Dexin Technology struggled to go public and paid hundreds of millions of dividends: its performance fell sharply, and the turnover rate of accounts receivable plummeted

"Harbor Business Observer" Huang Yi

A few days ago, the official website of the Beijing Stock Exchange disclosed that it had accepted the initial offering application of Chengdu Dexin Digital Technology Co., Ltd. (hereinafter referred to as "Dexin Technology"), and the sponsor was GF Securities.

According to public information, on June 24, 2021, Dexin Technology was accepted by the Growth Enterprise Market (GEM) and entered the inquiry letter on July 19, 2021. After completing two rounds of responses, the Listing Committee of the GEM of the Shenzhen Stock Exchange was originally scheduled to hold the 71st meeting of 2022 on September 29, 2022 to consider the initial offering application of Dexin Technology.

On September 27, 2022, both the company and the sponsor submitted a withdrawal application to the exchange, and the reason for the withdrawal is unknown.

On the eve of the IPO, Dexin Technology also paid a dividend. On December 22, 2023, the company held the second extraordinary general meeting of shareholders in 2023, which deliberated and approved the "Proposal on < the > of the 2023 Semi-annual Profit Distribution Plan", and the company distributed a cash dividend of RMB 10.00 (tax included) to all shareholders for every 10 shares based on a total share capital of 60 million shares, with a total cash dividend of RMB 60 million. The profit distribution was completed on January 5, 2024.

Earlier, from 2017 to 2021, Dexin Technology distributed a total of 369 million yuan in cash dividends.

01

The performance in the first half of the year fell sharply, and the stability was questionable

According to the prospectus, from 2021 to 2023 (during the reporting period), Dexin Technology will achieve operating income of 263 million, 335 million, and 411 million respectively; net profit was 81.4496 million, 102 million and 128 million respectively; The net profit attributable to the owners of the parent company after deducting non-recurring gains and losses in each period was 80.8226 million, 99.7042 million and 126 million respectively; The gross profit margins were 54.74%, 53.05% and 53.20% respectively.

In the first quarter of 2024, Dexin Technology achieved operating income of 33.7508 million, a year-on-year decrease of 47.81%, and net profit and non-attributable net profit were 10.8696 million and 10.6871 million respectively, a year-on-year decrease of 40.74% and 41.26%.

In view of the financial performance in the first quarter of 2024, Dexin Technology explained in the brochure that the decline in performance in the first quarter of 2024 was mainly due to the impact of factors such as the company's end customer financial budget, bidding and investment schedule. In the first quarter of 2024, the amount of revenue from system integration projects accepted by customers and carried forward was small, which led to a certain decline in revenue in the first quarter compared with the same period in the same period. As of May 31, 2024, the company has about 149 million orders in hand, and the relevant orders in hand will be converted into the company's revenue after the project is implemented and accepted by customers, and there is no major abnormal situation in the company's production and operation.

In the first half of 2024, the company achieved an operating income of 108 million yuan and a net profit of 34.0798 million yuan, a decrease of 49.03% and 47.36% respectively from the same period of the previous year, mainly due to the company's winning bid in 2022 for the "National Terrestrial Digital TV 700 MHz Frequency Migration Project", which is a major national project that has been implemented by the state in recent years to optimize wireless spectrum resources and promote the construction of radio and television 5G. The project has been fully accepted and recognized in 2023, and no related revenue has been generated in the current period, and there has been no large-scale project acceptance comparable to the relevant project, resulting in a decrease in operating performance compared with the same period.

In this regard, the issue of stable performance growth was highlighted in the inquiry letter, and the regulator also asked the company to respond to whether there is a risk of a significant decline in digital business revenue or profit after the period; Whether there is a risk of limited market space, intensified market competition, and further decline in revenue in the field of emergency broadcasting business.

In terms of business, the company's product types include emergency broadcasting, digital television and professional audio-visual products. Among them, the sales revenue of emergency broadcasting products accounted for 44.10%, 48.71% and 31.89% respectively, the sales revenue of digital TV products accounted for 41.35%, 36.26% and 54.49% respectively, and the sales revenue of professional audio-visual products accounted for 14.55%, 15.03% and 13.62% respectively.

During the same period, the gross profit margin of emergency broadcasting was 43.44% and 41.31% respectively; 42.07％； The gross profit margin of digital TV was 63.05%, 63.92% and 56.51% respectively; The gross profit margins of professional audition were 65.37%, 64.86% and 66.02% respectively.

It can be seen that as the proportion of digital TV revenue increases, its gross profit margin has declined. The gross profit margins of the other two products fluctuated, but both recovered in 2023.

02

Accounts receivable turnover plummeted

In terms of customers, Dexin Technology has shown that its dependence on the top five customers has gradually deepened.

During the reporting period, the company's total sales to the top five customers were 28.9684 million, 97.6585 million and 183 million respectively, accounting for 11.01%, 29.18% and 44.59% of the total sales in each period respectively. Among them, the top five customers accounted for 2.58%, 10.23% and 36.18% respectively.

From this point of view, Dexin Technology's dependence on the top five customers and the largest customers will deepen rapidly in 2023. In addition, the proportion of the top five accounts receivable balance has risen sharply.

During the same period, the top five accounts receivable balances of Dexin Technology accounted for 54.63%, 40.61% and 79.30% respectively, mainly for government departments, institutions such as radio and television departments, propaganda departments, financial media centers, and state-owned enterprises such as radio and television operators.

This is also inseparable from the rise of accounts receivable of Dexin Technology, whose accounts receivable book value is 20.8192 million yuan, 18.3662 million yuan and 92.9076 million yuan respectively, accounting for 6.26%, 3.81% and 16.99% of current assets respectively.

In this regard, Dexin Technology said that the company's accounts receivable book balance at the end of 2023 increased by 79.4646 million yuan, resulting in an increase in its proportion of operating income, mainly due to the company's "terrestrial digital TV 700 MHz frequency migration" system integration project provided to China Radio and Television Design and Research Institute and the emergency broadcasting system integration project in Anshun, Bijie, Qiannan and other places provided to Guizhou Radio and Television Information Network Co., Ltd. The installation was completed and passed the acceptance in the current period. After carrying forward the income, accounts receivable of 60.5101 million yuan and 11.4291 million yuan were formed, respectively, resulting in a significant increase in the balance of accounts receivable.

During the reporting period, the company's accounts receivable turnover ratios were 13.31 times/year, 14.48 times/year and 6.63 times/year respectively. Dexin Technology said that the turnover rate of accounts receivable in 2023 has decreased, mainly due to the large increase in the balance of accounts receivable.

03

Qualification certification may be risky, and the R&D expense rate continues to decline

It is worth noting that the inquiry letter mentions that there is a long-standing unresolved issue about Dexin Technology.

According to the inquiry letter, some of the products of Dexin Technology have not obtained the "Telecom Equipment Network Access License"; And as of the date of signing the manual, the company has radio and television equipment network access certificate, radio transmission equipment model approval certificate, telecommunications equipment network access license and other qualification certifications, some certificates (such as FM band digital audio broadcast transmitters) have expired, and some certificates (such as terrestrial digital television emergency broadcast adapters, etc.) are about to expire.

The regulatory authorities pointed out that according to the "Administrative Measures for the Identification of Radio and Television Equipment and Equipment Access to the Network" issued by the State Administration of Radio, Film and Television, the state shall carry out network access identification for the relevant equipment and equipment that intends to enter the radio and television broadcasting institutions, radio and television transmission coverage networks and monitoring and supervision networks. According to the Regulations of the People's Republic of China on the Administration of Industrial Product Production Licenses, wireless radio and television transmission equipment and other products related to communication quality and safety are subject to a production license system.

This time, the regulator requires Dexin Technology to explain the specific circumstances of the products involved in the failure to obtain the "Telecommunications Equipment Network Access License", and explain whether the aforementioned situation constitutes a major violation of laws and regulations in combination with the specific certification content of the certification documents obtained from the competent authority. At the same time, in view of the follow-up measures for some certificates that have expired and some certificates are about to expire, the progress of the renewal of relevant certificates and whether there are obstacles to renewal; In addition to the above-mentioned "Telecommunications Equipment Network Access License", whether the company has carried out business without obtaining relevant qualification certification or exceeding qualification during the reporting period, and if so, the regulator also requires an analysis of the impact of relevant legal risks on the company.

In terms of R&D investment, the gap between Dexin Technology and comparable companies in the same industry continues to expand. During the reporting period, the average R&D expense ratios of comparable peers were 9.60%, 9.34% and 12.19% respectively; Dexin Technology's were 8.14%, 7.37% and 7.06% respectively.

Obviously, the overall fluctuation of the comparable average of peers has increased, while the R&D expense ratio of Dexin Technology has continued to decline.

Regarding the unresolved issues of Dexin Technology, a legal person focusing on the field of company law said, "If an enterprise does not obtain the "Telecommunications Equipment Network Access License" for the production of related products, it is suspected of violating the following current laws and regulations:

1. Telecommunications Regulations of the People's Republic of China: According to the Regulations, no unit or individual may engage in telecommunications services without authorization. It is illegal to produce or sell telecommunications equipment without permission.

2. Measures for the Administration of Network Access of Telecommunications Equipment: The Measures clearly stipulate that telecommunication equipment must be tested by relevant state departments and obtain a network access license before entering the market. It is illegal to manufacture or sell telecommunications equipment without obtaining a license.

3. Administrative Punishment Law of the People's Republic of China: For the conduct of production and business activities without obtaining the necessary licenses, the relevant administrative departments have the right to impose penalties according to law, including but not limited to fines, confiscation of illegal gains, etc. ”

"According to the above-mentioned regulations, if an enterprise's production without obtaining the "Telecommunications Equipment Network Access License" is determined to be a serious violation of national laws and regulations, and has a significant impact on the public interest, or is subject to major administrative penalties, such as huge fines, orders to suspend production for rectification, etc., it may constitute a major violation of laws and regulations." (Produced by Harbour Finance)