Shengmei shares IPO left the "last mile" but the major shareholder litigation is entangled Supply chain risks should not be underestimated

"Science and Technology Innovation Board Daily" (reporter Zhang Yinhai) news, on September 17, the domestic semiconductor equipment companies Beijing Yitang Semiconductor and Huazhuo Jingke's science and technology innovation board IPO road made new progress, respectively submitted for registration and review meeting. The progress of the issuance and investment value of Shengmei Semiconductor Equipment (Shanghai) Co., Ltd. (hereinafter referred to as "Shengmei Shares"), another company that has obtained IPO registration, has become a topic of concern to the market.

Luo Mingzhu, secretary of the board of directors of Shengmei Shares, said in an interview with the "Science and Technology Innovation Board Daily" reporter that the company is currently conducting a one-on-one roadshow and is expected to be issued and listed in November.

In terms of sales, the company is mainly based on major customers such as Huahong Group and Yangtze River Storage, and the top five customers account for more than 80% of the total. Although the company is mainly based on agent sales, benefiting from the rapid rise in the prosperity of the semiconductor industry, some key components rely on external imports, and supply chain security is still a risk issue that should not be underestimated.

Listing process "get up early and catch up late"

Shengmei Co., Ltd. is mainly engaged in the research and development, production and sales of semiconductor special equipment, the main products include semiconductor cleaning equipment, semiconductor plating equipment and advanced packaging wet equipment. The company's semiconductor cleaning equipment business revenue accounts for more than 80%, customers cover wafer manufacturing, advanced packaging, semiconductor wafer manufacturing and recycling, research institutes and other fields.

Compared with domestic counterparts such as Northern Huachuang, Core Source Micro and Zhichun Technology, Shengmei Co., Ltd. is in a clear leading position in the product type and business revenue of semiconductor cleaning equipment, and is known as the leader of domestic semiconductor cleaning equipment. However, the above-mentioned peer companies have long been developing and growing with the help of the capital market, while Shengmei shares have lagged behind and are still on the long journey of sprinting to the IPO of the science and technology innovation board.

According to the project dynamics of the Shanghai Stock Exchange, Shengmei shares were accepted by the IPO of the Science and Technology Innovation Board as early as June 1, 2020, inquired by the exchange on June 9, and passed the review meeting of the Science and Technology Innovation Board on September 30, and the total number of key nodes listed took only 4 months. However, in the registration process of the "last mile", Shengmei shares were not so smooth, and it was not registered for the IPO of the Science and Technology Innovation Board until August 17, 2021.

"The listing process of Shengmei shares is relatively tortuous, mainly due to the impact of the US stock spin-off listing and the litigation involving major shareholders, and the supervision has not been released based on prudent considerations." It may be necessary to wait until the litigation of the major shareholder is clear before the company can be listed. An industry investment banker told the "Science and Technology Innovation Board Daily" reporter that compared with SMIC, which was also listed in the same period of IPO, and Daqo Energy, which was also a U.S. stock spin-off and listing, Shengmei shares can be described as "getting up early and catching up late".

It is reported that on October 8, 2020, foreign company J Capital Research released a short selling report on the company's controlling shareholder, the U.S. ACMR, questioning the revenue and agent issues of Shengmei shares. Since ACMR is a holding company that does not directly carry out business and is listed on the NASDAQ in the United States, Jeffrey Kain and others filed a class action lawsuit against ACMR in the United States at the end of December 2020 based on the short selling report.

Shengmei shares said that the current controlling shareholder ACMR class action lawsuit is still in progress, and the US lawyer expects that the court may make a relevant ruling before January 2022. For the new progress of the company's listing, Luo Mingzhu, secretary of the board of directors of Shengmei Shares, said in an interview with the "Science and Technology Innovation Board Daily" reporter that the company is currently conducting a one-on-one roadshow and is expected to be issued and listed in November.

In terms of equity structure, as of the end of 2020, ACMR in the United States directly held 91.67%, making it the company's largest shareholder. Wang Hui, chairman of Shengmei Co., Ltd., holds 168,000 A-share shares and 1.147 million B-share shares of ACMR in the United States, with a total of 43.64% of the voting rights of ACMR in the United States, and controls 91.67% of the equity of the company through ACMR of the United States, making him the actual controller of the company.

The reporter of "Science and Technology Innovation Board Daily" noted that in the process of historical equity changes of Shengmei shares, it has experienced the process of state-owned asset transfer and withdrawal, wholly-owned control of ACMR in the United States and re-capital increase. According to the data, in May 2017, Shanghai Venture Capital Company transferred its 18.77% equity interest in Shengmei Limited to ACMR of the United States for 40 million yuan, and in November 2017, the total 18.36% equity of Zhangjiang Kechuang Investment and Pudong Production and Investment co., Ltd. was transferred to the American ACMR for 95.6556 million yuan.

It is worth noting that the two equity transfers are only about half a year apart, but the transfer price is nearly 1 times different. On the issue of whether the loss of state-owned assets is involved, Luo Mingzhu responded to the reporter of the Science and Technology Innovation Board Daily: "The transfer of state-owned shareholders has been filed with state-owned assets and complies with the procedural provisions of the transaction. ”

Agency sales revenue accounted for 92%

Benefiting from the transfer of the global semiconductor industry to Chinese mainland and the increase in the penetration rate of domestic semiconductor equipment, the revenue of Shengmei Co., Ltd. in the past three years was 550 million yuan, 757 million yuan and 1.007 billion yuan, respectively, with a compound growth rate of 35.31%. However, from the perspective of customer concentration, the company is mainly based on five customers such as Huahong Group, Changjiang Storage, SMIC, Hynix, and Changdian Technology, and the total sales in the past three years account for more than 80%.

In terms of sales model, Shengmei shares are mainly agent sales, and the sales revenue achieved through agents in the past three years accounts for about 92%. Therefore, the reasons for the company's use of agent sales, the authenticity of performance, sales dependence and other issues have become the focus of supervision and market concern.

"Based on the development stage of its own products and technologies, the company has chosen a market development model based on agents." Shengmei shares related people told the "Science and Technology Innovation Board Daily" reporter that the business of the agent to provide services is essentially intermediary services, and the company directly signs a sales agreement with the customer and receives and pays for the goods, and there is no third-party payment.

According to the data, TJM PARTNERS LTD and other agents are overseas companies, mainly registered in South Korea, Hong Kong, Taiwan and other places. Among them, more than half of the revenue of TJM PARTNERS LTD, HANWOOL SCIENTIFIC CO., LTD and other companies comes from the sales of Shengmei co., LTD.

However, among the semiconductor industry companies that disclose sales commission data, the proportion of revenue from sales commissions of Shengmei shares is at a high level. For example, in 2020, the sales commission of Shengmei shares accounted for 4.02% of operating income, while Shanghai Silicon Industry and Montage Technology were 0.46% and 0.16% respectively in the same period.

In terms of business costs, direct materials account for about 94% of the company's main business costs. Valves, joints and other gas circuit materials, cavity parts and other mechanical materials accounted for about 27% of the level. Considering the increase in commodity prices this year, the company's gross profit margin may be affected to a certain extent.

It should be noted that some of the company's key components rely on external imports, and supply chain security is still a risk issue that should not be underestimated. For example, Product Systems Inc is the sole supplier of megasonic generators for key components in the company's monolithic cleaning equipment, and NINEBELL is the main supplier of robot arms in the conveyor system of the company's monolithic cleaning equipment.

The relevant person in charge of Shengmei shares told the "Science and Technology Innovation Board Daily" reporter that the company has specially developed components that have not yet been industrialized by domestic enterprises, and hopes to jointly develop high-quality, high-specification, cost-advantaged parts and components products with domestic enterprises, and gradually reduce the dependence on overseas supply chains.

For the driving force of the company's performance in the future, Shengmei co., Ltd. believes that "the demand growth of the downstream application industry is the core driving force for the rapid development of the semiconductor industry. In the future, the company will continue to introduce new products and technologies with international leading level of differentiation to enhance the company's core competitiveness. Through strong domestic and international market development, improve market share. ”

From the perspective of the competitive landscape, the global semiconductor cleaning equipment market is highly concentrated, and the four overseas giants of DNS, TEL, LAM and SEMES account for a total of 85%. At present, the localization rate is about 20%, and Shengmei shares account for a relatively high proportion of the domestic semiconductor cleaning equipment market. However, in the proportion of the value of the previous process equipment, lithography, film growth and etching equipment accounted for about 27% respectively, and the value of cleaning equipment accounted for only 7.73%.