After this stock issuance, it is planned to be listed on the science and innovation board market, which has high investment risk. Kechuang board company has the characteristics of large R & D investment, high operation risk, unstable performance and high delisting risk. Investors are facing greater market risk. Investors should fully understand the investment risks of the science and innovation board market and the risk factors disclosed by the company, and make investment decisions prudently.
Shaanxi Huaqin Technology Industry Co., Ltd
(No. 188, West Avenue, hi tech Zone, Xi’an, Shaanxi)
Initial public offering and listing on the science and Innovation Board
Letter of intent
Sponsor (lead underwriter)
(Building 4, No. 66 Anli Road, Chaoyang District, Beijing)
Statement
The issuer and all directors, supervisors and senior managers promise that the prospectus and other information disclosure materials are free from false records, misleading statements or major omissions, and bear individual and joint legal liabilities for their authenticity, accuracy and completeness.
The controlling shareholder and actual controller of the issuer promise that there are no false records, misleading statements or major omissions in this prospectus, and bear individual and joint legal liabilities for its authenticity, accuracy and completeness.
The person in charge of the company, the person in charge of accounting and the person in charge of the accounting institution shall ensure that the financial and accounting materials in the prospectus are true and complete.
The issuer and all directors, supervisors, senior managers, controlling shareholders, actual controllers, sponsors and underwriting securities companies promise to compensate investors for losses in securities issuance and trading due to false records, misleading statements or major omissions in the issuer’s prospectus and other information disclosure materials.
The sponsor and the securities service institution promise to compensate the investors for the losses caused to the investors due to the false records, misleading statements or major omissions in the documents prepared and issued for the issuer’s public offering.
Any decision or opinion made by the CSRC and the exchange on this issuance does not indicate that they guarantee the authenticity, accuracy and completeness of the registration application documents and the information disclosed, nor do they indicate that they make substantive judgment or guarantee on the profitability, investment value of the issuer or the income of investors. Any statement to the contrary is a false statement.
According to the provisions of the securities law, the issuer shall be responsible for the changes in the operation and income of the issuer after the shares are issued according to law; Investors independently judge the investment value of the issuer, make investment decisions independently, and bear the investment risks caused by the changes in the operation and income of the issuer or the changes in the stock price after the shares are issued according to law.
Overview of this offering
Type of shares issued: RMB ordinary shares (A shares)
The number of shares issued this time is 16.666668 million, accounting for 25% of the total share capital of the company after issuance. This offering does not involve the public offering of shares by the original shareholders of the company.
The sponsor will arrange China Securities Co.Ltd(601066) Investment Co., Ltd., an alternative investment subsidiary established according to law, to participate in the strategic placement of this offering. The number of shares invested by the sponsor is expected to be 5.00% of the shares of relevant subsidiaries of the sponsor participating in the strategic public offering, that is, 833333 shares. The difference between the number of strategic investors’ final placement and the number of initial placement is first transferred back to offline issuance. The restricted period of the shares allocated by China Securities Co.Ltd(601066) Investment Co., Ltd. for this strategic placement is 24 months, which shall be calculated from the date of listing of the shares issued to the public
Senior managers and employees of the issuer do not participate in the strategic placement and participate in the strategic placement
The par value of each share is RMB 1.00
The issue price per share is RMB []
Expected issue date: February 24, 2022
Stock exchanges and sectors to be listed Shanghai Stock Exchange Kechuang board
The total share capital after issuance is 66.666668 million shares
Sponsor (lead underwriter) China Securities Co.Ltd(601066)
Signing date of the prospectus: February 16, 2022
Tips on major issues
This major event reminder is a summary reminder of the company risks and other important matters that investors need to pay special attention to. Investors should carefully read the text of this prospectus. 1、 Special tips on main risk factors
Investors are requested to carefully read all the contents of “section IV Risk Factors” in this prospectus, fully understand the risk factors disclosed by the company, make prudent investment decisions, and especially remind investors to pay attention to the following risks of the company:
(I) the risk of fluctuation of the company’s profits caused by the pricing method of military products
As the approval cycle of military product price is generally long, before the completion of military price review, the company will recognize the revenue according to the provisional price agreed in the contract signed with the customer. After the completion of price review, the current revenue of price review will be adjusted due to the difference between the provisional price and the final approved price. In each period of the reporting period, the military products revenue settled by the company according to the temporary pricing was 34.9129 million yuan, 93.7686 million yuan, 348.3907 million yuan and 156.4481 million yuan respectively, accounting for 87.99%, 87.31%, 86.85% and 81.91% of the company’s main business revenue respectively, reaching a total of 63.3503 million yuan. As of the signing date of this offering intention, the price review of the above products sold and settled according to the provisional price has not been completed. If there is a large difference between the provisional price of the company’s products and the final approved price, there will be a risk of large fluctuations in the company’s future operating revenue and total profit.
(II) risk of decline in gross profit margin of main business
During the reporting period, the gross profit margin of the company’s special functional materials business was 68.07%, 67.70%, 65.31% and 59.25% respectively, showing a downward trend year by year, mainly due to the finalization and batch production of the company’s core products of stealth materials and camouflage materials in 2019 and 2020 respectively, a large increase in customer purchases and a decline in product sales prices.
On the one hand, with the further increase of the production and sales volume of the company’s batch products in the future, considering the military product pricing mechanism, the sales price of the company’s products may continue to decrease, resulting in the decline of the company’s gross profit margin; On the other hand, with the upgrading of products, intensified market competition and rising labor costs in the future, the company’s gross profit margin space may be compressed. The company will face the risk of declining gross profit margin.
(III) recovery and capital turnover risks caused by large receivables
At the end of each reporting period, the book values of the company’s accounts receivable (including contract assets) were 40.6125 million yuan, 48.026 million yuan, 209.8336 million yuan and 269.4633 million yuan respectively, and the book values of notes receivable were 21.335 million yuan, 90.786 million yuan, 198.4548 million yuan and 37.5152 million yuan respectively, accounting for 35.07%, 46.19%, 72.62% and 53.60% of the total assets at the end of each period, The amount of receivables of the company is large. As the payment settlement procedure of China’s military industry is complex and the period is relatively long, and the company’s customers are mainly subordinate units of China military industry group, they tend to issue commercial acceptance bills to settle the payment, resulting in the characteristics of relatively long recovery period and large amount at the end of the period. Large amount of accounts receivable and notes receivable slow down the speed of capital return of the company and bring certain capital pressure to the company. If the company’s main customers delay the payment progress or the payment capacity changes, it will bring capital turnover risk and asset impairment risk to the company.
(IV) in the stage of pre research and trial production and small batch trial production, there is a risk that the products will not meet the expectations
As the technology of special functional materials involves the development of major military materials, foreign countries have imposed a strict blockade on China in this technology. It is difficult for Chinese research institutions and participating enterprises to obtain technical information that can be used for reference, which increases the difficulty of material development and industrialization of achievements in relevant fields. The company’s main products are highly customized and need to be developed separately for different types of weapons and equipment and different parts of weapons and equipment. The research and development is difficult, the cycle is long and the investment is large.
Whether the products of the company in the stage of pre research and trial production and small batch trial production can realize finalized batch production in the future depends not only on the development progress of the company itself, but also on the finalized batch production of application equipment of downstream customers. If the company’s special functional material products involved in supporting and synchronous research and development cannot be successfully finalized and mass produced, it will have a significant adverse impact on the company’s future business development and future performance growth.
(V) risk of declining revenue growth
During the reporting period, the operating revenue of the company was 47.5609 million yuan, 116.7666 million yuan, 413.8647 million yuan and 196.9461 million yuan respectively. The operating revenue of 2019, 2020 and January June 2021 increased by 145.51%, 254.44% and 92.92% year-on-year. If the industry competition intensifies in the future, the national industrial policy changes adversely, the company cannot continuously consolidate and enhance its market competitive advantage, the growth rate of batch products slows down, the batch production speed of follow-up research and trial production products is lower than expected, the market development ability declines or the implementation of fund-raising investment projects is lower than expected, the company’s income growth rate may face the risk of decline.
(VI) risk of high customer concentration and dependence of major customers
As a professional supporting supplier of military products, the company’s customers are mainly enterprises and institutions subordinate to the military industry group, with high customer concentration. According to the criteria of consolidated calculation of customers controlled by the same actual controller, in each period of the reporting period, the proportion of the company’s income from group A in the main business income is 99.42%, 98.71%, 87.94% and 95.00% respectively, of which the proportion of income from A1 subordinate unit of group A in the main business income is 75.72%, 80.30%, 66.70% and 65.98% respectively, This is because the equipment production task applied to the company’s approved stealth material products during the reporting period was mainly undertaken by A1 unit under group A. In the future, if the company’s new customers and new product development are less than expected, or major customers such as A1 unit have technical route conversion, product structure adjustment, addition or replacement of suppliers, reducing the purchase of the company’s products will have an adverse impact on the company’s business performance.
(VII) high concentration of main raw material suppliers and risk of relying on a single supplier
Targets are the main raw materials of the company’s special functional material products. In 2018, 2019, 2020 and January June 2021, the amount of targets purchased by the company was 3.5689 million yuan, 31.3232 million yuan, 122.9465 million yuan and 76.7395 million yuan, accounting for 94.10%, 86.08%, 87.69% and 81.25% of the purchase amount related to the main business. During the reporting period, the company’s target materials were all provided by Beijing Purui New Material Technology Co., Ltd. and Zhangzhou Heqi target Technology Co., Ltd. in the list of qualified suppliers, mainly due to the particularity of the national defense equipment supply system, that is, various procurement and processing links from raw materials to products have been limited when the model design of terminal products is finalized, If suppliers are added or replaced, the company needs to evaluate various indicators of relevant suppliers, conduct multi batch product trial production inspection on the raw material samples provided by them, and enter the list of qualified suppliers of the company after reporting to the military representative stationed in the company for review and confirmation. In addition to target materials, the company also purchases raw materials such as powder from Beijing Purui New Material Technology Co., Ltd. During the reporting period, the company’s purchases from Beijing Purui New Material Technology Co., Ltd. were 3.5718 million yuan, 25.9398 million yuan, 93.5236 million yuan and 55.7846 million yuan respectively, accounting for 94.17%, 71.28%, 66.70% and 59.07% of the purchase amount related to the main business respectively. If Beijing Purui New Material Technology Co., Ltd. and Zhangzhou Heqi target Technology Co., Ltd. fail to meet the company’s business development needs in terms of product price, quality and supply timeliness in the future, it will have a certain adverse impact on the company’s production and operation. 2、 The company’s R & D driven business growth model
In each period of the reporting period, the company’s main business income was 39.6761 million yuan, 107.3954 million yuan, 401.1589 million yuan and 191.007 million yuan respectively, of which the proportion of military products in the main business income was 100.00%, 100.00%, 99.93% and 99.83% respectively. The growth of main business income was mainly due to the company’s core products successively passing the finalization and batch production.
The company’s special functional material products have a great impact on the technical and tactical indicators of weapons and equipment, and need to carry out targeted research and development according to the technical requirements of weapons and equipment. Focusing on the overall technical index requirements of downstream customer models and equipment, the company carries out synchronous research and development from the aspects of development design, raw material selection, material design and development, manufacturing process, quality and performance test, etc, After engineering trial production, finalization and batch production, it has become a qualified supporting supplier of military products.
Due to the particularity of military industry, participating in model development is generally a prerequisite for undertaking the task of model batch production in the future. The period from R & D to batch production of the company’s special functional material products is long and the R & D investment is large. Whether the company can realize the finalized batch production depends not only on the development progress of the company’s products, but also on the finalized batch production of the application equipment of downstream customers. After the finalization and approval of the company’s special functional material products, the relevant products will be included in the procurement list of military enterprises. In the subsequent equipment production process, in principle, customers will not easily change suppliers, and in the daily production of products
