Source: China Economic Net
China Economic Net Editor's Note: Shanghai Weiwan Seal Technology Co., Ltd. (hereinafter referred to as "Weiwan Seal") will be held at the GEM on December 29. The sponsor is Guosen Securities Co., Ltd., and the sponsor representatives are Hu Xuan and Wang Pan. Weiwan Seal plans to be listed on the Shenzhen Stock Exchange GEM. The number of shares issued this time shall not exceed 30 million shares, accounting for no less than 25% of the total share capital after issuance.
Weiwan Seal is a high-tech enterprise specializing in the research, development, production and sales of hydraulic pneumatic sealing products. The company's main products include hydraulic seals, hydraulic seal packages and other hydraulic seals, as well as other sealing products such as pneumatic seals, oil seals, track seals and other sealing products.
Weiwan Seal plans to raise 602 million yuan this time, of which 244 million yuan will be used for the newly built 80 million pieces/set of high-performance seals for Weiwan Technology Co., Ltd., 84.9962 million yuan will be used for the construction of Weiwan Technology Co., Ltd. Sealing Technology R&D Center, 92.4666 million yuan will be used for the intelligent upgrade and transformation construction project of Weiwan Technology Co., Ltd., and 180 million yuan will be used for the supplementary working capital.
From 2017 to January-June 2021, Weiwan Seal's net profit attributable to the parent company shareholders was RMB 20.3441 million, RMB 45.0439 million, RMB 47.2096 million, RMB 76.9044 million and RMB 33.7852 million, respectively.
Weiwan Seal Net Profit from 2019 to January-June 2021 lost to overdue accounts receivable. From 2018 to January-June 2021, Weiwan Seal's overdue accounts receivable were RMB 38.8176 million, RMB 52.6014 million, RMB 78.6447 million and RMB 86.9248 million, respectively.
Weiwan Seal's net profit in the first three quarters of 2021 fell by 23%, and the company expects the full-year net profit in 2021 to fall by 25% to 18% year-on-year.
From January to September 2021, Weiwan Seal achieved operating income of 323 million yuan, a year-on-year increase of 11.79%; achieved net profit attributable to parent company shareholders of 45.8048 million yuan, a year-on-year decrease of 23.40%; achieved net profit attributable to parent company shareholders of 43.3646 million yuan, a year-on-year decrease of 24.49%; net cash flow generated by operating activities was 17.8859 million yuan, a year-on-year increase of 177.45%.
Weiwan Seal is expected to achieve operating income of RMB 414 million to RMB 425 million in 2021, a year-on-year increase of 2% to 5%; net profit attributable to parent company owners was RMB 57 million to RMB 62.5 million, a year-on-year decrease of 25% to 18%; net profit attributable to parent company owners after deducting non-recurring gains and losses was RMB 54 million to RMB 59.5 million, a year-on-year decrease of 26% to 18%.
From 2017 to January-June 2021, the gross profit margins of Weiwan Seal's main business were 47.32%, 44.25%, 39.60%, 39.43% and 37.13%, respectively, showing an overall downward trend. The company said that it is mainly affected by changes in product sales structure and decline in product sales prices.
It is expected that the net profit attributable to shareholders of the parent company will decrease by 25% to 18% in 2021
Weiwanjiefeng's controlling shareholder and actual controller are Dong Jing. The company disclosed the draft of the prospectus on December 22, 2021, showing that as of the date of signing the prospectus, Dong Jing directly held 47.11% of Weiwanjiefeng's shares, and indirectly controlled 5.74% and 4.93% of Weiwanjiefeng's shares by serving as the executive partner of Shanghai Lindu and Shanghai Fangyi respectively. Dong Jing controlled 57.78% of Weiwanjie's shares through direct shareholding and indirect domination. Dong Jing is a Chinese nationality and has no permanent residence abroad.
From 2017 to January-June 2021, Weiwan Seal's operating income was RMB 105 million, RMB 245 million, RMB 289 million, RMB 405 million and RMB 240 million, respectively, and the net profit attributable to the parent company shareholders was RMB 20.3441 million, RMB 45.0439 million, RMB 47.2096 million, RMB 76.9044 million, and RMB 33.7852 million, and the net profit attributable to the parent company shareholders after deducting non-recurring gains and losses were RMB 18.9487 million, RMB 48.588 million, RMB 45.1572 million, RMB 73.1166 million, and RMB 35.1625 million, respectively, and the net cash flow generated by operating activities was RMB -6.0814 million, RMB -21.6915 million, RMB 5.4065 million, RMB 6.8164 million, and RMB 29.5539 million, respectively.
From 2018 to 2020, Weiwan Seal's cash dividend amount was RMB 8.5 million, RMB 50 million and RMB 20 million, respectively.
Overdue accounts receivable in the first half of this year was 86.9248 million yuan
From 2017 to January-June 2021, the book value of accounts receivable in Weiwan Seal was 81.0767 million yuan, 128 million yuan, 135 million yuan, 188 million yuan and 190 million yuan, respectively, accounting for 56.09%, 48.83%, 38.84%, 41.81% and 36.32% of current assets, respectively.
From 2017 to January-June 2021, the balance of accounts receivable of Weiwan Seal was RMB 85.1532 million, RMB 134 million, RMB 143 million, RMB 200 million and RMB 203 million, respectively, accounting for 82.15%, 55.26%, 49.72%, 49.71% and 42.43% of the main business revenue, respectively.
From 2018 to January-June 2021, Weiwan Seal's overdue accounts receivable were RMB 38.8176 million, RMB 52.6014 million, RMB 78.6447 million, and RMB 86.9248 million, respectively.
From 2017 to January-June 2021, Weiwan Seal accounts receivable turnover rate was 1.69 times, 2.23 times, 2.09 times, 2.36 times and 1.19 times, respectively.
core product revenue share has been declining continuously
According to the IPO Daily, according to the data, from 2018 to 2020 and the first half of 2021, Weiwan Seal's operating income was 245 million yuan, 289 million yuan, 405 million yuan and 240 million yuan respectively. Among them, the proportion of core technology product revenue to the main business revenue was 76.46%, 75.84%, 67.43% and 59.51%, respectively, showing a downward trend. The remaining part of
is mainly trade income. Weiwan Seal purchase standard parts and purchase seal bags are directly sold to customers after purchasing the finished products. The main products are imported brands such as Parker Hannifin and NOK, as well as SKF's oil seal products, accounting for 23.54%, 24.16%, 32.57% and 40.49% of the main business revenue, respectively.
It can be seen that the proportion of revenue of the company's core technology products continues to decline, but the proportion of trading revenue continues to grow.
In addition, Weiwan Seal Invention Patents also have highlights.
It is reported that Weiwan Seal has been established for more than 13 years, but in the draft application, Weiwan Seal only has one invention patent, and the application date can be traced back to December 2012. In response, Weiwan Jiefeng stated in the application draft that the main reason was that at the beginning of the reporting period, the company rarely applied for material technical patent protection in order to avoid leakage after the expiration of the material technical protection period.
Regarding the full-year performance in 2021, Weiwan Seal expects operating income to be 414 million yuan to 425 million yuan in the draft, a year-on-year increase of 2% to 5%. With the slight increase in operating income, Weiwanmai's net profit attributable to shareholders and net profit attributable to shareholders after deducting non-operating items fell a lot, with net profit attributable to shareholders falling a lot from 18% to 25%, and net profit attributable to shareholders after deducting non-operating items fell a lot from 18% to 26%.
In response to this, Weiwan Jiefeng stated in the draft that the reasons include the rise in commodity prices that have led to some major customers requiring the company to lower product prices, resulting in a decrease in gross profit margin compared with the previous year.
In terms of growth rate, compared with the net profit attributable to shareholders in 2019, Weiwan Seal expects net profit attributable to shareholders to shareholders to increase by 21% to 32% year-on-year in 2021.
However, when Weiwan Seal introduced external investors to increase its capital in November 2019, the post-investment valuation was only 671 million yuan, while this Weiwan Seal IPO plans to raise 602 million yuan, issuing no more than 30 million shares, accounting for 25% of the total shares after issuance. Based on this calculation, the company's post-investment valuation is 2.408 billion yuan. After considering the dilution effect, the value-added rate is as high as 169.15%.
gross profit margin declined
From 2017 to January-June 2021, the average gross profit margins of comparable listed companies in the same industry were 47.43%, 42.63%, 41.66%, 41.25% and 38.92% respectively.
Weiwan Sealing stated that during the reporting period, the gross profit margin of the company's out-of-buy products sales was generally lower than that of homemade products. As the proportion of the company's out-of-buy products sales increased year by year during the reporting period, the company's comprehensive gross profit margin showed a downward trend. During the reporting period, the gross profit margin of the company's out-of-buy products was generally lower than that of homemade products. As the company's business scale continues to expand, if the proportion of out-of-buy products sales will further increase in the future, it will have an adverse impact on the company's comprehensive gross profit margin and the company's profitability in the short term. At the same time, factors such as continuous rise in commodities and fierce market competition have led to continued pressure on major customers to reduce prices, and the company's product sales prices have further declined. In addition, the company's new product research and development, import substitution of homemade parts, optimization of production costs, and bargaining with upstream suppliers have not met expectations. The company's product gross profit margin will risk further decline.
Interbank companies were urgently cancelled, and their relationship was broken. According to Yicaixin, during the reporting period, another major affiliate with Weiwan Seal, Shanghai Wanyou Power Technology Co., Ltd. (hereinafter referred to as "Wanyou Power"), which had a close relationship with Weiwan Seal, was also an enterprise controlled by Dong Jing, the actual controller of Weiwan Seal, and there were also insiders of Zheng Coal Machinery among the affiliated shareholders.
In January 2004, Dong Jing, Xue Yuqiang (now director of Wanxie) and Jia Hao (now director and general manager of Zhengmei Machinery) established Wanyou Power to engage in sealing parts trading business. Through the operation of Wanyou Power, Dong Jing has accumulated more experience in the sealing industry and upstream and downstream market resources. Later, in November 2008, he jointly invested in the establishment of Shanghai Weiwan Seal Technology Co., Ltd. (hereinafter referred to as "Weiwan Limited"), the predecessor of Weiwan Seal, to engage in the research, development, production and sales of sealing materials and seals.
On September 30, 2015, after Wanyou Power's equity was transferred, Dong Jing held 51% of the shares, Jia Hao's sister Jia Xiaoqing held 34% of the shares, and Xue Yuqiang held 15% of the shares.
In September 2017, Weiwan Limited acquired assets under the same control of Wanyou Power, and acquired accounts receivable and inventory assets related to Wanyou Power's sealing business. The total price of transferred assets was RMB 47.5366 million, of which the inventory transfer price was RMB 28.6034 million (including tax amount) and the accounts receivable transfer price was RMB 18.9332 million. This acquisition is based on the book value of the relevant assets of Wanyou Power as of September 30, 2017.
From the end of 2017, Dong Jing decided to give up Wanyou Power's seal trading business in order to seek Weiwan Seal Listing. Weiwan Seal and the original Wanyou Power supplier continued to cooperate, and the two companies also had overlapping customers.
Weiwan Seal and Wanyou Power's related transactions were concentrated in 2017 and 2018, and there were still differences in gross profit margin and unrelated parties.
From January to September 2017, Wanyou Power's sales amount to Weiwan Seal was 6.35 million yuan, with a gross profit margin of 23.83%. During the same period, Wanyou Power's sales gross profit margin to other sealing customers was 30.59%.
In 2018, the amount of the Weiwan Sealing gasket replacement fee of Wanyou Power was 3.5022 million yuan. The main reason was that when Wanyou Power was operating normally from January to September 2017, the salary, bonus, social security and other salary of senior and middle-level managers of Weiwan Sealing and middle-level managers who worked part-time at Wanyou Power, as well as the travel expenses of sales managers, were included in Wanyou Power. The prospectus stated that by the end of 2018, the relevant part-time staff only provided services to Weiwan Mesh, but Dong Jing and Xue Yuqiang were still working at Wanyou Power until October 2020. In order to eliminate competition among industry and eliminate related transactions, after shareholder negotiation, Wanyou Power stopped its operations and completed the industrial and commercial cancellation in November 2020.
When disposing of Wanyou Power's subsequent assets, Dong Jing, Jia Xiaoqing and Xue Yuqiang established Shanghai Zhichuang Enterprise Management Consulting Co., Ltd. according to the proportion of the original shareholding of Wanyou Power, to take over 40% of the equity of Zhengzhou Coal Captain Wall Machinery Co., Ltd. (hereinafter referred to as "Zheng Coal Captain Wall") held by Wanyou Power.
Zheng Coal Captain Wall was established in 2009 by Zheng Coal Machinery and has been established as a subsidiary of Zheng Coal Machinery Holdings. As of December 31, 2020, Zheng Coal Machinery's shareholding ratio was 53.21%. In 2010, Zheng Coal Machinery plans to introduce private capital to invest in Zheng Coal Pilot. Because Jia Hao worked in Zheng Coal Machinery and had a good understanding of the business situation of Zheng Coal Captain Bi, Jia Xiaoqing was willing to invest in Zheng Coal Captain Bi through Wanyou Power, and Dong Jing and Xue Yuqiang also joined the joint investment.
In summary, although Weiwan Seal has dissolved its relationship with its main affiliate Zhengmei Machinery and cancelled its interbank company Wanyou Power, the actual controller and executives still invested in a subsidiary of Zhengmei Machinery Group with the original shareholders of Wanyou Power, and the interests are still close.
In addition, Weiwan Seal sold seals of the same specifications to Zheng Coal Machinery Group, the average unit price is significantly lower than the average unit price of customers of comparable OEMs, with an average difference rate of 22.62% to 28.56%. Weiwan Seal's gross profit margin to Zhengmei Machinery Group is 4 to 10 percentage points lower than that of comparable OEM customers.
Prospectus explains that Weiwan Seal's sales price to Zheng Coal Machinery Group is lower than that of comparable OEM customers. The main reason is that Zheng Coal Machinery Group has a high market share, large procurement batches and fierce competition, so Zheng Coal Machinery Group needs to be given a lower price in the same market.
In March 2021, Zheng Coal Machinery transferred the remaining 19.18% of its shares in Huaxuan Fund to Huaruan Investment. After the transfer is completed, Zheng Coal Machinery will no longer hold shares in Huaxuan Fund and will no longer hold shares in Weiwan Meefeng in any way.
After the relationship is terminated, the annual contract between Weiwan Seal and Zheng Coal Machinery will expire on June 30, 2022. According to the relevant provisions and agreements with Zheng Coal Machinery, Zheng Coal Machinery has the right to purchase or re-tender from other suppliers after the bid notice expires.
Customers and suppliers overlap
Prospectus shows that from 2017 to January-June 2021, Weiwan Seal, Sales amounts to Suda Shares, one of the top five customers, were RMB 10.8731 million, RMB 11.5104 million, RMB 6.3962 million, RMB 10.0513 million, and RMB 3.9958 million, respectively. The purchase amounts from the company from 2017 and 2019 to 2020 were RMB 33,000, RMB 0.02 million, and RMB 2,200, respectively.
Weiwan Sealing to one of the top five customers from 2017 to January-June 2021, the sales amounts of Shanghai Qiaosheng Hydraulic Technology Co., Ltd. were RMB 1.188 million, RMB 19.596 million, RMB 17.2667 million, RMB 12.005 million, and RMB 5.2061 million respectively. During the same period, the purchase amounts from the company were RMB 281,100, RMB 420,500, RMB 271,700, RMB 40,000, and RMB 56,800 respectively.
Weiwan Seal to one of the top five customers, Wanyou Power, in 2017 and 2018, was 20.9398 million yuan and 5.7717 million yuan respectively, and the purchase amount from the company during the same period was 12.2389 million yuan and 589,900 yuan respectively.
Weiwan Sealing to Guangzhou Gaste Seal Technology Co., Ltd., one of the top five suppliers from 2017 to January-June 2021, were 204,600 yuan, 171,600 yuan, 196,800 yuan, 203,700 yuan, and 173,200 yuan, respectively. During the same period, the purchase amounts from the company were 2.964,300 yuan, 2.854,700 yuan, 2.3904 million yuan, 3.319,300 yuan, and 1.886,800 yuan respectively.
Weiwan Sealing to SKF Group, one of the top five suppliers from 2018 to January-June 2021, were sold to SKF Group, one of the top five suppliers, respectively, and the purchase amounts from 2.9412 million yuan, 48.9439 million yuan, 60.0678 million yuan, 69.171 million yuan and 42.6987 million yuan respectively. From 2019 to January-June 2021, the sales amounts to Yangzhong Huasen Seal Co., Ltd., one of the top five suppliers were RMB 0,500, 445,900, and 236,000, respectively. During the same period, the purchase amounts from the company were RMB 39,500, 26,532,400, and 17,359,900, respectively.
