Introduction: In the cases of the IPO on the GEM this year, the positioning and business sustainability of the GEM have become the "red lines" for listing and issuance. However, Weidu's business seems to have a large packaging component, extremely low R&D investment and a business model that relies heavily on large customers seem to touch two "red lines". In addition, on-site inspections forced the company to passively disclose key information "concealed" by the company. As the sponsor of Weidu Co., Ltd. is Guosen Securities diligent and responsible?
Produced by: Sina Finance Listed Company Research Institute
Author: Forrest Gump, Zhong Wen
Recently, Weidu Co., Ltd.'s GEM has hit the listing and plans to raise 405 million yuan, mainly used for "CRM service upgrade construction projects in the automotive industry", "Multi-industry CRM service expansion projects", "brand digital marketing system construction and industrialization projects" and "supplementary working capital".
In the case of 's listing on the GEM IPO this year, the positioning and business sustainability of the GEM have become the "red line" for listing and issuance. However, Weidu shares seem to trigger these two "red lines". First, the company packaged its call outsourcing business into marketing CRM marketing services, and its positioning on the GEM is highly questionable; secondly, the company's major customers are dependent on and their performance is relatively fluctuating, and business sustainability is also a major problem. In addition, on-site inspections forced the company to "conceal" key information disclosure issues. Is Guosen Securities, the sponsor of Weidu Shares' issuance and listing, diligent and responsible?
GEM positioning is doubtful: low R&D investment, call center talent undergraduate rate is only 7%
If we only look at the company's prospectus, it seems that Weidu shares' business is very "high-end", as follows:
" The company focuses on mainly meeting the needs of well-known large-scale brands in the industry, focusing on the main line of customer relationship management (CRM), integrating CRM strategy consulting, CRM digitalization, data analysis and mining, creative design, operation services and retail tutoring. Provide brand customers with innovative CRM solutions that integrate technology, data and operational services. ”
However, from its business structure, its customer communication contributed the most revenue, and once accounted for more than 50%. The so-called customer communication is actually the outgoing call center of the car company. The core tasks are mainly to serve the car company's customers' calls, send short MMS messages, online customer service and email. Weidu Co., Ltd.'s call business is the main source of income in customer communication business. The prospectus shows that as of the end of 2021, Weidu Co., Ltd.'s revenue from call projects accounted for more than 90% of customer communication business. In 2020 and 2021, the proportion of call services to total revenue was 35.67% and 29.79% respectively.
Source: Announcement
It is worth mentioning that the regulatory inquiry directly questioned its communication business, questioning whether it belongs to a simple labor outsourcing business. Labor outsourcing is generally considered to have characteristics such as low business importance, low technical content, and weak personnel quality requirements. Let’s take a look at the talent structure of Weidu Co., Ltd.?
From the perspective of the company's personnel structure, the company's call center has a junior college degree or below account for more than 90%, which is 93%.
Source: Announcement
It should be pointed out that Weidu Co., Ltd.'s GEM positioning has been repeatedly inquired. Industry insiders said that the so-called CRM system solutions are extremely replaceable and replicable, and do not have the thresholds such as high technology and high innovation. The company's call center personnel have relatively low education, but also have relatively high turnover rates, many staff during probation periods, and some temporary employment. The issuer's call center turnover rate is relatively high. From 2018 to 2020, the issuer's call center turnover rate was 108.80%, 50.59% and 121.97% respectively.
Weidu shares have high technical content or have high innovation model characteristics, which may be difficult for us to prove ourselves, but we can test the real situation from some quantifiable indicators such as R&D investment and employee turnover rate.
According to the data disclosed in the company's prospectus, the company's R&D investment in the past five years was RMB 2.0549 million, RMB 3.2053 million, RMB 3.2617 million, RMB 2.8341 million and RMB 5.4018 million, respectively, accounting for 1.55%, 1.97%, 1.67%, 1.36% and 2.07% of the company's business income, respectively. The cumulative R&D investment in five years has not exceeded the threshold of 50 million yuan. It is worth mentioning that the R&D investment of the GEM is a key audit indicator for the GEM listing review. Regarding the sudden increase in R&D expenses on the eve of the company's listing, regulators questioned whether they are preparing for listing.
If Weidu shares business has high technology content or has innovative characteristics, its personnel should be relatively stable. First, the technical threshold is high, and second, talents are the company's core assets. However, the company's employees seem to be unstable. As of the end of 2021, Weidu Co., Ltd. had a total of 617 employees, of which more than 90% were business personnel. From 2019 to 2021, the company's turnover rates were 36.85%, 47.99% and 63.12% respectively. A high turnover rate may indicate that the company's grassroots employees are poor and the company's business is not very technical.
In summary, whether in terms of R&D investment or from the perspective of employee quality structure and personnel stability, Weidu shares seem to have a large packaging component, and its innovation is questionable. It is worth mentioning that when discussing innovation characteristics, the company "prides itself on" its unique business model and has no competitors, which is a strong competitiveness. However, it was eventually "slapped in the face" by third-party research and reporting data.
"Brave" was slapped in the face. The core product market share is only 1.27%
Weidu Co., Ltd. said: The company's positioned CRM innovative solutions have no similar companies in the A-share market at present, and there are no local companies of similar scale among non-listed companies. This deeply integrated service format is also a reflection of the company's core competitiveness, making the company have differentiated competitiveness in competition with internationally renowned CRM companies. Therefore, the company's business positioning is an innovative business model.
Source: Inquiry letter
According to Weidu Shares, there is no comparable peer in China, which is a manifestation of strong core competitiveness. This logic is really up to be discussed.
What’s even more ridiculous is that Weidu shares “slapped itself in the face” with the industry research reports they trust: there are many CRM companies in domestic non-listed companies. The prospectus shows that Weidu shares use the "China CRM Industry Research Report" released by iResearch Consulting as an important source of information and data support. We found this research report from iResearch Consulting and found that there are many CRM companies in my country, such as FengxiangSales , Saikk, Qince, Mantis Technology, Tencent Qingdian, etc.
Source: iResearch Consulting
Prospectus shows that in 2021, my country's CRM market size was 15.6 billion yuan, and Weidu Co., Ltd.'s CRM marketing revenue was 198 million yuan, with a market share of about 1.27%.
and other signs indicate that Weidu Co., Ltd. seems to have a larger packaging component. As a sponsor, Guosen Securities is diligent and responsible? It is worth mentioning that the sponsor Guosen Securities seems to have contributed to its packaging listing. Regarding Weidu shares’ strong gross profit margin, it was explained that it was caused by Weidu shares’ differentiated competition. However, we found that there may be something else behind the fact that the gross profit margin is far beyond that of peers.
Is there something wrong with the high gross profit margin? There are doubts about the collection of labor costs
Yinsai Group's brand management business includes brand strategic planning, integrated marketing communication planning and creative design and production; Kaichun Co., Ltd. customer relationship management service business includes the development and management of CRM system, CRM activities and communication, and customer service center services; Weidu Co., Ltd. regards these two companies as comparable peer companies. However, Weidu shares' gross profit margin seems to be far higher than its peers. In 2021, the gross profit margins of Kaichun Co., Ltd., Insai Group and Weidu Co., Ltd. were 27.95%, 38.46% and 43.88% respectively.
Source: Announcement
Why does the company's gross profit margin far exceed its peers?
The CRM service industry engaged in by Weidu Co., Ltd. is a talent-intensive industry, and labor costs constitute the main part of the company's daily operating resources.During the reporting period, the company's employee salary accounted for 56.33%, 65.26% and 70.3% of the cost structure, respectively. It can be seen that the company's labor costs account for a very high proportion. Therefore, labor costs are the key factor in determining the company's gross profit margin.
Source: Announcement
However, according to the on-site inspection of the association, the company's labor cost collection process is casual, and internal control seems to have defects. According to the company's "Cost and Expense Accounting System for Internal Control System", the Finance Department conducts project verification based on the working hours exported in the OA system. If there are any differences, it will be confirmed and adjusted with the project executive or department director. At the same time, the adjustment must be confirmed by email. The inspection found that during actual implementation, for abnormal projects such as working hours but no income, who still fill out working hours after the project is completed, the Finance Department directly exported the relevant working hours table and adjusted it to the same client's next year's project. It did not confirm with the project executive or department director, and no confirmation email was found.
As of the end of 2021, Weidu Co., Ltd. had a total of 617 employees, of which more than 90% were business personnel. In addition, from 2019 to 2021, the company's turnover rates were 36.85%, 47.99% and 63.12% respectively. The company's call center personnel have relatively low education, but also have relatively high turnover rates, many staff during probation periods, and some temporary employment. It is worth mentioning that the company's probationary period accounted for as high as 42% of its employees in 2019, and will reach 22% before its listing. In addition, the company's turnover rate is much higher than that of its peers. At this point, it is confusing whether the company is suspected of using employees during the probation period to reduce costs?
Source: Announcement
Business sustainability is doubtful: relying on a single customer, large customers also fluctuate
From the perspective of performance, Weidu shares' performance is relatively fluctuating.
From 2018 to 2021, the company's operating income was RMB 162 million, RMB 195 million, RMB 209 million and RMB 261 million, with year-on-year growth rates of 20.37%, 7.18%, and 24.75% respectively; net profit was RMB 50.7285 million, RMB 48.8516 million, RMB 63.7753 million and RMB 66.6303 million, respectively, with year-on-year growth rates of -3.7%, 30.55%, and 4.48%, respectively. In addition, the call business segment, which contributed the most to the revenue, saw a sharp decline in 2022, and the proportion of call execution revenue in the current main business revenue in the first half of 2022 dropped from 28.09% in 2021 to 14.72%. What is most worrying about
Compared with performance fluctuations is that the large customers that Weidu shares relies on are relatively volatile.
During the reporting period, the company's sales revenue to the top five customers was RMB 159 million, RMB 172 million and RMB 216 million, respectively, accounting for 81.48%, 82.23% and 82.67% of the current operating income, respectively. Among them, the sales revenue to the largest customer Volvo accounted for 26.77%, 30.92% and 42.31% of the operating income, respectively.
It should be noted that Volvo sales slowed down, but the company's revenue recognized by Volvo increased significantly. During the reporting period, the domestic sales of Volvo Car were 154,600 units, 166,300 units and 171,400 units respectively. There may be two major questions here. First, is the company's performance growth real? Second, even if the company's revenue is real, as sales of large customers slow down, will the growth that depends on a single customer be sustainable in the future?
In fact, Weidu Co., Ltd.'s major customers have fluctuated. is affected by factors such as SAIC-GM , Jaguar Land Rover , Volkswagen and Fisland, the new crown epidemic and whether the company has successfully accepted the draft, the company's revenue from the above major customers has declined to varying degrees during the reporting period. In addition, in 2021, the issuer failed to obtain the call center business of Mercedes-Benz and Jaguar Land Rover for the new year due to factors such as cooperation price and business positioning.
During the reporting period, the company's revenue to SAIC-GM was RMB 22.521 million, RMB 9.8562 million and RMB 9.8427 million (2018 annual revenue of RMB 9.4622 million); the company's revenue to Volkswagen was RMB 17.1499 million, RMB 15.2281 million and RMB 14.9618 million (2018 annual revenue of RMB 13.4184 million); the company's revenue to Jaguar Land Rover was RMB 9.5588 million, RMB 11.9812 million and RMB 6.1328 million, respectively.
The company's low-priced customer acquisition market is not sustainable. During the reporting period, the gross profit margins of Mercedes-Benz customer communication were -44.92%, 13.07% and 9.59% respectively, with the overall gross profit margin. In addition to customer communication business, Mercedes-Benz's other business development did not meet the company's expectations. Starting from 2022, the company has not undertaken Mercedes-Benz's call business. In 2019, the company obtained the "Mercedes-Benz Call Center 2019-2021" project at a relatively low price, aiming to deepen the company's business partnership with Mercedes-Benz through this call business and expand other businesses of CRM solutions through this call business. However, the company's business cooperation with Mercedes-Benz did not meet expectations and no longer undertakes new call business contracts. At the same time, Weidu shares will no longer undertake Jaguar Land Rover call center business since 2022.
Is Guosen Securities diligent and responsible?
Recently, the Shenzhen Stock Exchange has implemented a conversation reminder for the investment banking, quality control, kernel leaders and sponsor representatives of the eight sponsors that have failed to perform their duties in the issuance and listing of the GEM, further urged the sponsors to be diligent and responsible, and truly assume the responsibility of verification and control.
The problems encountered by the institution in investment banking business reflected "three inadequate":
First, the preparations for issuance and listing are not in place. Some issuers and sponsors still have the mentality of "breaking through the mark" and "placeholding" habits, and "declare with illness" will be "declared" if the prominent problems in the issuer's internal governance and internal control are not rectified and standardized.
Second, it is because it is not diligent and responsible. Some sponsors do not take the initiative or go deeper in the inspection. During the review, they cannot resist inquiries about important matters such as issuer's business operations and accounting treatment, fail to provide reasonable explanations, and are "retreat" after being carried out on-site supervision or on-site inspection.
Third, the positioning of the GEM is not well understood. Some sponsors do not have a deep understanding of the GEM's main service of innovative growth enterprises. A few of the applicant companies do not meet the requirements of the GEM's "three innovations" and "four new" requirements, and they voluntarily withdraw or are rejected during the review.
, and Guosen Securities, sponsored by Weidu Co., Ltd., seems to account for two. First, the article on the positioning of Weidu Co., Ltd. has been analyzed in detail before and will not be repeated; second, the company has many flaws such as internal control defects, accounting processing and incomplete information disclosure, and whether Guosen Securities is diligent and responsible is worth pondering.
In July last year, Weidu shares were drawn to the on-site inspection and found many problems.
First of all, the company's information disclosure was incomplete. On-site inspection found that Weidu Co., Ltd. had investments in independent directors and incomplete disclosure of overlap between suppliers and customers.
Secondly, some items are not shared according to the revenue recognition period.
Again, the company's internal process is flawed. According to the issuer's "Cost and Expense Accounting System for Internal Control System", the Finance Department conducts project verification based on the working hours derived from the OA system. If there are any differences, it will confirm and adjust with the project executive or department director. At the same time, the adjustment must be confirmed by email. The inspection found that during actual implementation, for abnormal projects such as working hours but no income, and those who still fill out working hours after the project is completed, the Finance Department directly exported the relevant working hours table and adjusted it to the same client's next year's project. It did not confirm with the project executive or department director, and no confirmation email was found.
On-site inspection found that during the reporting period, the issuer's temporary estimate of revenue was supplemented with at the reporting level and the corresponding value-added tax was set aside at the reporting level, but the value-added tax was delayed until the invoice is issued and the VAT was declared and paid in the tax system.
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