Nearly 9 percent of Dolly Technology's R&D personnel have lower education than bachelor's degree, and their goodwill is "short-lived"

Chuzhou Dolly Automotive Technology Co., Ltd. (stock abbreviation: Dolly Technology; Stock Code:001311. SZ) has disclosed its 2023 annual report. According to the annual report, nearly 9 percent of the company's R&D personnel have less education than bachelor's degree, and the goodwill formed by the purchased subsidiary is fully provided for goodwill impairment four months after the acquisition. In addition, there are also doubts about the disclosure of many places.

Dolly Technology is one of the earliest enterprises engaged in and continues to focus on the production of automotive stamping parts in China, the company's main products are automotive stamping parts, integrated die-casting parts and stamping dies.

From 2020 to 2022, the operating income of Dolly Technology will be 1.684 billion yuan, 2.772 billion yuan, and 3.355 billion yuan respectively, and the attributable net profit will be 156 million yuan, 386 million yuan, and 446 million yuan respectively, with a rapid growth rate of revenue and net profit.

In 2023, the performance growth rate of Duoli Technology will slow down, and the company will achieve operating income of 3.913 billion yuan, a year-on-year increase of 16.62%, and attributable net profit of 497 million yuan, a year-on-year increase of 11.05%.

Source: Photo.com

Nearly 9 percent of R&D personnel have lower education than bachelor's degree

In its 2023 annual report, Dolly Technology revealed that the company has established long-term and stable cooperative relations with vehicle manufacturers such as SAIC Volkswagen Co., Ltd., SAIC General Motors Co., Ltd., and SAIC Maxus Automobile Co., Ltd. In addition to vehicle manufacturers, Dolly Technology is also a subsidiary of Xinpeng Co., Ltd. (002328. SZ), Shanghai Tongzhou Auto Parts Co., Ltd., Shanghai Anlaide Auto Parts Co., Ltd., Shanghai Huizhong Automobile Manufacturing Co., Ltd. and other auto parts manufacturers. In addition, Dolly Technology timely grasps the opportunity of the rapid development of new energy vehicles in the world, and actively expands the layout of new energy vehicle customers, and has now become a major player of Tesla (TSLA.O), Li Auto (LI.O), NIO (NIO.N), Leapmotor (09863. HK) and BYD (002594.SZ) and other well-known new energy vehicle manufacturers qualified suppliers, with strong market competitiveness.

Dolly Technology previously said in the prospectus that with the increasingly fierce competition in the automobile market, the automotive research and development cycle is gradually shortened, and the speed of new product development is accelerated, vehicle manufacturers often require auto parts suppliers to have independent product research and development and mold development capabilities, and even have the ability to develop synchronously, which requires auto parts companies to establish a strong technical research and development team, continue to increase investment in research and development, and maintain strong new technology application capabilities and rapid new product development capabilities.

However, the technical level and R&D strength of Dolly Technology may not match its self-described "strong market competitiveness".

From 2020 to 2023, the proportions of Dolly Technology's R&D investment in operating income will be 2.67%, 3.25%, 3.70%, and 3.31% respectively, while the average proportion of R&D investment in the auto parts industry to operating income will be 4.91%, 5.11%, 5.57%, and 5.22% respectively according to Shenwan's secondary industry classification.

In addition, by the end of 2023, there will be 160 R&D personnel in Dolly Technology, with the highest education being only a bachelor's degree, and only 19 undergraduates, accounting for about 12%, and the rest of the R&D personnel with college education and below, accounting for 88%.

"Short-lived" goodwill

In April 2023, Dolly Technology signed the "Equity Transfer Agreement" with Wang Mei, a natural person, to acquire 100% of the equity of Anhui Yaomei Precision Technology Co., Ltd. (hereinafter referred to as Anhui Yaomei) held by Wang Mei for 14.5 million yuan. In August 2023, Dolly Technology completed the asset handover and dispatched a management team to confirm that it has substantial control of Anhui Yaomei. In order to facilitate accounting, Dolly Technology has determined August 31, 2023 as the purchase date, and Anhui Yaomei will be included in the scope of consolidated financial statements from September 1, 2023.

It is worth noting that Dolly Technology formed goodwill of 5.1437 million yuan due to the acquisition of Anhui Yaomei, accounting for 54.98% of the fair value of Anhui Yaomei's identifiable net assets, but at the end of 2023, only 4 months have passed from the date of purchase, Dolly Technology will fully accrue goodwill impairment losses.

In addition, due to the above-mentioned merger, the book of Dolly Technology added 49,050 yuan (fair value on the date of purchase), and the amortization period of the patented technology is 10 years, considering that Anhui Yaomei has been included in the scope of Dolly Technology's consolidated financial statements since September 1, 2023, theoretically the amortization expense of the patent accrued for 4 months in 2023 is 1,635 yuan, but the amortization expense of the above patent accrued by the "Intangible Assets" Division of Dolly Technology's 2023 annual report is 4,905 yuan. That is, the amortization expense for 12 months has actually been accrued.

In addition to the contradictions in the disclosure of information on patent amortization, the disclosure of other business costs and intermediary service fees of Dolly Technology is also confusing.

According to the 2023 annual report, the other business costs of Dolly Technology in 2023 will be 3.0578 million yuan, but according to the 2023 semi-annual report, the other business costs incurred by Dolly Technology from January to June 2023 will be 3.0702 million yuan, which has exceeded the above amount.

Similarly, there is an intermediary service fee. According to the 2023 annual report, the intermediary service fee incurred by Dolly Technology in 2023 is 4.4889 million yuan, but according to the 2023 semi-annual report, the intermediary service fee incurred by Dolly Technology from January to June 2023 has reached 7.6643 million yuan.

The sponsor was fined for failing to be diligent and conscientious, and the stock price of Dolly Technology broke for a long time

In fact, in addition to the doubts about the service fees of intermediaries disclosed, there are other matters of concern between Dolly Technology and intermediaries.

In November 2023, Guotai Junan, as the IPO sponsor of Dolly Technology, received a warning letter from the Anhui Securities Regulatory Bureau for related sponsorship business. According to the Decision on Administrative Supervision Measures of the Anhui Supervision Bureau [2023] No. 46, Guotai Junan, Li Yi and Cai Weicheng failed to be diligent and conscientious in the process of sponsoring the initial public offering and listing of Dolly Technology, resulting in problems such as insufficient penetrating verification procedures for the capital flow of directors, supervisors and senior executives of Dolly Technology, and the inconsistency between the verification conclusion of the capital flow and the actual situation.

It is worth noting that Dolly Technology's shares will be listed and issued in February 2023 at an issue price of 61.87 yuan per share, and will be broken in the second month of listing. Since the beginning of 2024, the share price of Dolly Technology has continued to be in a state of breakage, and as of May 6, 2024, the closing price (before the right to reset) is only 39.17 yuan per share. In addition, Dolly Technology raised 2.186 billion yuan through IPO, and the underwriting and sponsorship fees reached 131 million yuan.

In terms of the management of the raised funds, the 2023 annual report shows that during the reporting period, Dolly Technology mistakenly transferred 20 million yuan of the special account for raised funds to the general bank account of its wholly-owned subsidiary, Shanghai Daya Auto Parts Co., Ltd.; Changzhou Daya Auto Parts Co., Ltd., a wholly-owned subsidiary, mistakenly used 412,200 yuan of funds in the special account for raising funds to pay electricity bills, taxes and other payments; In the process of using the raised funds to replace the self-raised funds that had been invested in the fund-raising project in advance, Dolly Technology mistakenly replaced 32.4631 million yuan in the special account for raising funds.

The company has returned all the funds to the special account for raising funds as soon as possible after discovering the error, and there is no damage to the interests of the company and shareholders and changing the use of raised funds without authorization.