V-view Financial Report|Xinlai should receive an inquiry letter: is there any financial assistance and other circumstances?

On May 8, the Shenzhen Stock Exchange issued an inquiry letter for the 2023 annual report to Kunshan Xinlai Clean Applied Materials Co., Ltd. (hereinafter referred to as "Xinlai Materials"). Among them, the Shenzhen Stock Exchange requires the company to explain whether there is financial assistance or capital occupation.

Why did the gross profit margin of the two types of products decline sharply?

Specifically, in 2023, Xinlai Materials will achieve operating income of 2.711 billion yuan, a year-on-year increase of 3.49%, net profit attributable to shareholders of listed companies (hereinafter referred to as "net profit") of 236 million yuan, a year-on-year decrease of 31.58%, and net cash flow from operating activities of 219 million yuan, turning from negative to positive year-on-year. In terms of products, the gross profit margins of clean application materials and high-purity and ultra-high-purity application materials were 29.91% and 30.38% respectively, down 10.48 percentage points and 6.78 percentage points year-on-year.

In this regard, the Shenzhen Stock Exchange asked Xinlai to explain two matters.

The first is to explain the reasonableness of the sharp decline in the gross profit margin of the above two types of products by combining the sales field of the two types of products, the changes in downstream sub-industries and customer demand, the nature of customers, the type of products, the quantity, the average unit price, the amount and proportion, the price reduction of products, the changes in the cost of inventory and the changes in unit manufacturing costs.

The second is to analyze the reasons for the year-on-year decline in the company's net profit and the different trends in revenue and net cash flow in combination with the changes in costs and expenses.

At the end of the reporting period, the book balance of accounts receivable was 801 million yuan, of which accounts receivable aged less than one year accounted for 94.44%, and the cumulative provision for bad debts was 47.7366 million yuan, of which 8.6215 million yuan was provided for bad debts in the current period.

In this regard, the Shenzhen Stock Exchange asked Xinlai to explain two matters.

The first is to supplement the disclosure of the expected credit loss rate of accounts receivable for which provision for bad debts is made according to the aging portfolio, and the details of accounts receivable for which provision for bad debts is made on a single basis, including the name of the customer and the corresponding amount of arrears, the time of formation, the age, the background of the transaction, the specific reasons for the provision of bad debts according to a single item, and the time point of occurrence of signs of impairment.

The second is to explain the adequacy of the provision for bad debts of accounts receivable, whether there is a big difference between the accounts receivable turnover rate and the proportion of bad debts in the same industry, whether there is a large difference between the accounts receivable turnover rate and the proportion of bad debts, and whether there are accounts receivable that cannot be recovered for a long time and the aging continues to increase.

At the end of the reporting period, the balance of notes receivable was 20.1472 million yuan, an increase of 83.33% over the beginning of the period, all of which were commercial acceptance notes without impairment provisions, of which the amount not derecognized at the end of the period was 17.0925 million yuan.

In this regard, the Shenzhen Stock Exchange requires Xinlai to explain the specific situation of the debtor of the notes receivable, the name of the customer to be redeemed, the corresponding amount of the bills, and explain whether the notes receivable that have not been derecognized at the end of the period are attached to the right of recourse, whether there is a risk of being recovered, and the reasons and reasonableness of the significant increase in the notes receivable in the current period and the failure to make provision for bad debts.

Is the provision for inventory decline sufficient?

At the end of the reporting period, the book balance of Xinlai applied materials was 1.587 billion yuan, the opening balance of inventory price decline provision was 1.1532 million yuan, 1.1532 million yuan was reversed or resold in the current period, and 3.6714 million yuan was provided for inventory commodities and raw materials, of which the amount of reserve for inventory goods decreased significantly.

In this regard, the Shenzhen Stock Exchange asked Xinlai to explain two matters.

The first is to list the main contents of raw materials and inventory commodities at the end of the reporting period by category, including but not limited to category, quantity, inventory age, inventory cost and net realizable value, etc., combined with the calculation process, main parameters and selection basis, carry-over and sales after the period, orders in hand with clear delivery time and their implementation, inventory turnover rate in the same industry and the provision for inventory price decline, etc., to explain the reasons for the increase in the provision for inventory price decline in the reporting period, and whether the relevant provision for inventory price decline is sufficient.

The second is to explain the specific reasons for the reversal or resale of the provision for inventory price decline, and explain the reasonableness of the provision for inventory decline in the previous period in combination with the basis for determining the reversal and the difference between the calculation at the time of provision.

At the end of the reporting period, the balance of the construction in progress of Xinlai applied materials was 182 million yuan, an increase of 147.39% compared with the beginning of the period, mainly for the second phase of the new Wuqi plant, the semiconductor equipment integrated module parts production project, and the ultra-high clean and ultra-high purity pipeline system project.

In this regard, the Shenzhen Stock Exchange requires Xinlai to explain the main contents of the completed and unfinished projects of the above three projects, the project progress as of the date of the reply letter, the estimated completion and conversion time, whether the project is independently constructed by your company, whether the construction party is related to the company's controlling shareholder, directors, supervisors and senior executives, and whether there is any material difference between the construction progress and the expectation of the main construction party of the project.

Is it reasonable to make no provision for goodwill impairment?

At the end of the reporting period, the carrying value of the goodwill of Xinlai Materials was 120 million yuan, including 109 million yuan of goodwill formed by the acquisition of Shandong Bihai Packaging Materials Co., Ltd. (hereinafter referred to as "Shandong Bihai") and 10.9713 million yuan of goodwill from the acquisition of GNB Corporation (hereinafter referred to as "GNB") in the United States, all of which did not make provision for impairment.

In this regard, the Shenzhen Stock Exchange asked Xinlai to explain two matters.

The first is to explain whether there is a significant difference between the performance of the two companies in 2023, including revenue, gross profit margin, net profit, etc., and the predicted amount of goodwill impairment test in the previous year, and if so, explain the reasons and reasonableness, and list in detail the goodwill impairment test process, key parameters and selection basis in 2023.

The second is to list the details of the current orders in hand of Shandong Bihai and GNB by business or product type, and explain the basis for Xinlai's judgment on the realizability of the revenue and gross profit margin of the two subsidiaries, and whether it is reasonable to make no provision for goodwill impairment.

At the end of the reporting period, the book balance of other receivables of Xinlai was 14.6853 million yuan, mainly for deposits and deposits, and employee loans, of which the amount of accounts aged more than 1 year was 7.7834 million yuan. The Company's provision for bad debts for deposits and deposits, employee loans and reserves was 3% and 1% respectively, and the provision for bad debts was not made according to age.

In this regard, the Shenzhen Stock Exchange asked Xinlai to explain two matters.

The first is to list the specific content of the account aged for more than 1 year, including the amount of the payment, the age, the proportion of bad debt provision, the reason for occurring, the time, the relationship between the counterparty and the company, explain the reasons and reasonableness of the long-term uncollected payment, the adequacy of the bad debt provision, the recovery measures taken by the company and their effects, whether there is capital occupation, the transfer of benefits to related parties or other parties, and explain the solution and time limit.

The second is to explain the reasonableness of the deposit and security deposit, employee loan and reserve fund that are not accrued according to the aging of bad debts, and the basis for the selection of the proportion of bad debts.

At the end of the reporting period, the book balance of long-term receivables of Xinlai should be 19.9367 million yuan, which was sold in installments, with an age of less than 4 years, and a provision for bad debts of 3.0622 million yuan, with a provision ratio of 15.36%.

In this regard, the Shenzhen Stock Exchange requires Xinlai to explain the transaction background, customer information, transaction amount, necessity of installment collection, agreed settlement method, whether the payment is overdue, the basis for confirming the expected credit loss, and explain whether the amount of bad debt provision is sufficient and reasonable.

Is there a financial aid or tie-up of funds?

At the end of the reporting period, the book balance of other non-current assets of Xinlai applied materials was 148 million yuan, which was the prepaid purchase of engineering and equipment, an increase of 108 million yuan from the beginning of the period.

In this regard, the Shenzhen Stock Exchange requires Xinlai to list the prepaid object, amount, time of generation of the prepayment, the construction project and construction progress corresponding to the prepaid project payment, the name and use of the equipment corresponding to the purchase money, the settlement time agreed in the contract, the progress and arrangement of the performance of the transaction, explain the reasons for the inclusion of other non-current assets, and whether the prepaid object is related to more than 5% of the company's shareholders, controlling shareholders, actual controllers, directors, supervisors, senior management personnel or other relationships that may lead to skewed interests. Whether there is financial assistance or capital occupation.

In the secondary market, Xinlai applied materials closed down 3.78% at 23.93 yuan per share on May 8, down 21.36% during the year, with a total market value of 9.8 billion yuan. (Sino-Singapore Jingwei APP)