Nowadays, a series of electronic products represented by smart phones, smart home, 5G communication and new energy vehicles have been all over people’s lives. In this context, China’s precision electronic components manufacturing industry has developed rapidly, and a number of large-scale high-end electronic components manufacturing enterprises with precision manufacturing as the core have emerged.
Investment Times researchers noted that Yi Dong Electronic Technology Co., Ltd. (hereinafter referred to as Yi Dong Electronics) is one of the companies that has submitted its prospectus to the China Securities Regulatory Commission (CSRC) for listing on the ChiNext Stock Market. Recently, the Shenzhen Stock Exchange accepted its ChiNext IPO application.
The IPO, Yi Dong Electronics plans to raise funds of 914 million yuan, of which 814 million yuan were invested in the printed circuit board production line construction, advanced manufacturing base construction, and research and development center construction of three projects, in order to expand the scale of production capacity and enhance the research and development strength. The remaining 100 million yuan will be used to supplement working capital.
Investment Times researchers reviewed the company’s prospectus and noted that from 2017 to 2019 and the first half of 2020 (hereinafter referred to as the reporting period), the company’s operating revenue was growing year by year, but the growth rate of revenue slowed down, and the net profit attributable to the parent also increased and decreased. At the same time, with the rapid development of consumer electronics, 5G communication and other industries, the downstream market demand of Yidong Electronics may change greatly. If the company cannot release production capacity and improve product quality and technical level in time, it may be in a disadvantageous position in the market competition, which will affect the company’s business performance.
Expansion can encounter capital bottlenecks
According to the prospectus, the predecessor of Yi Dong Electronics was established in April 1997. At the beginning of its establishment, the company relies on R&D and production of LCD display terminals, communication connector components and other products to achieve development. At present, it has set up 6 specialized production bases in Dongguan, Guangdong, Changshu, Jiangsu, Xianning, Hubei, Suining, Sichuan, Huizhou, Guangdong and Delhi, India.
The company is expanding to close to full capacity. According to the prospectus information released by Yi Dong Electronics recently, the production and sales rate of its various lines from 2017 to 2019 is almost 100%, and the capacity utilization rate is also more than 90%. Among them, FPC capacity is even far beyond the actual design capacity, full load operation.
Based on the above situation, the company accordingly adopted investment expansion measures, but its capital scale is unable to match. During the reporting period, its monetary funds increased to 36.803 million yuan, 95.1002 million yuan, 136 million yuan and 86.6939 million yuan respectively, but the year-on-year growth rate dropped sharply from 158.40% in 2018 to 43.23% in 2019. By the first half of 2020, monetary funds have decreased somewhat.
At the same time, researchers at Investment Times noted that at full capacity, one of the company’s core products, the FPC, is in an industry with many manufacturers and low market concentration, which means competition in the industry will become more intense.
It is worth noting that, with the rapid development of consumer electronics, 5G communication and other industries, the downstream market demand of Yidong Electronics will likely undergo a greater change. On the one hand, the high-end precision soft-hard combination board with both soft and hard board characteristics may become the development trend of the future market; On the other hand, in the coming era of 5G large-scale commercial use, the demand space of the communication market will also be further expanded.
If Yidong cannot release production capacity and improve product quality and technical level in a timely manner in the future, the company may be in a disadvantageous position in the market competition, resulting in a decline in the downstream market demand and market share, which will further impact the business performance of the whole company.
Net profit fluctuates accounts receivable climb
Over the years, Yi Dong electronic business continues to expand and develop, but its operating performance is not ideal.
According to the prospectus, the company’s operating revenue increased year by year during the reporting period, reaching 867 million yuan, 992 million yuan, 1.055 billion yuan and 488 million yuan respectively, but the year-on-year growth rate slowed from 14.38% in 2018 to 6.34% in 2019. By the first half of 2020, its revenues were less than half of what they were in 2019.
At the same time, Yi Dong electronic mother net profit also increased and decreased. During the reporting period, its net profit attributable to its parent dropped abruptly from 91 million yuan in 2017 to 46 million yuan in 2018, a year-on-year decrease of 50.09%. Then it suddenly increased to 103 million yuan in 2019, with a year-on-year increase of 126.60%.
Accompanies with the revenue growth, Yidong Electronic accounts receivable also increased year by year, the reporting period was 343 million yuan, 385 million yuan, 372 million yuan and 396 million yuan, accounting for the current assets of 45.20%, 48.76%, 41.90% and 45.03% respectively; The book balance of accounts receivable was 358 million yuan, 406 million yuan, 397 million yuan and 423 million yuan respectively, which accounted for 41.25%, 40.89%, 37.60% and 43.32% of the company’s operating income, respectively.
This upper east electronic said in the prospectus, the company developed relatively strict provision policy, the provision for bad debts and aging structure is reasonable, but there are still some small customers own mismanagement or disputes cause money can’t back in time, or unable to full recovery of risk, this will be for the company’s business performance and cash flow has a larger adverse impact.
Yidong electronic operating income and the balance of accounts receivable at the end of the balance
Data source: company prospectus
Big customers “leave”
According to the prospectus information, since the end of December 2019 to change into a joint-stock company, Yi Dong Electronics introduced a number of private funds. Among them, Kun stone Tianli investment, Kun stone intellectual investment and Kun stone investment are Kun stone investment private equity funds. So far, “Kunshi Department” three private equity funds to occupy a total of game East Electronics 4.60% of the shares.
It is worth noting that before the shareholding system reform, Xiaomi Industry Fund increased its capital and invested in Yidong Co., Ltd. in October 2019, holding 3% shares, and then became the fourth largest shareholder of Yidong Electronics. According to the introduction of millet industry fund, this fund mainly supports the business expansion of millet and millet ecological chain enterprises.
Although the introduction of a large number of private equity funds to provide a stable source of capital and high value-added services, but the company’s big customers “leaving” is still worth paying attention to.
According to the prospectus information, from 2017 to 2019 three years, BYD has always appeared in the ranks of the top five customers of Yi Dong Electronics, hovering in the third and fourth. However, by the first half of 2020, after BYD officially launched the blade battery, it had disappeared from the top five customers list of Yidong Electronics.
In addition, the sales amount of FPC, the core product of Yidong Electronics, to BYD has also declined since 2019, from 86 million yuan in 2018 to 75 million yuan. The sales amount in the first half of 2020 is less than 20 million yuan, and even far less than half of that in each year from 2017 to 2019.
In addition, Yi Dong electronic nearly two years still exist the main customer is too concentrated problem. From 2019 to the first half of 2020, Suntec Group, Amphenol Group and Visheng Technology Group consistently occupy the company’s top three customer positions, with a combined annual revenue contribution of nearly 30 percent, according to the prospectus.
article links：Expansion can meet bottlenecks, big customers "leave"!
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