IPO Radar|The electric vehicle industry is developing rapidly! Backed by Geely Automobile's "big tree", can Shichang keep the fuel tank industry undefeated?

Shenzhen Business Daily · Reading Client Reporter Jin Enqi

On September 23, the IPO process of Hebei Shichang Auto Parts Co., Ltd. (hereinafter referred to as "Shichang shares") was updated, and the company replied to the first round of inquiries of the Beijing Stock Exchange.

According to the company's prospectus, Shichang's main business is the research and development, production and sales of automotive fuel systems, and the main products are automotive plastic fuel tank assemblies. It mainly sells to vehicle manufacturers, and its main customers include Geely Automobile, Chery Automobile, China FAW, Changan Automobile and other domestic mainstream vehicle manufacturers.

▌The demand for major products may decline sharply, and the customer concentration is high

Since the company's products are mainly used in plug-in hybrid vehicles (including range extenders) in traditional fuel vehicles and new energy vehicles, Shichang mentioned in the prospectus that the development of pure electric vehicles will cause the risk of declining demand for fuel tanks.

As we all know, BEVs do not need to be equipped with fuel tanks. In recent years, the rapid development of the new energy vehicle industry, among which the rapid growth of the production and sales of pure electric vehicles has formed a gradual replacement for traditional fuel vehicles, which has compressed the market space of the fuel tank industry to a certain extent.

Shichang said that if the rapid development or technological breakthrough of pure electric vehicles in the future leads to a significant decline in the market demand for traditional fuel vehicles, and the demand growth of plug-in hybrid vehicles is not as expected, it may lead to a significant decline in the market demand for the company's main product automotive plastic fuel tanks, which in turn leads to a decline in the company's plastic fuel tank sales and operating performance.

From 2021 to 2023 (hereinafter referred to as the "reporting period"), the sales revenue of the company's top five customers accounted for 92.70%, 93.22% and 92.48% of operating income respectively. Among them, Geely Automobile is the company's largest customer, and the company's sales to Geely Automobile accounted for 47.13%, 47.89% and 42.40% of operating income during the reporting period, respectively.

The letter of inquiry expressed concern about the relevant issues and asked Shichang to explain the reasons why the parts in the automotive field have been concentrated in plastic fuel tanks for many years and have not expanded into other types of products. In addition, Shichang shares are also required to explain whether the high customer concentration is in line with the characteristics of the industry, and whether there is a large difference compared with comparable companies in the same industry.

Shichang said that it takes a long time for the company to enter the auto parts industry, carry out technology research and development and accumulation, enter the qualified supplier system after auditing, form a stable cooperative relationship with high-quality customers, and achieve and improve business performance. The company has strong market competitiveness in the field of domestic plastic fuel tanks, has a first-mover advantage in the field of high-pressure plastic fuel tanks, is in the stage of harvest and rapid development, has sufficient development space, and the scale of plastic fuel tank business still has a large growth space compared with comparable listed companies in the same industry. Therefore, it is reasonable for the company to take plastic fuel tanks as its main product and not expand other types of products.

Shichang shares also mentioned that from the perspective of comparable listed companies in the same industry, its main products are also relatively concentrated.

For customer concentration, Shichang shares in the reply letter said that according to industry experience, the replacement cycle of models is generally about 5 years, at the same time, due to the strong cooperation between the company and major customers, based on the stability, reliability, safety and consistency requirements of parts supply, customers will generally give priority to the original supplier when designing and purchasing parts.

Shichang said that the company maintained a strong competitiveness in the industry, and during the reporting period, the company continued to obtain the project designation of replacement models or new models from major customers, and the cooperative relationship continued. Therefore, the business risk caused by the replacement of downstream customers is low.

Shichang also mentioned that the high concentration of customers in the auto parts industry is universal. As the upstream supporting industry of the automobile industry, the auto parts industry has a relatively single downstream application field, mainly for the sales of vehicle manufacturing enterprises, and the vehicle manufacturing industry is a capital-intensive, technology-intensive industry, and the vehicle manufacturing enterprises are generally larger, compared with the number of general industry enterprises are relatively small, and the industry concentration is high. Therefore, related enterprises in the auto parts industry generally have a high concentration of customers.

During the reporting period, the company's top five customer concentrations were higher than those of comparable companies in the same industry, mainly due to the fact that the company's main customers are vehicle manufacturers, and the scale of operating income is lower than that of listed companies, and the business is more focused at this stage, which is reasonable.

▌The asset-liability ratio is high, and the operating cash flow continues to be negative

In addition, the prospectus also shows that the scale of assets and liabilities of Shichang shares is at a high level, or faces certain debt repayment and liquidity risks. At the end of the reporting period, the company's asset-liability ratios were 72.90%, 69.71% and 62.87% respectively.

In the letter of inquiry, Shichang shares were also concerned about the asset-liability ratio. The inquiry letter shows that at the end of the reporting period, the company's asset-liability ratio was relatively high, and at the same time, the company's net cash flow from operating activities continued to be negative in each period of the reporting period.

During the reporting period, the net cash flow generated by the operating activities of Shichang Co., Ltd. was -9.016 million yuan, -32.5273 million yuan and -37.2454 million yuan respectively, all of which were negative.

The letter of inquiry requires Shichang to analyze and disclose whether there is a funding gap, whether there is a risk of cash flow disruption, whether there is a risk that the loan cannot be repaid when it expires, and whether the relevant assets are enforced, and explain the countermeasures that have been taken or are planned to be taken.

Shichang shares said that the company's operating cash flow continued to be negative, mainly due to the vast majority of the company's sales revenue during the reporting period to accept bills for settlement, based on the need for capital turnover the company will discount part of the bills, the company will credit rating 15 banks other than other banks issued bank acceptance bills, commercial acceptance bills discount inflow into other cash received related to financing activities, the reporting period of the part of the cash inflow was 65.4532 million yuan, 52.2863 million yuan and 54.942 million yuan. Taking this factor into account, the company's adjusted net cash flow from operating activities during the reporting period was 56.4372 million yuan, 19.759 million yuan and 17.6966 million yuan respectively, and the overall situation was good.

Shichang also said that during the reporting period, the company's main business income was 291 million yuan, 280 million yuan and 403 million yuan, and the company's net profit was 21.0351 million yuan, 17.7779 million yuan and 51.9843 million yuan respectively, and the operating situation was good.

In addition, at the end of the reporting period, the total liabilities of Shichang were 231 million yuan, 242 million yuan and 280 million yuan respectively. From the perspective of liability structure, the company's current liabilities accounted for 96.27%, 96.99% and 94.76% of the total liabilities respectively, which are the main components of the company's liabilities, and the current liabilities are mainly short-term loans, notes payable and accounts payable.

Among them, short-term borrowings were 50.9203 million yuan, 79.2279 million yuan and 64.8224 million yuan respectively, accounting for 22.06%, 32.78% and 23.18% of the total liabilities respectively, mainly for working capital loans and bill discount loans applied by the company to banks to meet the needs of production and operation. During the reporting period, the company's credit standing was good, and the bank loans were repaid on schedule, and there was no failure to repay the principal and interest of bank loans when due.

Shichang shares believe that the company's operating conditions, cash flow situation and monetary reserves are in good overall condition, and there is a large space for fund raising; The composition of the company's debts is reasonable, and the relevant debts can be repaid in a timely manner; The overall proportion of asset collateral is low, and there is no abnormal situation.