Shenzhen Business Daily Reading Client Reporter Ning Kejian
The Shenzhen Stock Exchange disclosed on May 11 that the Shenzhen Stock Exchange decided to terminate the review of its initial public offering and listing on the main board due to the withdrawal of the application for issuance and listing by Shenzhen Feisu Innovation Technology Co., Ltd. and the sponsor China Merchants Securities Co., Ltd.
According to the data, Feisu Innovation focuses on the R&D, design and sales of core equipment and general accessories in the field of network communication, providing one-stop supply of communication equipment, general accessories and system solutions for global customers.
The production of the company's products is mainly completed by outsourcing manufacturers, and the supplier list includes comparable companies in the same industry listed by the company, such as Accelink, T.Y.C., etc.
99% of revenue is generated in overseas markets, mainly in the United States
It is worth noting that the rapid innovation of product supply for global customers can be said to account for the absolute value of total revenue. In the prospectus, Rapid Innovation first hints at the risks associated with the overseas business environment.
In 2020, 2021, 2022 and from January to June 2023, the company's overseas sales accounted for 98.89%, 99.15%, 99.29% and 99.27% of the company's main business revenue in the current period, respectively. The company's overseas sales revenue accounts for a relatively high proportion and is the main source of the company's operating income and profit, which has a great impact on the company's operating performance.
As a result, the company will face more risks arising from changes in the overseas operating environment, which may lead to fluctuations in operating performance or even a decline of 50% or more.
Such risks include, but are not limited to: political turmoil, war, unrest, hostilities and changes in China policy in the countries and regions in which we operate; the adverse impact of overseas management and operation caused by the laws and policies of the countries and regions where the business is located, social values and cultural differences, and economic downturn; The access standards for network communication products in the countries and regions where the business is located are different. In order to meet the market access standards of different countries, the company needs to invest in professional personnel and improve supply chain management capabilities to obtain the corresponding quality system certification and product registration certificate. In the future, if there is a major adjustment or change in the access standards of these products, and the company is unable to adjust and adapt in time and obtain the relevant access qualifications, it may lead to a decline in sales in the region, which will have an adverse impact on the company's operating performance.
In addition, Feisu Innovation also mentioned that in 2020, 2021, 2022 and from January to June 2023, the company's sales revenue mainly came from overseas markets, of which the United States was the main source of income, and sales accounted for 45.77%, 43.58%, 46.25% and 46.38% of the company's main business income respectively. Since 2018, the U.S. government has successively issued several tariff measures on Chinese goods, and the list of relevant tariffs involves network communication products, which may hinder the operation of upstream manufacturers and downstream export brands in China's network communication industry to a certain extent.
The exchange rate between the settlement currency and RMB may fluctuate with the changes in the domestic and foreign political and economic environment, which exposes the company to the risk of exchange rate changes. During the reporting period, the company's exchange losses were 28.0138 million yuan, 39.5187 million yuan, -28.3686 million yuan and -29.5811 million yuan respectively.
The core products have a low share of the global market
During the reporting period, the main business income of Feisu Innovation mainly came from optical modules and high-speed cables, network equipment, optical fiber patch cords and pigtails, and the sales revenue of the above three categories of products accounted for more than 80% of the main business income in each year of the reporting period.
According to the prospectus, the global optical module market size in 2022 will be 11 billion US dollars, and the company's main business income, optical module and high-speed cable revenue will account for about 50%, and the company's market share will be about 1.24% if the company's optical module-related product revenue accounts for the global optical module market size.
Feisu Innovation said that because the global network communication equipment industry involves many subdivisions, including many representative and influential industry leaders such as Finisar, the company's market share is relatively low.
The products mainly rely on the outsourcing production mode
It is understood that the rapid innovation of the product production mode mainly relies on outsourcing production. That is, the cooperative outsourcing manufacturers will produce according to the technical standards, structural performance, parameter indicators and appearance styles set by the company.
According to the prospectus, during the reporting period, the manufacturers that have outsourced production cooperation with the company mainly include Accelink, Ruijie Network, Taichenguang, Clear, Zhaolong Interconnection, Centec Communications, Zhibang Technology, Finisar, Supermicro, Mingpu Optomagnetic and many other high-quality suppliers at home and abroad.
However, Feisu Innovation said that the capacity, quality and delivery time of the network communication products sold by the company are limited to a certain extent by factors such as the production capacity, product technology and management level of the outsourcing manufacturers, and some products with industry-leading technology design may not be able to find qualified suppliers for mass production in the short term.
At the same time, if the subcontractor stops work, suspends production, or the cooperation agreement signed with the company is terminated early and cannot be resolved in a timely manner, and the company fails to take timely and effective measures to remedy the situation, or there is a delay in the supply of products, the company's operating results and financial condition may be adversely affected.
In addition, Feisu Innovation also disclosed another risk point, that is, if the outsourcing manufacturer fails to deliver the products in accordance with the specifications, parameters, quality, quantity, cost and time agreed with the company, there may be product sales delays, returns and exchanges due to quality problems, etc., and the company's brand reputation, customer relationship and operating performance may be affected. Therefore, in the process of operation and management, the company has certain risks of outsourcing production.
It is worth noting that the outsourcing production model is still the focus of the two rounds of review inquiry letters of the Shenzhen Stock Exchange, including the company's core competitiveness and whether it has a significant dependence on major outsourcing manufacturers.
In its reply to the inquiry, Feisu Innovation said that during the reporting period, in the category of optical modules and high-speed cable products, the company did not have a single supplier that accounted for more than 50% of the supply amount. The purchase price and account period of the company's optical modules and high-speed cable products are commercially reasonable.
During the declaration period, a fundraising project will be cancelled
According to the IPO fundraising plan, Feisu Innovation plans to raise 1.354 billion yuan for three construction projects such as network communication equipment intelligent industrial park and supplementary working capital.
According to the "Daily Economic News", the reporter noticed that when Feisu Innovation carried out the pre-disclosure of the prospectus materials in July 2022, the original amount of funds to be raised was 1.394 billion yuan, which was used for 5 fund-raising projects. After updating the prospectus materials, the company plans to invest 40.0315 million yuan in the "Shenzhen Storage Center Upgrade and Construction Project" to cancel.
In order to meet the needs of the company's capacity expansion and rapid business development, the company will take the network communication equipment intelligent industrial park construction project (Wuhan Caidian warehouse) as the global core warehouse in the future to receive, process and transfer inventory products; Due to the high cost of use of the Shenzhen warehousing center, the company will not renew the lease. As a result, the "Shenzhen Warehousing Center Upgrade and Construction Project" was cancelled.
According to the prospectus, the above-mentioned network communication equipment intelligent industrial park construction project is the largest IPO investment project of Feisu Innovation, implemented by Wuhan Yuxuan Feisu Communication Technology Co., Ltd., a wholly-owned subsidiary of the company, with a total investment of 639 million yuan, and plans to invest 574 million yuan to raise funds, including the purchase of 11 industrial plants with a total construction area of 40,800 square meters.
According to the "Announcement on the Filing of the Construction Project of Network Communication Equipment Intelligent Industrial Park" disclosed by the People's Government of Caidian District, Wuhan City in March 2021, the total investment of the project is 503 million yuan, and the planned construction area of the project is 29,700 square meters. This is different from the information disclosed in the prospectus.
In this regard, Feisu Innovation replied that the construction project of the network communication equipment intelligent industrial park has been filed twice, the first record was carried out in 2021, and after the new plant was purchased in 2022, the investment record was changed, and the total investment of the record project was changed to 639 million yuan, and the record number was not changed;