Source: China Economic Net China Economic Net Editor's Note: On April 8, Zhejiang Wandekai Fluid Equipment Technology Co., Ltd. (hereinafter referred to as "Wandkai") will be held at the meeting. The sponsor is Guotai Junan Securities, and the sponsor representatives are Xu Yizho

The controlling shareholder and actual controller of the company are Zhong Xingfu, Chen Fangren, Chen Jinyong, Chen Lihong, Wang Suyun and Wang Guiping. Before this issuance, Zhong Xingfu, Wang Suyun, Chen Jinyong's family and Chen Fangren, Wang Guiping and Chen Lihong's families directly and indirectly held 96.48% of the company's shares, and Zhong Xingfu and Chen Fangren are brother-in-law.

Specifically, as of the date of signing the prospectus, Zhong Xingfu directly held 24.27% of the company's shares, his spouse Wang Suyun directly held 11.20% of the company's shares, his son Chen Jinyong directly held 11.20% of the company's shares, and Zhong Xingfu family owned a total of 46.67% of the company's shares; Chen Fangren directly held 24.27% of the company's shares, his spouse Wang Guiping directly held 11.20% of the company's shares, his son Chen Lihong directly held 11.20% of the company's shares, and Chen Fangren and his family owned a total of 46.67% of the company's shares. At the same time, Zhong Xingfu and Chen Fangren also indirectly held 1.54% of the company's shares through Taizhou Collaboration respectively. Wang Suyun and Wang Guiping are sisters.

Zhong Xingfu serves as the chairman of the company, Chen Fangren serves as the director and general manager of the company, Chen Jinyong and Chen Lihong serves as the director and deputy general manager of the company, and Wang Suyun and Wang Guiping both serve in the company's administrative department.

2021 net profit increased by 50.87%, but the net operating cash decreased by 77.99%

million Dekai said in its prospectus that in 2021, the net cash flow generated by operating activities was 21.1116 million yuan, lower than the net profit, mainly because: at the end of 2021, the company's on-hand order scale reached 183.5996 million yuan, an increase of 39.69% from the end of the previous period. In order to meet the production needs of orders, the company has purchased a lot of raw materials. The purchase amount of copper rods in 2021 reached 173.20% in 2020, and the purchase amount of accessories in 2021 reached 167.51% in 2020, causing a significant increase in procurement expenditure in 2021; international copper prices continued to rise, and the average purchase unit price of copper rods in 2021 increased by 40.19% compared with 2020, which also led to an increase in procurement expenditure; the impact of the global new crown epidemic on international freight continued, resulting in the failure of goods to leave the port in time, causing the inventory of goods and the goods issued at the end of 2021 to increase by 29.4111 million yuan and 10.5833 million yuan respectively compared with the end of last year, with a growth rate of 132.10% and 92.74% respectively, extending the turnover time of the company's sales end and increasing inventory capital occupation.

During the reporting period, the company did not make dividend distributions.

Nearly 70% of the main business income comes from the United States

During the reporting period, Wandekai's products were mainly exported. In each period, the company's overseas sales revenue accounted for more than 94% of the company's main business income, accounting for 96.01%, 95.26% and 94.10% from 2019 to 2021, respectively.

Among them, in each period, Wandekai's sales to the United States accounted for 73.10%, 73.76% and 65.98% of the company's main business income, respectively, with the highest proportion of revenues of various countries.

According to Wandekai's prospectus, from a regional perspective, the company's business was mainly concentrated in the United States during the reporting period.The downstream well-known plumbing equipment brands that have close cooperation with the company, such as RWC Group, Watts Group, Oatey Group, Sioux Chief Group, etc., whose businesses are mainly concentrated in the United States. The sales in China are small, and customers will eventually sell to European and American markets.

gross profit margin rose abnormally, peers fell

million Dekai gross profit margin overall showed an increase trend, but peers all showed a downward trend. In 2019 and 2020, Wandekai's gross profit margin was lower than the average of peers, and was already higher than the average of peers in 2021. From 2019 to 2021, Wandekai's gross profit margin was 23.52%, 26.41%, and 26.26%, respectively, and the average gross profit margins of comparable companies in the same industry were 27.69%, 26.88%, and 24.86%, respectively, of which Yonghe Intelligent Control was 31.78%, 32.43%, and 28.60%, respectively, and Haiou Housing was 22.74%, 21.32%, and 21.11%, respectively.

Wan Dekai stated in its prospectus that the gross profit margin of the company's main business during the reporting period is equivalent to the average gross profit margin of comparable listed companies in the same industry, and there are no abnormal situations.

Main raw material Copper rod purchase unit price rose by 40% last year

million 0000 Dekai's main raw materials needed for production were copper rods and purchased spare parts, among which the cost of copper rods accounted for about 60% of the production cost. The main components of copper rods are copper and zinc, and the price of copper is an important factor affecting the price of copper rods. During the reporting period, the average monthly price trend of domestic spot copper was as follows:

Last year, the company's copper rod purchase unit price rose by 40.19% year-on-year. From 2019 to 2021, the average purchase unit price of Wandekai copper rods was 35.57 yuan/kg, 33.55 yuan/kg, and 47.04 yuan/kg respectively.

Wandekai stated in its prospectus that the company's direct material costs account for a high proportion during the reporting period, and fluctuations in the price of major raw materials have a great impact on the company's product costs. Since the second half of 2020, copper prices have continued to rise. Although the quotation of the company's products is usually formulated in a cost-added manner and adjusted accordingly according to the changes in the prices of raw materials such as copper rods and exchange rate changes, the company can pass on the risk of copper price fluctuations to downstream customers to a certain extent, but the company's order execution time is generally 1-3 months, and the changes in product prices lag behind the changes in material prices. If the prices of main raw materials continue to rise in the short term and the company cannot manage the purchase price of raw materials well, it will face the risk that it is difficult to digest the rising prices of raw materials through timely product price adjustments, which will reduce the company's profit level and lead to a decline in the gross profit margin of the company's product; if the prices of main raw materials continue to fall, under the company's cost-added pricing model, although the gross profit margin can remain relatively stable, the growth of sales revenue may slow down. If the price drops sharply exceed the growth rate of sales volume, operating income may decline, which will have a significant adverse impact on the company's operating performance.

supplier abnormality: established and crashed in one year

Shenzhen Stock Exchange asked questions about Wandekai's supplier in the first and second rounds of review inquiries.

The first round of review inquiry response shows: Taizhou Qihe Copper Technology Co., Ltd. was established in 2019. It cooperated with Wandekai in the year of its establishment. It is the fourth largest copper rod supplier in 2019. The purchase amount in that year was 19.7692 million yuan. Since 2020, the company has not purchased it.

Guixi Tianyi Copper Co., Ltd. was established in 2017. In 2018, it cooperated with Wandekai to be the fourth largest copper rod supplier in 2018. The purchase amount in that year was 19.5452 million yuan. The company will no longer purchase from it since 2019.

Taizhou Judeyi was established in 2018. It is an enterprise actually controlled by Gong Shiju, a former employee of Wandekai. It mainly provides the company with spare parts for bathroom products. During the reporting period, the company purchased from it was RMB 8.0439 million, RMB 9.6987 million, RMB 8.2085 million and RMB 4.3027 million, respectively.

The second round of inquiry letter requires Wandekai to explain: the reasons and rationality of Taizhou Qihe Copper Technology Co., Ltd. and Guixi Tianyi Copper Co., Ltd. becoming the top five copper rod suppliers of the issuer in the year of its establishment (the following year), the reasons and rationality of the issuer’s no longer purchasing from it after one year of cooperation, whether the price of the issuer’s purchase from it is fair; the types of accessories purchased from Taizhou Judeyi, whether the purchase price is fair, and whether Taizhou Judeyi is in the situation of preparing the cost of the issuer on behalf of the issuer.

Wandekai replied that Guixi Tianyi Copper Co., Ltd.'s business was transferred from Guixi Yuxing Copper Co., Ltd., and the two companies are related parties. Guixi Yuxing was founded in 2011. It is one of the company's main suppliers and has a long cooperative relationship with the company. Guixi Tianyi was established in 2017 and became the company's fourth largest copper rod supplier in 2018. The main reason is: At the beginning of its establishment, Guixi Tianyi Copper Co., Ltd. enjoyed local policy preferential treatment in Guixi City, Jiangxi Province and actively explored the market. Its copper rod price has a competitive advantage. In order to control the procurement price and diversified procurement of copper rods, the company introduced Guixi Tianyi Copper Co., Ltd. as a new copper rod supplier, and the purchase amount from it in 2018 was 19.5452 million yuan. After 2018, the local policies enjoyed by Guixi Tianyi Copper Co., Ltd. have weakened. As its copper rod price returns to normal levels, and its distance is far away and its purchase and freight costs are high, the company will no longer purchase from it since 2019. The company purchased copper rods from it in 2018 mainly included 37700 copper rods and CW617N copper rods. The two types of copper rods have sufficient supply in the market. From 2019, it turned to suppliers such as Taizhou Qihe Copper Technology Co., Ltd., Taizhou Yangfan Copper Co., Ltd., and Ningbo Jintian Copper (Group) Co., Ltd. to increase procurement. In summary, it is reasonable that Taizhou Qihe Copper Technology Co., Ltd. and Guixi Tianyi Copper Co., Ltd. became the top five suppliers of copper rods in the year of its establishment (the following year). After a year of cooperation, it is reasonable that the company will no longer purchase from it.

According to Wandekai's reply, the company's actual controller Wang Suyun received a total of 16 transfers from Gong Shiju, the actual controller of Taizhou Judeyi, from February 2018 to November 2019, with a total amount of 5.0873 million yuan, all of which were the asset prices of Wandekai Copper Sanitary Ware Products Project. Gong Shiju started operating sanitary ware products in 2010. Due to shortage of funds, he adopted the method of cooperative operation with Wandekai Copper, which was implemented within Wandekai Copper in the form of a project. Wandekai Copper advances to purchase equipment and advances to pay working capital, and Gong Shiju is specifically responsible for the project. After many years of operation, the project still failed to achieve the expected development. There was only one main customer, the order scale was not large, and it was unable to form a good scale effect and its profitability was not high. In 2017, Wandekai Copper decided to stop the project, terminate the cooperative operation, and convert existing orders from self-production to direct outsourcing. When the cooperative operation was terminated, after the agreement between the two parties confirmed, Gong Shiju installment will repay the funds advanced during the cooperation period of Wandekai Copper, and Wang Suyun will collect the corresponding funds on his behalf as the shareholder representative of Wandekai Copper. The two parties involved in the above-mentioned cooperative operation method are Wandekai Copper Industry and Gong Shiju, and have been terminated before the reporting period. The relevant funds have nothing to do with the company's production and operation.

Except for the above situations, the company and its actual controllers, directors, supervisors, senior management personnel, employees, former employees have no financial transactions or other interest arrangements with Taizhou Judeyi and its actual controllers, directors, supervisors, senior management personnel, employees, and former employees. During the reporting period, the unit price of the main products purchased by the company from Taizhou Judeyi was not significantly different from the purchase price of other customers of Taizhou Judeyi. The gross sales profit margin of the company's related products was not much different from those of companies in the same industry. The relevant transaction pricing was fair, and Taizhou Judeyi did not have the situation of providing the company with the cost of the company.

Current ratio is lower than 2 for three consecutive years, and the quick ratio is lower than 1

From the end of 2019 to the end of 2021, Wandekai's total liabilities were 252 million yuan, 228 million yuan and 335 million yuan, respectively, of which current liabilities were 251 million yuan, 224 million yuan and 330 million yuan, respectively, accounting for 99.98%, 98.24%, and 98.66%, respectively. During the same period, the balance of Wandekai's cash funds was RMB 27.5895 million, RMB 65.3937 million and RMB 72.6911 million, respectively.

From the end of 2019 to the end of 2021, the debt-to-asset ratio of Wandekai (parent company) was 52.39%, 43.26%, and 44.42%, respectively. The average values ​​of comparable listed companies in the same industry were 40.65%, 43.43%, and 47.83%, respectively; the current ratios were 1.27, 1.60, and 1.49, respectively, and the average values ​​of comparable listed companies in the same industry were 2.32, 1.51, and 1.42, respectively; the quick ratios were 0.70, 0.87, and 0.64, respectively, and the average values ​​of comparable listed companies in the same industry were 1.53, 0.97, and 0.90, respectively.

Wan Dekai stated in its prospectus that overall, at the end of each period of the reporting period, the company's current ratio and quick ratio were slightly lower than those of companies in the same industry, and the debt-to-asset ratio was slightly higher than those of companies in the same industry, mainly because comparable listed companies in the same industry had enhanced their capital strength after listing, more diverse financing channels, and relatively low bank borrowing scale.

The total amount of the guarantee contract of the related parties during the reporting period was 444 million yuan

As of the end of the reporting period, under the above-mentioned maximum guarantee guarantee agreement/maximum mortgage contract, the total amount of guarantee loans under the guarantee agreement and maximum amount of mortgage contract that have not yet been fulfilled was 19.2844 million yuan.