Zhongrui Electronics: sell more than 10 million yuan to Laolai, the price is on the high side or face the risk of losing key customers

“Jin Zheng Yan” Southern Capital Center Leng Yun/Author Yi Xi Nanjiang/Risk Control
In July 2020, Shenzhen Stock Exchange accepted the listing application documents submitted by Changzhou Wujin Zhongrui Electronic Technology Co., Ltd. (hereinafter referred to as “Zhongrui Electronics”). Subsequently, due to the decline in performance and the urgent need for financing, Sino-Swis Electronics actively withdrew its listing application in January 2021. After nearly a year and a half, Sino-Swiss Electronics again submitted its listing application to the Shenzhen Stock Exchange.
In this declaration, Sino-Swis Electronics may still have to face the adverse factors that led to the withdrawal of the previous listing application. Among them, the domestic new energy subsidy policy will be terminated by the end of 2022. In addition, the main customer of Sino-Swis Electronics, Shenzhen Bike Power Battery Co., Ltd. and its subsidiaries (hereinafter referred to as “Bike Battery”) have been taken to restrict consumption. Will the order demand for Sino-Swis Electronics be reduced in the future? In addition, Sino-Swis Electronics lost key customers due to the failure to reach an agreement on pricing. In contrast, at present, Sino-Swis Electronics has a higher price than its peers for another major customer, LG New Energy (including Aierji New Energy (Nanjing) Co., Ltd. and LG Energy Solution Ltd.
1、 The cooperation with the “delinquent” customer has warmed up again, and the customer has been restricted in consumption or questioned about the stability of cooperation
There must be a reason for everything. Zhongrui Electronics had withdrawn its listing application due to the decline of its performance. At that time, the decline of its performance was due to the decline of new energy subsidies and the reduction of the demand for Bicke batteries from its main customers. In contrast, Sino-Swiss Electronics declared that the new energy subsidy policy will be terminated by the end of 2022. In addition, the main customer, Bike battery, was taken to limit consumption because it had no property to be executed.
1.1 Due to the decline of performance and urgent financing needs, he voluntarily withdrew his listing application in January 2021
According to the reply to the inquiry letter on the review of the application documents of Changzhou Wujin Zhongrui Electronic Technology Co., Ltd. for IPO and listing on the GEM signed on September 9, 2022 (hereinafter referred to as the “reply to the first round of inquiry”), the withdrawal time of Zhongrui Electronics’ previous IPO application was January 2021, and the application section was the GEM.
In response, Zhongrui Electronics explained that its previous withdrawal of its application for IPO was mainly due to the decline of the company’s performance and the urgent need for financing.
It should be pointed out that the decline in the performance of Sino-Swiss Electronics is due to the decline of the new energy subsidy policy and the decrease in the demand of major customers.
1.2 Due to the decline of subsidies for new energy and the reduction of demand for Bike batteries by major customers, the performance in 2019 declined significantly
According to the reply to the first round of inquiry, from 2017 to 2019, the operating revenue of Sino-Swiss Electronics was 357 million yuan, 383 million yuan and 279 million yuan respectively. During the same period, the net profit of Sino-Swiss after deduction of non-cash was 59788000 yuan, 66717500 yuan and 8984300 yuan respectively. It should be noted that in 2019, the operating revenue decreased by 27.01% year on year, and the net profit after deduction decreased by 86.53% year on year.
With regard to the reasons for the sharp decline in performance in 2019, Sino-Swis Electronics said that in 2019, the new energy subsidies declined sharply, and the subsidy threshold was further raised. In the short term, it caused greater cost pressure and capital pressure on the lithium battery industry chain, leading to the transformation and upgrading of terminal manufacturers, adjustment of development strategies, and transmission of cost reduction pressure to the upstream. In addition, the main customer of Zhongrui Electronics, Bike Battery, was adversely affected by the payment arrears of some downstream customers. The difficulty in capital turnover reduced the demand for orders from Zhongrui Electronics, and failed to pay the payment for goods from Zhongrui Electronics as agreed in the contract. As a result, Zhongrui Electronics made a single provision for bad debts of 24.8673 million yuan, and the profit level fell sharply.
It can be seen that the adjustment of new energy subsidy standard and subsidy intensity, as well as the demand of major customers, has a significant impact on the performance of Sino-Swiss Electronics.
However, the new energy subsidy policy is about to end, and the government will no longer subsidize the purchase of new energy vehicles.
1.3 The new energy subsidy policy will be terminated at the end of 2022, and the new energy vehicles will not be subsidized after being licensed
According to the government’s interpretation of the Notice of the Ministry of Finance, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, and the Development and Reform Commission on the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles in 2022 (hereinafter referred to as the “Notice”) on January 1, 2022, the implementation period of the financial subsidy policy for the promotion and application of new energy vehicles will be extended to the end of 2022 according to the requirements of CJ [2020] No. 86 document, taking into account technological progress, scale effect and other factors. In order to maintain the good development momentum of the new energy vehicle industry and stabilize the expectations of the industry and consumers, the Notice specifies that the subsidy policy for the purchase of new energy vehicles will be terminated on December 31, 2022, and no subsidy will be given to vehicles licensed after December 31, 2022.
It is worth mentioning that the application fields of the main products of Sino-Swiss Electronics include new energy vehicles, and more than 90% of the main business income is from domestic sales.
1.4 The main products are mainly applied to downstream new energy vehicles, and more than 90% of the main business income comes from domestic sales
According to the prospectus signed on December 4, 2022 (hereinafter referred to as the “prospectus”), from 2019 to 2021 and from January to June 2022, the main business income of Zhongrui Electronics was 258 million yuan, 385 million yuan, 600 million yuan and 370 million yuan, respectively, accounting for 92.46%, 83.71%, 92.67% and 91.05% of its current business income.
It should be noted that the main business income of Sino-Swis Electronics comes from the sales of power-type combination caps, capacity-type combination caps and other products.
Among them, from 2019 to 2021 and from January to June 2022, the revenue of Sino-Swiss electronic power combination cap was 229 million yuan, 358 million yuan, 578 million yuan and 358 million yuan, respectively, accounting for 88.77%, 93%, 96.32% and 96.85% of the current main business revenue. In addition, the power-type combination cap is mainly used in downstream new energy vehicles, electric bicycles, electric tools, smart home and other fields.
On the other hand, from 2019 to 2021 and from January to June 2022, the domestic sales revenue of Sino-Swiss Electronics was 258 million yuan, 382 million yuan, 591 million yuan and 362 million yuan, respectively, accounting for 99.73%, 99.12%, 98.48% and 97.94% of its current main business revenue.
It can be seen that the main products of Zhongrui Electronics are power-type combination caps, and these products are mainly used in downstream new energy vehicles and other fields, and more than 90% of its main business income comes from domestic sales. So far, will the termination of the new energy subsidy policy at the end of 2022 lead to a sharp decline in the subsequent performance of Sino-Swiss Electronics as compared with the previous declaration? can make nothing of it.
Not only that, the main customer of Sino-Swis Electronics this time, Bike battery, was taken to limit consumption because there was no property available for execution.
1.5 The main customer of this declaration, Bike battery, was restricted in consumption in June 2022 due to no executable property
According to the prospectus, from 2019 to 2021 and from January to June 2022, the sales of Sino-Swiss Bike batteries were 28.7156 million yuan, 56.4196 million yuan, 80.411 million yuan and 35.2515 million yuan, respectively. Bike batteries were the third largest, second largest, second largest and second largest customers.
Among them, Bike batteries include Zhengzhou Bike Battery Co., Ltd. (hereinafter referred to as “Zhengzhou Bike Battery”) and Shenzhen Bike Power Battery Co., Ltd. (hereinafter referred to as “Shenzhen Bike Power”).
According to the (2021) Jin 03 Zhi No. 1011 document issued on June 22, 2022, the civil judgment (2020) Jin 03 Min Chu No. 1333 in the case of the execution of the lease contract dispute between the applicant Tianjin Guotai Financial Leasing Co., Ltd. (hereinafter referred to as “Guotai Financial Leasing”) and the respondent Shenzhen Bike Power, Shenzhen Bike Battery Co., Ltd., Li Xiang and Yu Xiaoqiu has taken legal effect. Due to the non-performance of the obligations of Shenzhen Bike Power and other executors, the Tianjin Third Intermediate Court filed a case for execution on November 18, 2021, after the application of Cathay Pacific Financial Leasing, the subject matter of execution was 49.6038 million yuan.
In this case, Shenzhen Bike Power and other executed persons have no property to execute. The Third Intermediate Court of Tianjin issued a consumption restriction order to Shenzhen Bike Power and other enforced persons, and took consumption restriction measures against them.
According to the public information of the Supreme Court, as of the inquiry date of February 14, 2023, there was a record of breach of trust in the Bike battery. The filing time was November 9, 2020, and the specific form was “refusal to perform the obligation determined by the effective legal instrument due to the ability to perform”.
It can be seen that in June 2022, Shenzhen Bike Power was restricted from consumption because it had no property to be executed. Will it reduce its order demand for Sino-Swis Electronics in the future? It is worth considering.
That is to say, in the previous declaration, Sino-Swis Electronics actively withdrew its listing application due to the sharp decline in its performance in 2019. It should be pointed out that the decline of new energy subsidies and the reduction of demand for Bike batteries from major customers are the reasons for the decline of 2019 performance.
However, in this declaration, the new energy subsidy policy will be terminated at the end of 2022. In June 2022, Shenzhen Bike Power, a customer of Zhongrui Electronics, was listed as the executor, and was taken measures to limit consumption because there was no property to be executed. The transaction volume between the customer and its related parties with Zhongrui Electronics increased year by year from 2019 to 2021. In addition, the liquidity risk of Bike Battery had occurred before and the company’s payment for goods was not repaid, which led to the large amount of bad debt provision made by Zhongrui Electronics and the decline of profits, Today, Bike batteries are listed in the restricted consumption list. So far, is the BIK battery, a major customer of Sino-Swis Electronics, stable? Is there any uncertainty in the future cooperation between Sino-Swis Electronics and Bike Battery? Doubts remain to be resolved.
2、 Once lost key customers due to inconsistent pricing, and the pricing of another key customer was still “on the high side”
Customers are the foundation of enterprise survival. Yiwei Lithium Energy (including Huizhou Yiwei Lithium Energy Co., Ltd. and Hubei Yiwei Power Co., Ltd.) used to be the main customers of Zhongrui Electronics, and no longer conducted business cooperation with Zhongrui Electronics due to the failure to reach an agreement on pricing. In contrast, at present, Sino-Swiss Electronics sells LG new energy at a higher price than its peers.
2.1 From 2020 to 2021, the operating revenue and net profit of Sino-Swis Electronics will maintain a rapid growth
According to the prospectus, from 2019 to 2021 and from January to June 2022, the operating revenue of Sino-Swis Electronics was 279 million yuan, 460 million yuan, 648 million yuan and 406 million yuan respectively; During the same period, the net profit was 3.201 million yuan, 65.6619 million yuan, 136.6909 million yuan and 92.9098 million yuan respectively.
According to the calculation of the South Capital Center of the Financial Securities Research, from 2020 to 2021, the year-on-year growth rates of the operating revenue of Sino-Swiss Electronics were 64.58% and 40.81% respectively, and the year-on-year growth rates of the net profit were 1951.3% and 108.17% respectively.
It is not difficult to see that in 2019, the net profit of Zhongrui Electronics was less than 4 million yuan. Then in 2020, the net revenue of Sino-Swiss Electronics soared. By 2021, the growth rate of net revenue of Sino-Swiss Electronics has slowed down, but it still maintains the “momentum” of rapid growth.
Behind the soaring performance, the comprehensive gross profit rate of Sino-Swis Electronics is higher than the average of its peers.
2.2 From 2019 to 2021, the comprehensive gross profit rate of Sino-Swis Electronics is higher than the average of its peers
According to the prospectus, Zhongrui Electronics selected Shenzhen Kedali Industrial Co., Ltd. (hereinafter referred to as “Kedali”), Zhenyu Technology Co., Ltd. (hereinafter referred to as “Zhenyu Technology”) and Wuxi Jinyang New Materials Co., Ltd. (hereinafter referred to as “Jinyang”) as comparable companies in the same industry.
According to the prospectus, from 2019 to 2021, Kodali’s comprehensive gross profit margin was 29.63%, 29.19% and 26.7% respectively; The comprehensive gross profit rate of Zhenyu Technology is 13.07%, 21.98% and 17.49% respectively; The comprehensive gross profit rate of Jinyang shares was 31.53%, 44.47% and 43.14% respectively. During the same period, the average comprehensive gross profit rate of the three peer comparable companies was 24.74%, 31.88% and 29.11% respectively.
From 2019 to 2021, the comprehensive gross profit rate of Sino-Swis Electronics was 26.7%, 32.28% and 34.2% respectively.
It can be seen that from 2019 to 2021, the comprehensive gross profit rate of Sino-Swis Electronics continued to be higher than the average of comparable companies in the same industry.
It is worth mentioning that in 2020, the unit price of the main products of Sino-Swiss Electronics increased, and the main customers in the same year stopped business cooperation with Sino-Swiss Electronics because they did not reach an agreement on product pricing.
2.3 The price of main products will rise in 2020, and the main customer Yiwei Lithium Energy will no longer cooperate in the same year because the price has not been agreed
According to the prospectus, the main products of Zhongrui Electronics are power combined cap and capacity combined cap.
From 2019 to 2021 and from January to June 2022, the price of power combination cap was 0.33 yuan/piece, 0.36 yuan/piece, 0.36 yuan/piece and 0.38 yuan/piece respectively, and the price of capacity combination cap was 0.35 yuan/piece, 0.37 yuan/piece, 0.32 yuan/piece and 0.33 yuan/piece respectively.
It can be seen that in 2020, the price of the power combination cap and the capacity combination cap of Sino-Swiss Electronics will increase.
In addition, according to the prospectus signed by Sino-Swis Electronics on December 1, 2020 (hereinafter referred to as the “December 2020 prospectus”), the sales of Sino-Swis Electronics to Yiwei Lithium Energy from 2017 to 2019 were 19.6297 million yuan, 48.8148 million yuan and 50.8207 million yuan respectively. During the same period, Yiwei Lithium Energy was the third largest, second largest and first largest customer respectively.
According to the reply to the first round of inquiry, the sales of Sino-Swis Electronics to Yiwei Lithium Energy from 2020 to 2021 and from January to June 2022 were 1.6526 million yuan, 0 yuan and 0 yuan respectively.
It can be seen from the above that from 2017 to 2019, the sales revenue of Zhongrui Electronics to Yiwei Lithium Energy increased year by year, and Yiwei Lithium Energy was one of the top five customers of Zhongrui Electronics. Then in 2020, the sales revenue of Zhongrui Electronics to Yiwei Lithium Energy fell, and by 2021 and January to June 2022, the sales revenue of Zhongrui Electronics to Yiwei Lithium Energy fell to 0 yuan.
In response, according to the first round of inquiry, Sino-Swis Electronics said that in 2020, due to its failure to reach an agreement on product pricing with Yiwei Lithium, Sino-Swis Electronics did not continue to carry out business cooperation with Yiwei Lithium.
Does the above situation mean that Zhongrui Electronics lost its main customer Yiwei Lithium Energy due to its lack of price advantage?
It should be pointed out that the sales unit price of Sino-Swis Electronics to another major customer is higher than that of its peers.
2.4 The main customer LG New Energy has accumulated more than 700 million yuan in revenue, and the sales price of Zhongrui Electronics is higher than that of its peers
According to the prospectus, from 2019 to 2021 and from January to June 2022, the sales of Sino-Swis Electronics to LG New Energy were 25.8994 million yuan, 170.1826 million yuan, 303.0308 million yuan and 228.4183 million yuan respectively.
According to the calculation of the South Capital Center of the Financial Securities Research, the total sales of Sino-Swiss Electronics to LG new energy from 2019 to 2021 and from January to June 2022 was 728 million yuan.
It should be noted that according to the agreement signed by Sino-Swis Electronics on November 7, 2022, Changzhou Wujin Sino-Swis Electronics Technology Co., Ltd