"Investor Network" Zhang Wei
Editor Hu Shan
html On April 21, textile dye manufacturer Zhejiang Wanfeng Chemical Co., Ltd. (hereinafter referred to as "Wanfeng Shares") disclosed a prospectus for listing on the Shanghai Stock Exchange main board. No more than 33.38 million shares will be issued, raising 548 million yuan for technological transformation and upgrading, R&D center construction and additional working capital.However, the company’s revenue in the past three years has not been stable, and its net profit has declined for two consecutive years. If this IPO is approved, how will it digest it in the future when its investment project is expected to double its production capacity? Adding new production capacity and maintaining performance growth are issues Wanfeng needs to face.
Net profit continues to decline
According to the prospectus, Wanfeng Co., Ltd. was established in November 2003 and is mainly engaged in the research and development, production and sales of disperse dyes and their filter cakes. disperse dye is mainly used for dyeing and printing of polyester and its blended fabrics. Some of the terminal application brands include Anta , Li Ning , Adidas, Nike, Uniqlo , Decathlon , etc. In terms of
performance, from 2019 to 2021 (hereinafter referred to as the "reporting period"), the operating income of Wanfeng Co., Ltd. was 673 million yuan, 516 million yuan and 563 million yuan respectively; the net profits attributable to the parent company were 123 million yuan and 87 million yuan respectively. billion and 75 million yuan, of which revenue from disperse dyes accounts for nearly 90%, and the rest comes from filter cakes and dye intermediates.
Chart 1: Main business income composition of Wanfeng Co., Ltd.
It can be seen that Wanfeng Co., Ltd.’s performance during the reporting period was not stable. In terms of operating income, it decreased by 23% year-on-year in 2020 and increased by 9% year-on-year in 2021. In particular, the net profit attributable to the parent company has declined for two consecutive years during the same period, with year-on-year decreases of 29% and 14% respectively in 2020 and 2021.
Regarding the reason for the continuous decline in net profit, Wanfeng Co., Ltd. told the "Investor Network" that it was related to the decline in gross profit margin of its main business. During the reporting period, the company's main business gross profit margins were 43%, 34% and 31% respectively.
Wanfeng shares stated that the gross profit margin in 2019 was significantly higher than that in 2020 and 2021, mainly due to the "3.21" explosion in Xiangshui, Jiangsu, which caused some dye companies to suspend production and the market demand for the company's products increased significantly; with the "3.21" explosion The impact of the accident has weakened, the suspension of production of dye companies has resumed work, coupled with the entry of some new competitors and the impact of the new coronavirus epidemic, the gross profit margin of the main business has declined, returning to the same level as the industry average.
Wanfeng shares also mentioned in the prospectus that in the future, if the downstream market sentiment declines, product prices continue to fall, and costs and expenses further increase, the company will face the risk of a decline in the gross profit margin of its main business, which will have an adverse impact on profitability. Why does the inventory of
remain high?
While profitability continues to decline, Wanfeng's inventory is also increasing.
Financial data shows that at the end of each reporting period, the book values of Wanfeng's inventory and were 266 million yuan, 264 million yuan and 308 million yuan respectively, and the current assets during the same period were 713 million yuan, 643 million yuan and 701 million yuan respectively. The proportions of inventories in current assets are 37%, 41% and 44% respectively.
It can be seen that the book value of Wanfeng's inventory in 2019 and 2020 remained relatively stable. The book value of inventory at the end of 2021 increased by 43.56 million yuan compared with the end of 2020, an increase of 16%. In this regard, the company stated that it was mainly due to the company's expansion of production scale and increase in stocking, and the inventory product increased significantly.
In addition, from a structural point of view, Wanfeng's inventory mainly consists of raw materials, self-made semi-finished products and inventory goods. The total book value of the three accounts for more than 90% of the book value of the inventory. Among them, self-made semi-finished products and inventory goods increased to varying degrees at the end of each reporting period.
Chart 2: Details of the book value of Wanfeng's inventory
Wanfeng said that the company adopts a production model that combines "production based on sales" and "appropriate stocking", and organizes and arranges production based on judgments of market demand; self-made semi-finished products in 2020 The book value increased by 23% year-on-year, mainly because the company produced raw materials into semi-finished products and reserved them in advance, and responded to changes in customer demand in a timely manner by shortening the subsequent production cycle; the book value of inventory goods in 2021 increased by 37% year-on-year, mainly due to the higher number of orders on hand at the end of the year. More, the company has expanded production scale and increased stocking. At the end of 2021, it plans to suspend production during the normal holiday during the Spring Festival in 2022, so production and stocking are ahead of schedule.
However, the company's inventory depreciation provisions and are relatively low, respectively 5.93 million yuan, 5.77 million yuan and 6.2 million yuan, only about 2% of the book balance of the inventory at the end of each period.
How to digest the doubled production capacity
The purpose of fundraising shows that Wanfeng Co., Ltd. plans to raise 548 million yuan in this IPO, of which 359 million yuan is planned to be used for the technical transformation and improvement project with an annual output of 10,000 tons of disperse dyes, and 79 million yuan is used for The R&D center construction project and 110 million yuan were used to supplement working capital.
Chart 3: Wanfeng Co., Ltd.’s fund-raising purpose arrangement
It is reported that the 10,000-ton annual disperse dye technical transformation and upgrading project is located in the existing factory of Wanfeng Co., Ltd. It will be rebuilt into a 4-story building by demolishing the existing single-story workshops 4 and 1. Gao's 4th workshop, and purchased production equipment such as reactor , filter press , sand mill , beating pump, spray drying tower, etc. After technical transformation, it has reached an annual production capacity of 20,000 tons of disperse dyes.
According to the prospectus, Wanfeng's output during the reporting period remained at 10,000 tons/year. The actual annual output was only 8,262 tons, 8,037 tons, and 8,983 tons respectively. The corresponding capacity utilization rates were 83%, 80%, and 8,000 tons respectively. 90%.
Wanfeng Co., Ltd. stated that the relatively low production capacity utilization rate in 2019 was mainly affected by the rectification of some workshops and production lines in the current period; in 2020, it was mainly caused by the suspension of production at the beginning of the year due to the impact of the new crown epidemic. However, the company is still not operating at full capacity in 2021.
Regarding how to digest the doubled production capacity, Wanfeng Co., Ltd. said that it will ensure the new production capacity by participating in domestic and foreign professional exhibitions, brand promotion, using domestic and foreign professional media to strengthen publicity, focusing on target markets, increasing the proportion of exports, etc. to achieve sales.
Financial data shows that during the reporting period, Wanfeng's domestic sales accounted for approximately 70%, concentrated in Zhejiang and Jiangsu; overseas sales accounted for approximately 30%, and its products were directly exported to: South Korea, Indonesia, , Turkey , Mexico and other countries.
In addition, Wanfeng shares’ fundraising purposes include 110 million yuan to supplement working capital. At the end of each reporting period, the company's monetary funds and trading financial assets were 149 million yuan, 77 million yuan and 103 million yuan respectively. It is worth noting that the company paid dividends three times from 2020 to 2022, with a cumulative profit distribution of 80 million yuan.
Chart 4: Comparison of the asset-liability ratio of Wanfeng Shares with peers
Regarding the rationality of supplementing working capital, Wanfeng Shares stated that it will be helpful to meet the company’s future working capital needs that will increase due to the expansion of production and operation scale and reduce assets and liabilities. rate and improve the company's solvency. At the end of each reporting period, the company's asset-liability ratios were 48%, 39%, and 38.14% respectively, which was slightly higher than the average level of 28% for listed companies in the same industry. (Produced by Think Finance) ■
