"Electric Eel Finance" article / Li Ruifeng
On June 27, the IPO of Wuhan Honghai Technology Co., Ltd. (hereinafter referred to as Honghai Technology) on the Beijing Stock Exchange resumed its listing review process. According to the prospectus, Honghai Technology's main business is the research and development, design, manufacturing and sales of household appliance accessories such as air conditioning structural parts, heat exchangers, and display structural parts.
When reading the listing information provided by the company, "Electric Eel Finance" noticed that in this IPO, Honghai Technology plans to use 30 million yuan to raise funds to supplement liquidity, and the company will pay a cash dividend of 16 million yuan in 2022. The company's share of monetary funds has been declining. It is worth noting that the capacity utilization rate of Honghai Technology is not high, how will its new production capacity be digested in the future? It's worth paying attention to. Honghai Technology has only one invention patent in 9 years, and the gross profit margin of major customers has declined. Honghai Technology has only one invention patent in 9 years, and the company's gross profit margin of sales to major customers is declining.
The cash dividend is 16 million yuan, and another 30 million yuan will be raised to make up the flow
In this IPO, Honghai Technology plans to raise 188 million yuan, of which 143 million yuan will be used for the construction project of heat exchanger and CNC sheet metal intelligent manufacturing base, 15 million yuan will be used for the construction project of household power appliance accessories R&D center, and 30 million yuan will be used to supplement working capital.
It can be seen that Honghai Technology will use 30 million yuan of raised funds to supplement liquidity, and in 2022, the company will pay a cash dividend of 16 million yuan. As of the signing date of the latest prospectus, Zhou Hong directly held 51,852,875 shares of the company, accounting for 51.85% of the company's total share capital; Zhou Ziyi directly holds 18,265,625 shares of the company, accounting for 18.27% of the company's total share capital, and Zhou Hong and Zhou Ziyi hold a total of 70.12% of the company's shares. Zhou Ziyi is the daughter of Zhou Hong, and the actual controllers of the company are Zhou Hong and Zhou Ziyi.
It is worth noting that in recent years, Honghai Technology's monetary funds have been decreasing. From 2020 to 2022 and from January to June 2023 (hereinafter referred to as the reporting period), the balance of monetary funds of Honghai Technology was 33.2633 million yuan, 12.1536 million yuan, 12.6566 million yuan and 12.1951 million yuan respectively, accounting for 19.67%, 9.58%, 8.03% and 6.08% of current assets respectively.
In the case of decreasing monetary funds, the salaries of Honghai Technology's executives are not high. From January to June 2022 and 2023, the remuneration of Zhou Hong, chairman and general manager of the company, will be 297,400 yuan and 129,100 yuan; During the same period, the remuneration of Jiang Yan, the company's director and deputy general manager, was 221,900 yuan and 102,200 yuan; During the same period, the remuneration of the company's director Wu Suqing was 257,100 yuan and 124,100 yuan.
During the reporting period, the remuneration of directors, supervisors and senior executives of Honghai Technology was 801,200 yuan, 908,900 yuan, 1,344,100 yuan and 656,500 yuan respectively, accounting for 2.94%, 3.15%, 4.42% and 1.89% of the total profit of the current period respectively.
The capacity utilization rate is not high, how to digest the new capacity?
According to the prospectus, in this IPO, Honghai Technology plans to use 143 million yuan for heat exchangers and CNC sheet metal manufacturing base construction projects. However, it is worth noting that the company's capacity utilization is not high.
During the reporting period, the capacity utilization rate of Honghai Technology's air-conditioning structural parts was 52.72%, 94.53%, 98.69% and 86.62%, respectively, while the capacity utilization rate of the company's display structural parts was 74.31%, 53.31%, 45.29% and 58.39% respectively during the same period.
From January to June 2022 and 2023, the capacity utilization rate of metal structural parts of home appliances in Thailand Guanhong, a subsidiary of Honghai Technology, was 15.61% and 36.46%, respectively; During the same period, the capacity utilization rate of injection molded structural parts of home appliances in Thailand was 16.12% and 38.85% respectively.
During the reporting period, the capacity utilization rate of Honghai Technology was 33.82% and 82.65% respectively.
It can be seen that the capacity utilization rate of Honghai Technology is not high, how to digest the company's newly raised capacity? It's worth paying attention to. In addition, it is worth noting that the proportion of inventory goods in the company's inventory is relatively high, which was 32.16%, 38.35%, 41.65% and 36.81% respectively during the reporting period.
During the reporting period, the book value of Honghai Technology's inventory was 7.6777 million yuan, 7.4595 million yuan, 7.4264 million yuan and 10.2614 million yuan respectively, accounting for 4.54%, 5.88%, 4.71% and 5.12% of the current assets at the end of each period. The Company's inventory is mainly composed of raw materials, work-in-progress and commodities in stock. At the end of the reporting period, the company's total book balance of raw materials, products in process and inventory commodities accounted for 86.33%, 88.57%, 90.77% and 89.87% of the inventory book balance, respectively.
Only one invention patent in 9 years The gross profit margin for large customers has declined
As of the signing date of the latest prospectus, Honghai Technology has a total of 69 patents, including 7 invention patents and 62 utility model patents.
However, it is worth noting that Honghai Technology only applied for one invention patent after 2015, which was an invention patent for the protective panel of an air conditioner exterior unit applied for in August 2021.
However, Honghai Technology's R&D expense ratio is significantly higher than that of comparable companies in the same industry. During the reporting period, the R&D expense ratios of Honghai Technology were 7.2%, 9.22%, 9.18% and 5.32%, respectively, while the average of comparable companies in the same period was 4.8%, 4.13%, 4.08% and 4.07%, respectively.
During the reporting period, the sales revenue of the top five customers accounted for 95.83%, 94.12%, 95.28% and 94.01% of the operating income respectively. Therefore, the vast majority of Honghai Technology's revenue comes from the top five customers, and there are certain risks in the future.
It is worth noting that Midea Group has always occupied the position of the largest customer of Honghai Technology during the reporting period. During the reporting period, Honghai Technology mainly sold products to Midea Group for air conditioning structural parts, heat exchangers, the company's operating income from Midea Group was 55.0644 million yuan, 78.7766 million yuan, 126.9 million yuan and 91.7014 million yuan respectively, accounting for 39.67%, 41.81%, 50.16% and 48.74% of the current operating income respectively. It can be seen that during the reporting period, the company's sales to Midea have been growing until it exceeded 50% in 2022.
Honghai Technology is relatively passive when cooperating with large customers, and even if the profit margin of the product is squeezed by downstream large customers in the future, it is difficult for the company to come up with effective countermeasures. In fact, during the reporting period, Honghai Technology's gross profit margin was in a fluctuating situation, reaching 33.00%, 30.35%, 32.32% and 34.50% respectively, and the company also admitted that it had the risk of declining gross profit margin in the future due to the dual distribution model.
It is worth mentioning that during the reporting period, the gross profit margin of air conditioning structural parts, one of Honghai Technology's main products, was 48.64%, 46.42%, 47.46% and 38.84% respectively, and the gross profit margin in the first half of 2023 decreased by nearly 9 percentage points, while air conditioning structural parts were basically sold to Midea Group and Haier Group.