Source: Yicaixin
Author: Zhou Wensi
As early as March 29, 2022, the GEM IPO of Beijing Jiuzhou Fengshen Technology Co., Ltd. (hereinafter referred to as "Jiuzhou Fengshen") failed to pass the review because the Listing Committee deliberated that the issuer's information disclosure on the growth of export revenue and the reasonableness of raw material procurement costs was insufficient and reasonable, and the issuer's internal control system was not effectively implemented during the reporting period, which did not comply with the issuance review regulations.
After a year, Kyushu Fengshen changed its IPO to the Beijing Stock Exchange, the sponsor was replaced by China Securities Construction Investment, and the audit institution was replaced by Baker Tilly. On March 6, Kyushu Fengshen received the second round of audit inquiry letters, and the authenticity and sustainability of overseas income growth were once again concerned.
The growth of overseas income is again in the spotlight
Founded on April 10, 2003, Kyushu Fengshen is mainly engaged in the research and development, production and sales of heat dissipation devices, the company's heat dissipation products mainly include computer radiators and industrial radiators, which are widely used in PC, power electronics, cloud computing, commercial LED lighting and other industries. In addition, Kyushu Fengshen's products also include intelligent high-end chassis, intelligent high-end power supply and other computer hardware, and the company's "DeepCool" brand has a high brand influence and popularity.
According to the prospectus, from 2020 to January to June 2023 (hereinafter referred to as the "reporting period"), Kyushu Fengshen achieved operating income of 829.7551 million yuan, 799.5771 million yuan, 833.7753 million yuan and 747.0669 million yuan respectively, and the net profit attributable to the owners of the parent company after deducting non-recurring gains and losses was 95.7093 million yuan, 54.1234 million yuan, 52.9252 million yuan and 144.1948 million yuan respectively.
In 2021, Kyushu Fengshen's net profit after deducting non-attributable to the parent decreased by 41.5859 million yuan compared with 2020, a year-on-year decrease of 43.45%. The reply to the first round of inquiries disclosed that the decline in Kyushu Fengshen's profit for the year was mainly due to the decline in the gross profit margin of the company's main products chassis, radiators and power supplies, as well as foreign exchange gains and losses. In 2022, Kyushu Fengshen's revenue has increased, but its profit is still slightly declining.
Kyushu Fengshen's ability to continue to make profits is once again being tested. However, affected by the economic sanctions imposed on Russia by European and American countries and other regional countries, well-known competitors of European and American brands, such as CORSAIR and Owl, have successively reduced their chassis, power supply and radiator business in Russia, while Kyushu Fengshen has taken the opportunity to seize most of the market share in the Russian-speaking region.
In 2023, Kyushu Fengshen will achieve operating income of 1.463 billion yuan, an increase of 75.50% over 2022. Among them, the operating income of the Russian-speaking area was about 524 million yuan, an increase of 125.06% over the same period of the previous year. Regarding the sustainability of performance growth in the Russian-speaking region, Kyushu Fengshen said that the current competitive landscape in the Russian market has basically stabilized.
(Screenshot from Kyushu Fengshen's 2023 annual report)
On the contrary, Kyushu Fengshen's domestic revenue in 2023 will be about 156 million yuan, a decrease of 3.43% from the same period last year.
In this regard, in the second round of inquiry, the Beijing Stock Exchange asked Kyushu Fengshen to explain whether the company's products have intensified competition and weakened bargaining power in China, whether there is a risk of continuous decline in domestic revenue and gross profit margin, and the stability of domestic business. At the same time, the Beijing Stock Exchange also questioned the authenticity and sustainability of Kyushu Fengshen's overseas income in 2023. It is worth mentioning that one of the reasons for the rejection of Kyushu Fengshen's previous declaration of the GEM is that the disclosure of the rationality of the growth of export revenue is not sufficient and reasonable, and I don't know whether Kyushu Fengshen's reply this time can be recognized.
After the expansion, the digestion of production capacity has been repeatedly inquired
When applying for the GEM IPO last time, Kyushu Fengshen planned to raise 460 million yuan for the construction project of Huizhou Xin Quansheng Precision Technology Co., Ltd. (hereinafter referred to as "Huizhou Xin Quansheng") manufacturing base and R&D center construction project.
The reply to the inquiry at the GEM disclosed that the Kyushu Fengshen manufacturing base project added 6 million PCS of heat pipe computer radiators (number of units), 1.2 million PCS of water-cooled computer radiators, 4.2 million PCS of basic computer radiators, 5.4 million PCS of fans, 250,000 PCS of laptop radiators, 960,000 PCS of chassis, and 2.43 million PCS of industrial radiators, and the project capacity utilization rate is expected to reach 100% by 2026.
In 2022, the Huizhou factory of Kyushu Fengshen has been completed and put into operation.
According to the EIA document, Huizhou Xin Quansheng also invested in the construction of chassis and radiator production projects, mainly engaged in the production and processing of cooling fans, water-cooled radiators, chassis and other products, with an annual output of 9 million cooling fans, 720,000 water-cooled radiators, and 1.2 million chassis, which was completed in December 2020.
(Screenshot from the environmental impact report form of the chassis and radiator production project)
In this transfer to the IPO of the Beijing Stock Exchange, Kyushu Fengshen plans to raise 500 million yuan for the Malaysian factory construction project (hereinafter referred to as the "Malaysia project"), the European marketing network construction project, the intelligent upgrade of the Huizhou factory and the new production line construction project (hereinafter referred to as the "Huizhou project"), the R&D center construction project and the replenishment of working capital.
In the first round of inquiry, the Beijing Stock Exchange asked Kyushu Fengshen to explain the specific types and specific production increases of radiator products and new products involved in the expansion of the Malaysia project and the Huizhou project, and explain whether the new production capacity can be effectively digested.
According to the reply to the first round of inquiries, the Malaysian project plans to invest 162.7313 million yuan, and is expected to add 10.06 million sets of radiator production capacity, including 2 million sets of heat pipe computer radiators, 400,000 sets of water-cooled computer radiators, 1.4 million sets of basic computer radiators, 6 million sets of fans, 80,000 sets of laptop radiators, and 180,000 sets of LED light radiators; The Huizhou project is implemented by Huizhou Xin Quansheng, with a total investment of 165.5877 million yuan, and is expected to add 6 million sets of hot plate production capacity and 240,000 sets of water cooling plate production capacity.
Kyushu Fengshen said that the company's Huizhou factory has reached a high level of capacity utilization of the main radiator products, with the company's future performance of the further growth, the Huizhou factory supply capacity is expected to be unable to meet the product market demand, so the construction of the Malaysia project will alleviate the Huizhou factory is expected to have insufficient capacity.
In 2023, the output of Kyushu Fengshen CPU heat pipe radiator products will be 3,357,800 pieces, and the capacity utilization rate will be 74.74%; The output of CPU water cooling radiator products was 899,500 pieces, and the capacity utilization rate was 78.63%; The output of industrial radiator products was 479,000 pieces, and the capacity utilization rate was 49.52%; The output of chassis products was 643,000 pieces, and the capacity utilization rate was 56.21%.
(Screenshot from Kyushu Fengshen's 2023 annual report)
From this point of view, the production capacity of the Huizhou factory in Kyushu Fengshen is still in the climbing stage, so the company's capacity digestion is still worth paying attention to.
In the second round of inquiry, the Beijing Stock Exchange also asked Kyushu Fengshen to explain whether there is a risk of a decline in the capacity utilization rate of the products to be expanded in Malaysia, and at the same time analyze whether there is excessive investment or expansion of the fundraising project in combination with the market capacity and competition pattern of various products of each fundraising project.
There are discrepancies in the content of the two application materials
"There are many accounting errors" is the focus of Kyushu Fengshen's previous declaration. In this review, the Beijing Stock Exchange also required Kyushu Fengshen to explain whether there were any major differences or omissions between the disclosure documents of the previous application for GEM listing and the application materials based on factors such as customers, suppliers, product types, financial data and financial indicators.
There is an overlap in the reporting period of Kyushu Fengshen's two declarations in 2020, which indicates that there are no significant differences in the company's main customers, suppliers and product types, among which there is no difference in the disclosure of major suppliers, and there are small differences in the operating income and main business income composition of major customers in the current period.
However, there are also discrepancies in the disclosure of production and sales and raw material procurement in the application materials of Kyushu Fengshen's two IPOs.
ACCORDING TO THE GEM PROSPECTUS, IN 2020, THE OUTPUT AND SALES VOLUME OF KYUSHU FENGSHEN INDUSTRIAL RADIATOR PRODUCTS WILL BE 452,100 PCS AND 496,200 PCS, RESPECTIVELY, AND THE OUTPUT AND SALES VOLUME OF CHASSIS PRODUCTS WILL BE 607,800 PCS AND 734,300 PCS, RESPECTIVELY.
(Screenshot from GEM prospectus)
However, the IPO prospectus of the Beijing Stock Exchange disclosed that in 2020, the output and sales of Kyushu Fengshen Industrial radiator products will be 427,500 pieces and 478,500 pieces, respectively, and the output and sales volume of chassis products will be 553,100 pieces and 756,600 pieces, respectively.
(Screenshot from this declaration prospectus)
According to the GEM prospectus, in 2020, the total procurement of Kyushu Fengshen hardware, electronics, plastics, accessories, packaging materials and other raw materials was 168.0307 million yuan, 51.0207 million yuan, 33.3013 million yuan, 22.0823 million yuan, 22.5246 million yuan and 13.0601 million yuan respectively.
(Screenshot from GEM prospectus)
The procurement amounts of hardware, electronics, plastics, accessories, packaging materials and other raw materials disclosed in the prospectus were 193.7853 million yuan, 62.1235 million yuan, 31.3489 million yuan, 15.3558 million yuan, 22.9452 million yuan and 14.5455 million yuan respectively.
(Screenshot from this declaration prospectus)
There are also discrepancies in the company's electricity procurement.
The GEM prospectus disclosed that in 2020, the actual electricity consumption of Kyushu Fengshen was 6.4554 million kWh, and the electricity expenditure was 4.6833 million yuan, but the declaration prospectus disclosed that the electricity consumption of Kyushu Fengshen in that year was 6.4283 million kWh, and the electricity expenditure was 4.6526 million yuan.
(Screenshot from GEM prospectus)
(Screenshot from this declaration prospectus)
During the reporting period of this declaration, Kyushu Fengshen also had a change in accounting policies, but it did not affect the company's 2022 financial statements. In addition, Kyushu Fengshen also made a correction of accounting errors, and the reporting period of financial data adjustment is January-June 2023/June 30, 2023. In other words, the change in accounting policies and the correction of errors may not have affected Kyushu Fengshen's financial data in 2022.
According to the prospectus, the second and fifth largest customers of Kyushu Fengshen in 2022 are Beijing Jingdong Century Trading Co., Ltd. and its affiliates (hereinafter referred to as "JD Century") and ABB Ltd and its global branches (ABB Group), with sales revenue of 36.7101 million yuan and 24.1626 million yuan respectively.
(Screenshot from this declaration prospectus)
However, Kyushu Fengshen's 2022 annual report shows that its second and fifth largest customers that year were JD Century and Canada Computers Inc (Canada CC), with sales of 36.3966 million yuan and 23.4464 million yuan respectively. Among them, the sales to Jingdong Century were 313,500 yuan less than the prospectus, and the fifth largest customer and the sales amount were different from the prospectus.
(Screenshot from Kyushu Fengshen's 2022 annual report)
In addition, the disclosure of Kyushu Fengshen's two application materials for a customer's cooperation time is also incorrect. Founded in 2001, LISTAN GMBH (hereinafter referred to as "BE") focuses on the design and sales of PC radiators, cases, power supplies and other products, and its brand BE Quiet is a well-known brand in the industry. According to the reply to the first round of inquiries, Germany BE is an OEM (OEM (OEM) customer of Kyushu Fengshen, and the history of cooperation between the two sides is from 2014 to the present. According to the reply to the previous GEM inquiry, the cooperation between Kyushu Fengshen and German BE began in 2013.
We will continue to pay attention to when the reply to the second round of inquiries of Kyushu Fengshen will be updated and whether the explanation will be sufficient.