The domestic capital market is moving to the world. For a period of time, the red chip structure has attracted much attention. Simply put, it is pseudo-foreign capital. The company's main business and source of profits are in China, but the profit and controlling rights belong to

article: Weighting financial researcher Yu Huafeng

editor: Xu Hui

Domestic capital market is moving to the world. For a period of time, the structure of red chip has attracted much attention. Simply put, it is pseudo-foreign capital. The main business and source of profits are in China, but the profit and controlling rights belong to the founding shareholders of domestic companies that are established offshore areas such as the British Virgin Islands and Cayman Islands . The offshore company is listed overseas as the financing platform .

Suzhou Weijia Technology Co., Ltd. (referred to as Weijia Technology), established as a foreign businessman, plans to be listed on the GEM, and the sponsor is CICC. This time, the plan is to issue RMB common shares (A shares ) of no more than 12.0714 million shares, which is no less than 25% of the total share capital after issuance. It plans to invest 1.128 billion yuan in fundraising funds for high-speed high-precision PCB drilling and milling and testing equipment production base construction projects, high-end special equipment R&D production projects, R&D center transformation and upgrading projects, and supplement working capital. As of June 30, 2022, the company's total assets were 897 million yuan, and the funds raised this time were higher than the company's total assets.

Weijia Technology's actual controller acquired Weijia Co., Ltd. on behalf of others, borrowed and transferred loans to continuously, and internal control is poor in standardization; the gross profit margin is more than a dozen points lower than the average of the peer, and accounts receivable and inventory are both high; the R&D expense ratio is lower than the average of the peer, and competitors sued it for patent infringement; relying on a single overseas supplier, the proportion of financing and small and medium-sized customers is high, which is different from the customer's procurement and sales data; the debt-to-asset ratio far exceeds the average of the peer, and was punished twice during the reporting period.

acquired Weijia Co., Ltd., which is constantly borrowing and lending, and the internal control standardization is poor. Weijia Co., Ltd., the predecessor of the company, was a wholly foreign-owned limited liability company established by BVI Weijia (VEGASCIENCE & TECHNOLOGYCO., LTD.) on April 18, 2007. The registered capital of Weijia Co., Ltd. was US$10 million when it was established, and all of them were subscribed by BVI Weijia, of which: US$8 million is US$6 for the capital contribution, and US$2 million is in-kind.

On December 15, 2009, BVI Weijia transferred 80% of its shares in Weijia Co., Ltd. to Wang Chengdong, and transferred 20% of its shares in Weijia Co., Ltd. to Xu Xiong. Wang Chengdong and Xu Xiong acquired the above shares from BVI Weijia for RMB 24 million (equivalent to HK$27.19 million). Wang Chengdong and Xu Xiong acquired 100% of Weijia Co., Ltd.'s equity in a proxy manner instead of directly acquiring it.

On June 15, 2010, Wang Chengdong transferred his 36% equity in Weijia Co., Ltd. to Qiu Sijun, transferred his 2% equity in Weijia Co., Ltd. to Guangzhou Hetai, and transferred his 12% equity in Weijia Co., Ltd. to Changyuan , Yang Renjie, Kang Mingsheng, Jiang Meiwen and other four people. The four each acquired 3% equity in Weijia Co., Ltd.; agreed to Xu Xiong transfer his 20% equity in Weijia Co., Ltd. to Guangzhou Hetai. After the relevant equity transfer, Wang Chengdong continued to hold 30% of Weijia Co., Ltd. for Hu Zehong. As the operative holder, Hu Zehong actually held 30% of Weijia Co., Ltd., of which 20% of the shares were transferred by the acting holder Wang Chengdong for RMB 10 million on December 31, 2018, and 10% of the shares were transferred by the acting holder Zhong Peizhao (this part of the shares was accepted from Wang Chengdong on January 1, 2019) to Qiu Sijun for RMB 7 million on July 26, 2020.

On January 7, 2021, the joint-stock company was established. As of the date of signing the prospectus, Qiu Sijun directly held 44.97% of the company's shares, and indirectly controlled 15.78% of the company's shares through Weijia Kai Hyatt. Qiu Sijun directly and indirectly controls the company's shares by 60.75%, and is the company's controlling shareholder and actual controller.

The company has added 8 new shareholders in the past year, including Fengnian Junhe, Muli Venture Capital, Zhongbi Fund, Haifu Yangtze River, Shunrong Angel Phase IV, Shunrong Kaituo No. 2, Anyuan, and Zhongjin Pucheng. CICC Pucheng holds 2.2485% of the company's shares and is a wholly-owned subsidiary of CICC, the sponsor (lead underwriter) of this issuance.

On September 22, 2020, Qiu Sijun transferred his 6.5% equity in Weijia Co., Ltd. to Fengnian Junhe for RMB 32.5 million, and transferred his 6.5% equity in Weijia Co., Ltd. to Muli Venture Capital for RMB 32.5 million. Qiu Sijun cashed in 65 million yuan through equity transfer.It is worth noting that the actual controller Qiu Sijun has an betting agreement with the new external institutional shareholders, which involves the obligation to repurchase. The specific triggering events include the company's failure to submit application materials to the China Securities Regulatory Commission or the stock exchange for the company's qualified issuance and listing before March 31, 2022 and was officially accepted, and the company's failure to complete the qualified issuance and listing before March 31, 2023.

At the beginning of the reporting period, Qiu Sijun's non-operating capital balance was RMB 10.0178 million. From 2018 to 2020, the actual controller Qiu Sijun borrowed RMB 8.1478 million, RMB 6.4708 million and RMB 7.751 million, respectively, totaling RMB 22.3696 million, mainly used to directly pay the price of his acquisition of equity held by other shareholders of Weijia Technology, and to repay foreign loans caused by the historical acquisition of equity of Weijia Technology. From 2018 to 2020, Qiu Sijun's annual repayment amounts were RMB 537,100, RMB 5.061,900 and RMB 26.7885 million respectively. As of October 21, 2020, Qiu Sijun paid off all the loan balances, and based on the actual loan amount, the number of days of loans, and the 5-year loan interest rate announced by the People's Bank of China 4.90%, the total interest payment was 4.0875 million. The main source of funds for Qiu Sijun to return the above-mentioned loans to the company was the equity transfer funds obtained by Qiu Sijun transferring 6.5% of Weijia Co., Ltd. to Fengnian Junhe and 6.5% of the equity to Muli Venture Capital in October 2020.

In addition, during the reporting period, the company had deposited funds from some related parties and borrowed money from Zhu Jie and Changyuan. From 2018 to 2020, the amount of loans the company had for other employees was RMB 86,700, RMB 334,400 and RMB 105,800, respectively; the company had accumulated RMB 52.44 million in loans to several non-financial institutions and other natural persons.

From 2018 to January 2020, the amount of company loan transfers was RMB 50.1 million, RMB 22.7 million and RMB 3.7 million, respectively. During the reporting period, the actual controller of the company and some related parties provided guarantees of RMB 899.9 million for the company's bank loans and other financing activities to support the company's business development.

gross profit margin is less than a dozen points lower than the average of the peers, and accounts receivable and inventory are both high. Weijia Technology is mainly engaged in the research, development, production and sales of PCB special equipment and other special equipment. From 2019 to 2021, the company's operating income was RMB 229.7 million, RMB 481.2 million and RMB 797.7 million, respectively, with revenue growth of RMB 109.49% and 65.77% in 2020 and 2021 respectively; net profits of each period were RMB 15.6361 million, RMB 55.5331 million and RMB 93.2779 million, with growth in 2020 and 2021 respectively. From January to June 2022, the company's operating income was 320 million yuan, a year-on-year decrease of 7.84%, and its net profit was 31.9218 million yuan, a year-on-year decrease of 20.91%.

It is worth noting that during each period of the reporting period, the net cash flow generated by the company's operating activities was -31.5404 million yuan, 30.5595 million yuan and -85.8628 million yuan respectively. cash flow for operating activities net less than net profit is the main reason for the increase in operating receivables and the large-scale inventory inventory reserves caused by the increase in business scale. At the end of each period during the reporting period, the book balance of the company's accounts receivable was RMB 120.1 million, RMB 181.9 million and RMB 364.1 million, respectively, accounting for 52.27%, 37.80% and 45.65% of the revenue, respectively. As of the end of 2019, the end of 2020 and the end of 2021, the proportion of the accounts receivable was 99.81%, 85.04% and 43.20% of the company's inventory book value was RMB 66.4173 million, RMB 136.1 million and RMB 283 million, respectively, accounting for 24.99%, 22.53% and 35.49% of the current assets in the current period, respectively. The company plans to use the raised 300 million yuan to supplement working capital.

The PCB special equipment industry where the company is located is a typical technology-intensive industry, involving interdisciplinary comprehensive technology in multiple fields. The continuous development of application fields such as 5G communications, smart terminals, integrated circuits, automotive electronics, cloud computing, and aerospace has promoted the continuous upgrading of PCB product performance, and the requirements for PCB special equipment have also been continuously improved. The company needs to make continuous R&D investment in technology and products to meet customers' high-quality and diversified needs.

PCB drilling equipment and PCB molding equipment are the company's core products, among which PCB drilling equipment accounts for 81.88%, 91.95% and 92.97% respectively, and PCB molding equipment accounts for 17.44%, 7.73% and 6.49% respectively. The revenue of other special equipment mainly comes from the sales of AOI products, CNC drilling machines and SMT splitter machine , etc., accounting for 0.68%, 0.32% and 0.53% respectively.The company's product line is relatively single.

During the reporting period, the company's core products covered key PCB processes and faced fierce competition from domestic and foreign manufacturers such as Schmoll, Japan VIA, Taiwan Dongtai Precision Machinery, Taiwan Taiwan, and a large number of technology, Dazu CNC. The company has won the second prize of Suzhou Science and Technology Progress Award, and was selected as the "Hot 100 Enterprises in the China Electronics Circuit Industry" by the China Electronics Circuit Industry Association and China Electronics Information Industry Federation (2018, 2019). Public information shows that according to the ranking of PCB dedicated equipment by the CPCA Industry Association, Dazu CNC ranked first in the top 100 electronic circuit industry in China (special equipment and instrument category) released by CPCA for twelve consecutive years (2009-2020), and Maxun Electronics (2014-2020), a wholly-owned subsidiary of Dazu CNC, ranked fourth in seven consecutive years. In 2020, Suzhou Weijia Technology Co., Ltd. ranked seventh.

CSRC requires the company to combine the company's ranking in the top 100 electronic circuit industry rankings (special equipment and instruments) and the gap with competitors, and to explain the company's comparison of operating conditions, market position, technical strength, key business data, indicators for measuring core competitiveness, etc. between the company and its peers, and the industry echelon situation.

2019-2021, the company's comprehensive gross profit margin was 27.28%, 26.87% and 27.35%, respectively, which is lower than the average level of comparable companies in the same industry 44.50%, 41.65% and 41.31%.

R&D expense ratio is lower than the average of peers. Competitors sued it for infringement of patents

From 2019 to 2021, Weijia Technology's R&D expenses were RMB 11.7603 million, RMB 17.4976 million and RMB 49.8743 million, respectively, accounting for 5.12%, 3.64% and 6.25% of revenue, respectively, and the R&D expense ratio was significantly lower than the average level of the same industry by 10.81%, 9.80% and 10.98%.

As of April 25, 2022, the company has 102 authorized invention patents, 102 utility model patents, and 46 software copyrights. One of the company's core technologies, the technology source of "ultra-large thrust water-cooled linear motor technology", is independent research and development and patent acquisition. The CSRC requires the company to explain whether the intellectual property rights related to the company's core technology are clear, whether there are disputes, litigation or arbitration, and whether there are related technologies and products based in part on foreign countries in the company's main business and application scenarios. If there is, it indicates whether the potential economic and trade friction risks have a significant adverse impact on the company's main business.

The three acquired patents, namely "3 inventions and utility models of low-thrust pulsation permanent magnet linear motors with low thrust pulsation, and a kind of iron-free linear motor without iron core" (patent numbers are 2015101636663, 2015202095909, and 2016202768655, respectively), were purchased by the company from Ningbo Yiwente; after obtaining the ownership of these patents, combined with its own patent technology, the independent production of ultra-large thrust water-cooled linear motors was successfully achieved. From October 2020 to April 2021, Yiwente patents and non-patent technology were paid in installments, with a total payment of 3.6 million yuan.

As of the date of signing the prospectus, the company received the "Civil Complaint" for four intellectual property lawsuits. The plaintiffs are all Dazu CNC, and Dazu CNC is one of the company's competitors. Up to now, three of the lawsuits are in the pre-trial mediation stage, the court has not filed a case, and one lawsuit is in the first instance stage. The patents involved in the four intellectual property lawsuits are "Mechanical Drilling Machine Terminal Box" (ZL201621372239.2), "A spindle chuck cleaning device and PCB drilling equipment" (ZL202020272526.6), "Pressure foot device and circuit board mechanical drilling machine" (ZL201220088293.X), and "Attachment of gas clamp opening and anti-stupidity, system and gas clamp control device" (ZL201210424336.1). The four patents involved in the four intellectual property lawsuits are applied to the company's core product - PCB drilling equipment. The CSRC requires the company to explain whether it will have a significant adverse impact on the company's ability to continue operating; the above three intellectual property litigations are not the basis for determining major litigation involving the company's core technology.

From 2019 to 2021, the company's employees were 190, 352 and 536 respectively. In 2020, the company's labor dispatch accounted for 17.56%. The number of labor dispatched workers accounts for more than 10% of the total number of labor employed by the company, which does not comply with the provisions on the proportion of labor dispatched workers in the " Interim Provisions on Labor Dispatch ".

During the reporting period, the company had a payment cooperative relationship with Qianjin Network Information Technology (Shanghai) Co., Ltd. and a payment cooperative relationship with Suzhou Zhongzhi Human Resources Co., Ltd. There was a payment cooperative relationship with Suzhou Zhongzhi Human Resources Co., Ltd. and Suzhou Zhongzhi Human Resources Co., Ltd. and its seven affiliates or cooperative third-party payment institutions paid social insurance and housing provident fund at their actual workplaces. As of March 31, 2021, the company had 35 employees who paid social insurance and housing provident fund through third-party payment institutions. The third-party payment institutions paid social insurance and provident fund and accounted for 7.8% of the company's employees.

relies on a single overseas supplier, and accounts for a high proportion of financing and small and medium-sized customers. It is different from the customer's sales data

Weijia Technology's main raw materials include marble bases, guide rails, motors, grating scales, , spindles, control systems, electronic components , etc. During the reporting period, the company's direct material costs were RMB 157.9 million, RMB 332.5 million and RMB 544.7 million, respectively, accounting for 95.37%, 95.40% and 94.60% of the current main business cost , respectively.

During the reporting period, some of the company's key devices such as control systems, spindles and guide rails still rely on overseas brands Germany SIEB&MEYER, UK NoVANTA and Japan THK respectively. From 2019 to 2021, the total amount of purchases from the above three overseas brands was RMB 49.8317 million, RMB 123.5 million and RMB 235 million, respectively, accounting for 27.69%, 30.84% ​​and 34.82% of the total purchases in the current period (the total amount of purchases by the company for overseas brands was RMB 65.5166 million, RMB 152.9 million and RMB 288.3 million, respectively, accounting for 36.41%, 38.16% and 42.73% of the total purchases in the current period, respectively). Overseas supplier SIEB&MEYER is the single supplier of the company's procurement control system. The amounts of the procurement system during the reporting period were RMB 28.3863 million, RMB 61.5237 million and RMB 130.2 million, respectively, accounting for 15.78%, 15.36% and 19.30% of the total procurement amount in the current period, respectively.

During each period of the reporting period, the company's sales to small and medium-sized customers accounted for 27.93%, 40.48% and 41.85% of the company's total sales in the current period, respectively, showing an upward trend, mainly due to the high dispersion of competition in the domestic PCB industry. Since 2020, the new crown epidemic has caused the global PCB industry to accelerate the transfer of production capacity to mainland China and the downstream demand is strong. The domestic PCB industry has poured in new manufacturers mainly in the scale of small and medium-sized enterprises. Some small and medium-sized customers have small business scales and relatively single product types. If these customers cannot adapt to the high-end development trend of PCB products in the future, it may lead to deterioration of operating conditions, which will lead to the company being unable to continue to cooperate with these customers and the receivable collection of uncertainties.

Jinlu Electronics is the company's fourth largest customer in 2019. The company's amount to its PCB drilling equipment and PCB forming equipment was 14.6549 million yuan, accounting for 6.38%. According to the registration draft of Jinlu Electronics, Weijia Technology is not among its top five suppliers, and its purchase amount from the largest supplier was only 12.933 million yuan.

Nantong Juqiang is the company's third largest customer in 2020. The company sold products to it was 30.2488 million yuan. Public information shows that this customer was established on May 8, 2020. In the year of its establishment, it became one of the company's top five customers. In 2020, the number of social security payments was only 6.

The same customers also include Huizhou Xinfeng Industrial Co., Ltd., which was established in 2019, which is also a financial leasing customer.

During the reporting period, the main leasing companies that the company cooperated with were Ping An International Financial Leasing , Olix Financial Leasing, Haitong Hengxin International Financial Leasing, Haier Financial Leasing, Far East International Financial Leasing, etc. The company's sales revenue collected through the financial leasing model was RMB 38.3119 million, RMB 84.6731 million and RMB 249.6 million, respectively, accounting for 17.09%, 17.87% and 31.58% of the main business revenue.

's debt-to-asset ratio far exceeds the average of peers. It was fined twice during the reporting period

As of the end of each period of the reporting period, Weijia Technology's current ratio was 1.07 times, 1.62 times and 1.65 times, respectively, and the quick ratio was 0.80 times, 1.26 times and 1.06 times, respectively, and the debt-to-asset ratio was 83.69%, 58.88% and 57.80% respectively.

As of the end of each period of the reporting period, the average current ratio of comparable companies in the same industry was 4.84 times, 5.47 times and 6.55 times, the average quick ratio was 4.11 times, 4.72 times and 5.71 times, and the average debt-to-asset ratio was 34.63%, 39.76% and 38.20% respectively.

Weijia Technology was punished twice during the reporting period. First, it was that the tax payable included value-added tax, business tax, corporate income tax and urban construction tax. First, he was fined 15,000 yuan for failing to provide safety education and training to practitioners in accordance with regulations.

According to the Judgment Document Network, Weijia Technology has contract purchase and sales disputes with customers or suppliers many times and has been enforced. For example, if a dispute with Suzhou Weilong Lifting Equipment Manufacturing Co., Ltd. is settled and deducted bank deposits of RMB 37,455; if a dispute with Dongguan Hongcheng Optical Products Co., Ltd. is enforced. According to (2020) Su 0591 Execution No. 3344, the bank deposits of RMB 500.00 were enforced, requiring the return of the glass calibration plate and bear the execution fee.

According to Suyuan Municipal Supervision Punishment No. 00331, Novante Technology (Suzhou) Co., Ltd., the main supplier of Weijia Technology, was fined 30,000 yuan on October 15, 2021.

Weijia Technology will usher in the grand test of the conference on September 22. The outcome of the conference will affect a number of external institutions that have suddenly invested. Even if the issuer is removed from the betting agreement, it will not be able to evade the repurchase liability of the actual controller.