say, by 2023, half of the production capacity of Rongta Hezhong's product lines will be idle.
Large dividends before "handing over the table".
The two brothers took 40 million in three years
Rongta Hezhong's revenue scale is not high, and its valuation level is also low. Since the company received the last round of financing from Xiamen Rongxin in October 2022, its valuation is only 676 million yuan to 718 million yuan.
In the past, Rongta Hezhong has received multiple rounds of financing, but the investor camp is not strong. In 2021, the company received 6 million yuan in financing from Guangyun Technology (688365.SH), an e-commerce SaaS company, and other investors are mainly related parties and other third parties of Rongta Hezhong's controlling shareholder.
It is worth mentioning that Guangyun Technology is not only an investor of Rongta Hezhong, but also one of its largest customers. From 2021 to 2023, Guangyun Technology has ranked among the top five customers of Rongta Technology for three consecutive years. In view of this special relationship, it is worth paying attention to whether the transaction between the two is objective and reasonable.
In addition, Rongta Hezhong is a family business, and the equity is firmly controlled by the Xu Kaiming brothers.
Rongta Hezhong was founded by two brothers, Xu Kaiming and Xu Kaihe, the former is an executive director, chairman of the board of directors, president and general manager of the company, 42 years old, and the latter is an executive director and senior vice president of the company, 41 years old.
The two brothers are the controlling shareholders of Rongta Hezhong, and through Xiamen Rongxin and other companies and direct shareholdings, the two brothers currently directly and indirectly hold 93.05% of the company's shares, and the company's equity is highly concentrated.
Although Rongta Hezhong's profits are not high and unstable, the two brothers have not forgotten to continue to pay dividends to themselves in the past three years.
From 2021 to 2023, Rongta Hezhong declared dividends of 1.2 million yuan, 5 million yuan and 35 million yuan to shareholders respectively, increasing year after year. Among them, the amount of dividends paid in 2023 before the "submission" also exceeded the scale of net profit in the same period. In January 2024, Rongta Hezhong also declared and paid a dividend of RMB1.5 million to shareholders.
According to the shareholding ratio, in the past three years, Xu Kaiming and the two brothers have paid dividends of more than 40 million yuan.
Behind the high dividend rate, Rongta Hezhong does not have enough cash on hand. At the end of March this year, the company's cash and cash equivalents were 29.196 million yuan, total current assets were 190 million yuan, and total current liabilities were 144 million yuan.
If it can be successfully listed in Hong Kong this time, Rongta Hezhong is expected to usher in a "blood transfusion". For the purpose of the proceeds from this listing, Rongta Hezhong intends to use it for R&D activities to expand its product portfolio and improve R&D capabilities, enhance production efficiency and efficiency, expand its sales network and international territory, and use it for working capital and general corporate purposes.
(Image source in the article: prospectus)