Pre-IPO Performance Shifts Lead to Queries for Huangshan Gujue's Hurdle IPO

In recent years, while new energy vehicles have maintained rapid growth, they have also driven related enterprises in the industry chain to accelerate their competition in the capital market. Recently, Huangshan Guojie Co., Ltd. (hereinafter referred to as "Huangshan Guojie") has passed the IPO review and plans to go public on the Growth Enterprise Market (GEM).

It is reported that Huangshan Guojie is a national high-tech enterprise specializing in the research and development, production, and sales of power semiconductor module heat dissipation substrates, with products mainly applied in the field of new energy vehicles, making it an enterprise in the automotive-grade power semiconductor module heat dissipation substrate industry.

Huangshan Guojie plans to raise 502 million yuan for the intelligent manufacturing and capacity enhancement project of power semiconductor template heat dissipation substrates, the research and development center construction project, and to supplement working capital, with the intended use of the raised funds being 328 million yuan, 73 million yuan, and 100 million yuan, respectively.

The prospectus for Huangshan Guojie's GEM IPO (draft for review) shows that from 2021 to 2023 (hereinafter referred to as the "reporting period"), Huangshan Guojie achieved double growth in both operating income and net profit. However, entering 2024, Huangshan Guojie's performance has undergone a "face change."

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On August 9, the Shenzhen Stock Exchange Listing Review Committee held the 14th review meeting of 2024. The main inquiry at the meeting was about the operating performance of Huangshan Guojie, requiring it to explain whether there is a risk of further decline in future performance.

In addition to the risk of declining performance being a concern, there are also discrepancies between the content of Huangshan Guojie's prospectus and publicly available information, including several senior executives, including the independent director and deputy general manager, whose resumes contradict public information.

Regarding the company's 2024 performance "face change" and related information disclosure issues, the journalist called and wrote to the securities affairs department of Huangshan Guojie. The person in charge responded in writing, stating that the company has received the interview letter, but the company's leaders are busy with work and temporarily cannot spare time for an interview. Details can be found in the company's prospectus and other publicly disclosed materials.

Declining revenue and net profit in the first half of the year

"Since 2016, China's new energy vehicle industry has developed rapidly overall, and the copper needle heat dissipation substrate, as an important component of the power semiconductor module used in new energy vehicle motor controllers, has also developed rapidly in the market," Huangshan Guojie stated in its prospectus.

The copper needle heat dissipation substrate is crucial to Huangshan Guojie. During the reporting period, the company's sales revenue from copper needle heat dissipation substrates was 182 million yuan, 402 million yuan, and 590 million yuan, respectively, accounting for 93.48%, 96.96%, and 98.51% of the main business income.The reporter noticed that as the main source of income for Huangshan Valley Jie, the sales revenue of copper pin heat dissipation substrates has been increasing year by year, which also helps Huangshan Valley Jie to achieve double growth in operating income and net profit. During the reporting period, the operating income of Huangshan Valley Jie was 255 million yuan, 537 million yuan, and 759 million yuan, with a compound growth rate of 72.37%. The net profit attributable to the parent company after deducting non-recurring gains and losses was 33.9834 million yuan, 96.7178 million yuan, and 145 million yuan, with a compound growth rate of 106.77%.

However, in 2024, Huangshan Valley Jie did not continue the growth trend of performance, and both operating income and net profit declined in the first quarter of this year. Relevant data show that from January to March 2024, Huangshan Valley Jie achieved an operating income of 140 million yuan, a decrease of 9.83% compared to the same period last year. The net profit attributable to the parent company's shareholders after deducting non-recurring gains and losses was 26.0643 million yuan, a decrease of 8.38% compared to the same period last year.

Why did the operating income decline in the first quarter of this year? Huangshan Valley Jie explained that this was mainly due to the rapid decline in export volume affected by foreign new energy vehicle-related policies and the fierce competition in the new energy vehicle market, leading to a decline in the company's product sales prices.

In addition, Huangshan Valley Jie also stated in the prospectus that based on the actual operating conditions and orders in hand, it is estimated that the operating income for January-June 2024 will be 298 million yuan, a year-on-year decrease of 13.07% to 9.86% compared to January-June 2023; the net profit attributable to the parent company's shareholders will be between 57 million yuan and 59 million yuan, a year-on-year decrease of 15.00% to 12.02%; the net profit attributable to the parent company's shareholders after deducting non-recurring gains and losses will be between 53 million yuan and 55 million yuan, a year-on-year decrease of 17.65% to 14.55%.

Regarding the decline in operating income and net profit attributable to the parent company's shareholders after deducting non-recurring gains and losses in the first half of 2024, Huangshan Valley Jie explained that it was affected by factors such as adjustments in overseas new energy vehicle policies, a decline in product unit prices, and the continuous rise in copper prices.

Huangshan Valley Jie stated in the reply to the review center opinion implementation letter for listing on the Growth Enterprise Market that with the rise of domestic independent brand automobiles represented by new energy vehicles, the overall competition in the automotive industry tends to be fierce. New energy vehicle manufacturers have successively used active price reductions to compete for market share, and downstream vehicle manufacturers generally face significant price competition pressure. "The cost reduction pressure of vehicle manufacturers is transmitted upstream to parts suppliers, leading to a decline in product prices in the new energy vehicle parts industry. In addition, with the rapid increase in demand for automotive-grade power module heat dissipation substrates, other competitors are gradually entering, which also brings certain challenges to the company's operations."

The reporter noticed that during the reporting period, the average sales price of Huangshan Valley Jie's core product, the copper pin heat dissipation substrate, was 97.63 yuan, 95.40 yuan, and 90.97 yuan, showing a downward trend. Subsequently, affected by factors such as price reduction promotions by new energy vehicle companies, the average price of the company's core product, the copper pin heat dissipation substrate, is expected to decrease from 90.97 yuan per piece in 2023 to 86.16 yuan per piece from January to June 2024.

Regarding the risk of further decline in future performance, Huangshan Valley Jie stated that if there are significant adverse changes in future new energy vehicle industry policies, intensified market price competition in new energy vehicles, and continuous rises in copper prices that further lead to a decline in product sales unit prices and gross profit margins, causing significant adverse effects on the company's profitability, the company will face the risk of declining operating performance.

There may be flaws in information disclosure.

Behind the smooth approval of the IPO, there are still inconsistencies between Huangshan Valley Jie's prospectus and public information, including the employment history of several senior executives. The prospectus shows that since September 2022, he has served as the deputy general manager and secretary of the board of directors of Huangshan Valley Jie.According to the prospectus, Cheng Jiabin served as a section member in the Enterprise Management Department of Ningguo Shuangjin Industrial Co., Ltd. in Anhui Province from July 1996 to December 1997. From January 1998 to May 2002, he successively held positions as the head of the Enterprise Management Department, director of the project office, and office director at Anhui Feida Industrial Co., Ltd. From June 2002 to April 2012, he served as the head of the secretary section and office director at Anhui Zhongding Holding (Group) Co., Ltd. From May 2012 to November 2013, he was the securities affairs representative (also the head of the securities affairs department) at Wuhu Yaxia Automobile Co., Ltd. From December 2013 to December 2021, he was a director and board secretary at Anhui Pacific Cable Co., Ltd. From January to September 2022, he was the board secretary of Gujie Limited (the predecessor of Huangshan Gujie).

Tianyancha shows that Ningguo Shuangjin Industrial Co., Ltd. in Anhui Province (now known as "Anhui Shuangjin Industrial Co., Ltd.") was established in December 1997, and Anhui Feida Industrial Co., Ltd. (now known as "Anhui Feida Industrial Co., Ltd.") was established in January 2003. This means that Cheng Jiabin started his positions at the aforementioned two companies before they were officially established.

Luo Rentang, the deputy general manager of Huangshan Gujie, also has a similar situation. The prospectus shows that from November 2003 to November 2010, Luo Rentang was the quality manager at Jiangsu Kunshan Universal Locks Co., Ltd. However, Tianyancha shows that the company was established in October 2004.

Xu Dongmei, an independent director of Huangshan Gujie, also has the aforementioned experience. The prospectus shows that from July 2003 to July 2005, Xu Dongmei was the head of the marketing department at Dalian Huarui Audio & Video Industry Co., Ltd. However, Tianyancha shows that the company was established in December 2003.

It is worth noting that, in addition to the discrepancies between the information disclosed in the prospectus and public data receiving widespread attention, Huangshan Gujie's investment in R&D during the reporting period has also attracted much attention. The prospectus shows that Huangshan Gujie's R&D expenses were 4.94 million yuan, 12.34 million yuan, and 18.40 million yuan, respectively, accounting for 1.93%, 2.3%, and 2.42% of the current period's operating income.

Regarding the 149.84% and 49.06% increases in R&D expenses for 2022 and 2023 compared to the previous year, Huangshan Gujie explained: "Mainly due to the increase in customer demand, the company has increased R&D investment in new products and new processes, and to meet the needs of the company's R&D, the company has increased its investment in personnel." However, Huangshan Gujie's R&D expense ratio is lower than the industry average.

It is understood that the average R&D expense ratio of comparable companies in the industry during the reporting period was 5.29%, 6.83%, and 5.13%, respectively. "The company's R&D expense ratio is lower than the average level of comparable listed companies in the industry, mainly because the company transfers the cost of samples produced during the R&D process that can be sold to others from R&D expenses to operating costs/inventory," Huangshan Gujie stated.

It is worth noting that Huangshan Gujie's high-tech enterprise certificate is about to expire. It was re-certified and obtained the "High-tech Enterprise Certificate" (No.: GR201834001048) on July 24, 2018, by the Anhui Provincial Department of Science and Technology, the Department of Finance of Anhui Province, and the Anhui Provincial Taxation Bureau of the State Administration of Taxation, with a validity period of three years; and was re-certified and obtained the "High-tech Enterprise Certificate" (No.: GR202134002903) on September 18, 2021, with a validity period of three years. During the reporting period, the corporate income tax rate applicable to the company was 15%.

This means that Huangshan Gujie's high-tech enterprise certificate will expire within a month. According to the certification of high-tech enterprises, there are specific regulations on the proportion of the total R&D expenses of enterprises in the last three fiscal years to the total sales income in the same period, which are as follows: for enterprises with sales income of less than 50 million yuan (inclusive) in the most recent year, the proportion should not be lower than 5%; for enterprises with sales income between 50 million yuan and 200 million yuan (inclusive) in the most recent year, the proportion should not be lower than 4%; for enterprises with sales income above 200 million yuan in the most recent year, the proportion should not be lower than 3%. However, Huangshan Gujie has not met the above certification standards.

The reporter noticed that the improvement of R&D strength has also attracted sufficient attention from Huangshan Gujie. In the prospectus, one of the purposes of Huangshan Gujie's listing mentioned is "Through this listing, the company will leverage the advantages of the capital market platform to further enhance its overall R&D strength, enrich the product matrix, improve product quality, expand market share, and strengthen the company's market position."