Listing goes one step further.
Recently, the China Securities Regulatory Commission (CSRC) issued a reply on approving the registration of the initial public offering of shares of Shenzhen Greenlink Technology Co., Ltd. (hereinafter referred to as "Greenlink Technology" or "Greenlink"). At present, the registration result of Greenlink Technology has been changed to "registration effective".
According to public information, the prospectus of Greenlink Technology was accepted by the Shenzhen Stock Exchange in June 2022, and the IPO passed the listing committee meeting in January 2023. A year later, the company submitted for registration, and after disclosing three registration drafts one after another, Greenlink Technology finally got the key to open the door to listing.
First, the scale effect is empowered, and the income is stable and improving
According to the prospectus, Greenlink Technology was established in 2012 and is mainly engaged in the research and development, design, production and sales of 3C consumer electronic products, and is committed to providing users with a full range of digital solutions.
In fact, Greenlink Technology was born out of the single domestic wire model, quality control mixed supply and demand scissors, the founder Zhang Qingsen in a keen insight into the market pain points, the first in the domestic launch of different lengths and specifications of data cables, so as to quickly start the "UGREEN" brand reputation in the market.
After that, Greenlink Technology anchored the vertical category of IT digital accessories, and continued to expand its business boundaries with digital wires as the origin. Today's Greenlink Technology has formed a diversified 3C digital ecology, and its product matrix covers five series: transmission, audio and video, charging, mobile peripherals, and storage.
The growing scale of products has driven the sustained and steady growth of Greenlink Technology's revenue scale. The company's operating income increased by 11.40% from $3.446 billion in 2021 to $3.839 billion in 2022, and further increased by 25.09% to $4.803 billion in 2023, with a three-year compound annual growth rate of 18.05%.
Among them, transmission products are the largest product category in the business scale of Greenlink Technology, and the most significant contribution to the company's revenue. During the reporting period, the sales revenue of such products was 1.235 billion yuan, 1.305 billion yuan and 1.445 billion yuan respectively, accounting for 35.93%, 34.05% and 30.09% of the main business income respectively.
At the same time, the charging products represented by charging cables, chargers and mobile power supplies achieved revenues of 788 million yuan, 981 million yuan and 1.557 billion yuan respectively, accounting for 22.91% of Greenlink Technology's main business income from 22.91% in 2021 to 32.43% in 2023, and becoming the company's most growing product category with a compound annual growth rate of 40.60%.
However, it should be noted that the revenue changes and cash flow situation of Greenlink Technology are very different. In the case of steady growth in operating income for two consecutive years, the company's net cash flow from operating activities fell to 173 million yuan in 2023, a year-on-year decrease of 61.82%, after soaring by 200.23% to 454 million yuan in 2022.
Second, high operating costs squeeze profit margins
The reason why Greenlink Technology has been able to emerge in a short period of time is that in the context of other brands still focusing on offline sales channels, the company has already seen the traffic potential of Internet e-commerce, shifted its sales focus to online channels, and gradually developed its offline distribution network while conducting online sales on domestic mainstream e-commerce platforms.
At present, Greenlink Technology has entered mainstream online e-commerce platforms at home and abroad such as Amazon, JD.com, Tmall, AliExpress, Lazada, Shopee and other mainstream online e-commerce platforms at home and abroad to carry out sales. However, while expanding sales channels with the help of third-party platforms, Greenlink also needs to bear certain platform service fees, including sales commissions, service fees, storage fees, etc.
In 2021, 2022 and 2023, Greenlink's revenue from online e-commerce platforms will be 2.687 billion yuan, 2.912 billion yuan and 3.590 billion yuan respectively, accounting for 78.14%, 75.98% and 74.77% of the main business income, respectively, which is still the company's main source of income.
With the continuous growth of sales revenue, the platform service fee of Greenlink Technology has also increased. The platform service fees paid by the company were 234 million yuan, 228 million yuan and 329 million yuan, respectively. In addition, the company's platform, media and other marketing and promotion expenses were 208 million yuan, 238 million yuan and 362 million yuan respectively.
During the same period of the reporting period, the sales expenses of Greenlink Technology were 583 million yuan, 666 million yuan and 912 million yuan respectively, and the sales expense rates reached 16.91%, 17.33% and 18.99% respectively, which were much higher than the average of 9.15%, 9.74% and 10.95% in the same industry, of which platform service fees and promotion fees accounted for more than 70% of the total sales expenses.
Not only that, but the additional courier costs of online sales are also a significant expense. The logistics costs of Greenlink Technology in the reporting period were 437 million yuan, 428 million yuan and 520 million yuan respectively, of which the express delivery and freight insurance costs were as high as 393 million yuan, 388 million yuan and 476 million yuan, accounting for a high proportion of the main business costs and continuing to rise
The high operating costs have undoubtedly squeezed the profitability of Greenlink Technology. During the reporting period, the company's net profit was 305 million yuan, 330 million yuan and 394 million yuan respectively, and the net profit after deducting non-profits was 276 million yuan, 302 million yuan and 367 million yuan respectively.
Third, the strength of research and development is doubtful, and the production relies on outsourcing
In the official webpage of Greenlink Technology, it positions itself as a national high-tech enterprise integrating R&D, design, production and sales. The company has also repeatedly emphasized in the prospectus the importance of independent ID design, structural design, functional design and software research and development to product innovation.
In 2021, 2022 and 2023, the sales amount of Greenlink Technology's self-developed products will be 3.115 billion yuan, 3.465 billion yuan and 4.412 billion yuan respectively, accounting for 90.60%, 90.41% and 91.89% of the main business income, respectively, all of which will remain above 90% and maintain a stable growth trend.
During the reporting period, Greenlink's R&D expenses increased year by year, from 157 million yuan in 2021 to 216 million yuan in 2023, with a compound annual growth rate of 17.41%. The company's cumulative R&D investment from 2021 to 2023 is about 556 million yuan, accounting for 4.60% of the cumulative operating income.
However, while the R&D expenses are far less than the sales expenses, the R&D expense rate of Greenlink Technology is also "lagging behind" among comparable companies in the same industry. Specifically, the R&D expense ratio of Greenlink is 4.54%, 4.78% and 4.50%, which is lower than the average level of 5.06%, 5.91% and 7.13% in the same industry, and the gap is getting wider and wider.
Greenlink Technology explained in the prospectus that the main reason for this situation is that the company's revenue growth rate during the reporting period was relatively fast, resulting in its increased R&D investment during the reporting period, but the R&D expense ratio was still lower than the average of comparable listed companies.
As of the signing date of the latest prospectus, Greenlink Technology has more than 800 domestic patents and more than 700 overseas patents, but only 17 invention patents and 1,200 design patents. In other words, the R&D achievements that have been implemented by Greenlink are not technically sufficient, so they are questioned by the outside world whether they can match the name of "science and technology".
In addition, according to the prospectus, the industrial chain of Greenlink Technology is not completely independent, the company only conducts independent research and development, and the production process adopts the mode of outsourcing production and independent production. During the reporting period, the number of products from outsourcing accounted for 78.28%, 79.33% and 78.22%.
In the view of Greenlink Technology, this kind of production model can make full use of the mature and rich 3C consumer electronics processing resources in the Pearl River Delta region, and can also enable the company to focus more on the original design of products, supply chain management and sales channel development and maintenance and other higher value-added links.
Greenlink Technology added that the company's independent production is mainly undertaken by two subsidiaries, Haiying Zhilian and Zhize Technology, however, it does not hand over a certain product category to the production subsidiary, but integrates it into the supplier management system in the same way as the outsourcing manufacturer, and conducts market-oriented assessment and management of the product quality and supply price of the production subsidiary.
Fourth, the left hand raised a high amount of funds, and the right hand paid a large amount of dividends
In this sprint listing, Greenlink Technology plans to raise about 1.504 billion yuan, of which 551 million yuan will be used for product research and development and industrialization construction projects, 110 million yuan for intelligent warehousing and logistics construction projects, 392 million yuan for headquarters operation center and brand building projects, and another 450 million yuan for supplementing working capital.
However, Bedo Finance found that Greenlink Technology, which is eager to go public and raise funds, is actually not short of money. Tianyancha information shows that Hillhouse Venture Capital became its shareholder in May 2021 by transferring 5.56% of the shares held by Zhang Qingsen and Chen Junling, and the valuation of Greenlink Technology at that time was about 3.597 billion yuan.
In June of the following year, Hillhouse Venture Capital subscribed for about 11,113,400 new shares of Greenlink Technology at a price of 250 million yuan, in addition, Shenzhen Shiheng, Yuanda Fangluo, Nut Nuclear Power and other investors also participated in the strategic financing, with a total transaction amount of 300 million yuan.
As of the signing date of the latest prospectus, Zhang Qingsen, founder and chairman of Greenlink Technology, is the company's largest shareholder, controlling shareholder and actual controller, directly holding 50.3019% of the shares, and Chen Junling, vice chairman of the board of directors, holds 19.2880% of the shares, and is also one of the company's natural person shareholders.
At the same time, Greenlink Consulting holds 14.2471% of the shares of Greenlink Technology, Greenlink Heshun holds 4.6865%, Heshun No. 4 holds 0.4617%, Heshun No. 3 holds 0.4294%, and Heshun No. 2 holds 0.3781%, all of which are the company's employee shareholding platforms. Hillhouse Xiheng holds 9.3740% of the shares, Shenzhen Shiheng holds 0.3333% of the shares, and Yuanda Fanglu and Nut Nuclear Power hold 0.2500% of the shares respectively.
In addition to the introduction of external capital to supplement energy, Greenlink Technology's equity incentive policy can be described as very generous. The company's cash dividends in 2021 and 2022 will be 120 million yuan and 59.7456 million yuan respectively, and the dividends are mainly for shareholders Zhang Qingsen, Chen Junling, Greenlink Consulting, Greenlink and Shun.
Previously, the prospectus disclosed that Greenlink Technology will implement cash dividends of 50 million yuan and 170 million yuan in 2019 and 2020 respectively. According to this calculation, the company has had seven dividend distributions in five years, with a total cash dividend of nearly 400 million yuan. According to the shareholding structure, most of this cash flowed into the pockets of Zhang Qingsen and Chen Junling.
In response to the Shenzhen Stock Exchange's inquiry about the necessity and reasonableness of large cash dividends, as well as the flow of funds and the ultimate use, Greenlink Technology said in the reply letter that the company's cash flow and operating performance can support cash dividends, and natural person shareholders mainly use it for the purchase of wealth management and insurance products, the purchase of real estate, daily consumption and other activities.
According to the "Opinions on Strictly Controlling the Access to Issuance and Listing and Improving the Quality of Listed Companies from the Source (Trial)" released on March 15, we will pay close attention to whether the enterprises to be listed have pre-listing surprise "clearance" dividends, etc., strictly prevent and strictly investigate, and implement negative list management.
The "National Nine Articles" also make it clear that the continuous supervision of listed companies is strictly enforced. Strengthen information disclosure and corporate governance supervision, comprehensively improve the system of shareholding reduction rules, strengthen the supervision of cash dividends of listed companies, and promote listed companies to enhance their investment value.
V. Conclusion
Greenlink Technology revealed in the prospectus that the company is expected to achieve operating income of 1.286 billion yuan in the first quarter of 2024, a year-on-year increase of 27.17%, a net profit of 105 million yuan, a year-on-year increase of 13.12%, and a net profit of 101 million yuan, a year-on-year increase of 17.11%.
In terms of future performance development trend alone, Greenlink Technology, which is in the leading position in the industry, can continue to drive efficiency growth by virtue of its scale advantage. However, in the wave of "involution" of science and technology, if enterprises cannot ensure continuous R&D innovation and product iteration, customers may gradually lose due to the lack of vitality of the brand.
For Greenlink Technology, the successful listing is not the result, but a new beginning for it to enter the spotlight of the capital market. What awaits it on the road to the future is not only the accumulation of word-of-mouth from the consumer side, but also the long-term investigation from investors in the secondary market.