Securities code: 000070 securities abbreviation: Shenzhen Sdg Information Co.Ltd(000070) Announcement No.: 2022-16 Shenzhen Sdg Information Co.Ltd(000070)
Announcement on reply to the letter of concern of Shenzhen Stock Exchange
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Shenzhen Sdg Information Co.Ltd(000070) (hereinafter referred to as “the company” or ” Shenzhen Sdg Information Co.Ltd(000070) “) received the letter of concern on Shenzhen Sdg Information Co.Ltd(000070) (company department concern letter [2022] No. 127) (hereinafter referred to as “concern letter”) issued by the second Department of management of listed companies of Shenzhen Stock Exchange on February 8, 2022. According to the requirements of the letter of concern, the company has carefully checked the problems in the letter of concern, and now replies to the relevant questions as follows:
Question 1. The performance forecast shows that due to the impact of the epidemic, the shortage of chips and the sharp rise in the price of raw materials, the operation of tefa Dongzhi is less than expected. Please explain whether there is continuous pressure risk in the external business environment of tefa Dongzhi and whether the performance decline is sustainable in combination with the above factors, the development trend of the industry in which tefa Dongzhi is located and the change of market demand.
reply:
(I) the external business environment pressure of tefa Dongzhi still exists, but the pressure gradually decreases and the market demand shows an increasing trend
From the perspective of industry development trend, with the evolution of 5g technology and the popularization of global commerce, the field of Internet of things and artificial intelligence has developed and applied rapidly, and promoted the development of chip related industries. Affected by the global covid-19 epidemic, on the one hand, the chip production capacity has decreased. On the other hand, home office and learning have become a new trend, which has further stimulated the market demand for notebook computers, home network terminals and other equipment, and the demand for consumer electronic products has also increased rapidly. In this case, the supply and demand are further unbalanced, resulting in a global shortage and price rise of chips. At the same time, affected by the epidemic, it also led to a shortage of commodity supply and a sharp rise in the price of raw materials. In 2021, the two sessions issued the 14th five year plan for national economic and social development of the people’s Republic of China and the outline of long-term objectives for 2035, which proposed the need to concentrate advantageous resources to tackle key core technologies in many fields, including the development of integrated circuit design tools, key equipment and high-purity targets, Breakthroughs have been made in advanced integrated circuit technology and characteristic processes such as insulated gate bipolar transistor (IGBT) and micro electromechanical system (MEMS), the upgrading of advanced storage technology, and the development of wide band gap semiconductors such as silicon carbide and gallium nitride. In 2022, the United States and the European Union also successively issued relevant bills to increase policy support and financial support for the local semiconductor industry.
At present, the main products of tefa Dongzhi are consumer electronics products such as home gateway terminal products and intelligent wear. With the demand of 5g and Internet of things, this kind of products increase year by year. Although the impact of the epidemic on production and manufacturing still exists in a certain period of time, with the accumulation of epidemic prevention experience in various countries, the impact is also gradually decreasing. In addition, countries have increased investment in the semiconductor field. According to the market forecast, the chip shortage is expected to be gradually alleviated in the second half of 2022.
To sum up, the external business environment pressure of tefa Dongzhi still exists, but the pressure gradually decreases, the development trend of the industry is good, and the market demand is increasing.
(II) the operation of tefa Dongzhi is improving, and its performance will not continue to decline
In 2021, the supply of upstream chip materials was tight and the price of bulk commodities rose sharply, resulting in the continuous high cost price of main raw materials of tefa Dongzhi, and the stability of orders and profit level were affected. The shortage of materials such as CPU master chip, WiFi chip, Bosa driver chip and voice chip and the rise of prices in varying degrees have affected the company’s production continuity. The increase of product sales price is less than that of raw material price, and the operation is less than expected.
In 2021, Shenzhen Sdg Information Co.Ltd(000070) has dispatched a new management team to take over and carry out operation and management after the end of tefa Dongzhi gambling period. In order to effectively respond to the changes of market situation, it has taken a series of positive measures.
1. In terms of market, on the basis of maintaining original customers, actively expand new customers, especially those with chip resources, and adopt the production mode of providing chips by customers to reduce the impact of orders and production discontinuity caused by chip shortage.
2. In terms of supply chain management, it actively connects with suppliers and reorganizes the supply chain system. At present, the supply of raw materials has basically met the demand of order production.
3. In terms of internal management, on the one hand, readjust the internal management organization structure and sort out the system process, on the other hand, actively promote cost reduction and efficiency improvement measures, improve production efficiency and save fixed expenses.
With the gradual implementation of the above measures, the orders received and output of TEDA Dongzhi have shown an upward trend in the second half of 2021, of which the output has increased by 90% over the first half of the year. According to the current situation, the operation of tefa Dongzhi is gradually improving, and its performance will not continue to decline.
To sum up, the external business environment pressure of tefa Dongzhi still exists, but the pressure gradually decreases, the development trend of the industry is good, and the market demand is increasing. At the same time, tefa Dongzhi has taken a series of measures in internal operation and management, and the operation is gradually improving, and the performance will not continue to decline.
Question 2. Please add the counterparty, transaction background and causes of the accounts receivable involved in the provision for impairment, and explain the amount, basis and rationality of the provision for impairment of relevant accounts receivable and inventories in this year in combination with question 1.
reply:
The annual performance forecast Shenzhen Sdg Information Co.Ltd(000070) net profit loss is 590 million yuan – 690 million yuan. The loss is mainly due to the operating performance of tefa Dongzhi at the end of the gambling period (poor management of the original management team), which is less than expected. The operating loss for the whole year of 2021 is expected to be about 150 million yuan (the specific amount of loss is subject to the audit result). In Shenzhen Sdg Information Co.Ltd(000070) 2021, the original management team of tefa Dongzhi was completely replaced. According to the state-owned asset management standards, the company established a special asset inventory team to conduct a comprehensive asset inventory of tefa Dongzhi. By the end of 2021, the inventory found that there were large risks of impairment and loss of tefa Dongzhi’s assets. The inventory will further consolidate the assets of tefa Dongzhi. At the same time, the new operation and management team will actively take various measures to reverse the operation situation of tefa Dongzhi.
（1） For the accounts receivable of tefa Dongzhi with litigation risk, the credit impairment is expected to be about 40 million yuan. The litigation cases of some receivables of tefa Dongzhi have not been settled, and some customers have poor repayment ability, which may lead to bad debt risk, with an estimated loss of about 40 million yuan. (mainly involving Shenzhen Shanghai Shundi Communication Technology Co., Ltd., involving 26.87 million yuan in arbitration; Shenzhen huayihong Electronics Co., Ltd., involving 6.13 million yuan in litigation; Hunan hengying Electronic Technology Co., Ltd., involving 5.42 million yuan in litigation.)
(1) Tefa Dongzhi v. Shanghai Shundi Communication Technology Co., Ltd.:
Main information: Shanghai Shundi Communication Technology Co., Ltd. filed a lawsuit because of its arrears in payment.
Due to the failure to preserve its property, it is expected that the repayment ability is poor, and the bad debt is withdrawn in full.
Progress of the case: the filing of the case was completed on January 14, 2021, and the Shanghai Second Intermediate People’s court held a hearing on the case on November 17, 2021. Our company received the judgment of the second instance on February 7, 2022, and the original judgment was upheld in the second instance.
(2) Tefa Dongzhi v. Shenzhen huayihong Electronics Co., Ltd.:
Main information: our company supplied goods to huayihong company and filed a lawsuit because of its malicious default in payment. At present, the company is in the state of dishonest executee, with poor repayment ability and full provision for bad debts.
Progress of the case: the case was filed on December 13, 2021, and the litigation materials were not delivered to the defendant because it was under litigation preservation.
(3) Tefa Dongzhi v. Hunan hengying Electronic Technology Co., Ltd.:
Main information: our company supplied goods to Hunan hengying company and filed a lawsuit because of its arrears in payment. At present, only 38000 yuan has been recovered, and there is no other executable property for the time being. The bad debt has been withdrawn in full.
Case progress: the case was settled through mediation on April 13, 2021: hengying company paid 4.96 million yuan to our company. However, hengying company and Cui Changyin failed to perform the mediation statement. After compulsory execution, the executive board has terminated the execution of more than 38000 yuan.
(II) the provision for inventory impairment is expected to increase by 300 million yuan to 40 million yuan
1. Tefa Dongzhi had poor operation and management in the early stage, the business had not recovered rapidly, and the risk of impairment of overstocked inventory increased.
Due to the poor management of tefa Dongzhi’s former management team and the comprehensive impact of quality accidents, goods preparation and order shrinkage, the inventory backlog was caused. The signs of inventory impairment increased in 2020. At the end of 2020, 210.5 million yuan of impairment reserves had been accrued according to the inventory situation. As of December 31, 2021, the book value of Dongzhi’s inventory was 739.27 million yuan. Due to the decrease of orders and the change of order structure, the stock age of some raw materials and finished products increased. Affected by special chips, quality defects and other conditions, it is expected that the realization difficulty of some inventories increased, and the net realizable value of relevant inventories is lower than the book value. It has been preliminarily evaluated by professional evaluation institutions, It is estimated that the impairment of new inventories will be about 300 million yuan to 40 million yuan in 2021 (the specific amount shall be subject to the approval result).
2. The impairment test is carried out in accordance with the provisions of the accounting standards for business enterprises and business conditions, and the basis for the provision for impairment is sufficient and has business rationality.
(1) The inventory falling price test shall be conducted in accordance with the relevant provisions of the accounting standards for business enterprises
In order to fairly and objectively reflect the company’s financial situation, asset value and operating results, based on the principle of prudence, the company evaluates, analyzes and tests the company’s inventory on the balance sheet date in accordance with the accounting standards for Business Enterprises No. 1 – inventory and the relevant provisions of the company’s accounting policies.
On the balance sheet date, inventories are measured at the lower of cost and net realizable value. When the net realizable value is lower than the cost, the inventory falling price reserves shall be withdrawn. The recognition basis of net realizable value of different types of inventories is as follows:
The net realizable value of finished products, goods in stock, materials for sale and other goods inventories directly for sale shall be determined by the amount of the estimated selling price of the inventory minus the estimated selling expenses and relevant taxes in the normal process of production and operation; In the normal production and operation process, the net realizable value of the material inventory that needs to be processed is determined by the amount of the estimated selling price of the finished products minus the estimated cost to be incurred at the time of completion, estimated selling expenses and relevant taxes. For the inventory that is no longer needed in the production and operation process and has no use value and transfer value, The estimated net realizable value is 0; The net realizable value of inventories held for the execution of sales contracts or labor contracts is calculated based on the contract price. If the quantity of inventories held is more than the quantity ordered in the sales contract, the net realizable value of excess inventories is calculated based on the general sales price.
At the end of each period, the company will timely handle the inventory without use and transfer value and damaged. On a regular basis, the warehouse management department, together with the finance department, sales department, R & D center and other relevant departments, will screen the inventory items one by one and test whether there is a falling price of the inventory at the end of the period. Analyze, summarize and record whether the raw materials, revolving materials, goods in stock and products in process in inventory have use value, whether the inventory without use value has transfer value and the specific transfer value.
(2) Hire a professional competent evaluation institution to evaluate the inventory value
Due to the impact of special chips and quality defects, it is expected that it will be more difficult to realize some inventories. In view of the large number of inventories and strong professionalism, we have hired a professional competent evaluation institution to evaluate the inventory value to determine the specific amount of net realizable value of inventories, and the final evaluation and approval results shall prevail.
Question 3. Please add whether there is insufficient and unreasonable provision for impairment in 2020 and previous years.
reply:
(I) before 2020, tefa Dongzhi did not find any sign of large impairment, and the impairment provision has been withdrawn in accordance with relevant regulations.
Shenzhen Sdg Information Co.Ltd(000070) after wholly purchasing 100% equity of tefa Dongzhi, it made full use of the resources of listed companies, gave full play to the synergy of restructuring and M & a business, and supported the business development of subsidiaries. In August 2016, it increased the registered capital of 200 million yuan to tefa Dongzhi with its own funds for production and operation. The business environment of tefa Dongzhi continued to be optimized, and the income scale of ZTE, KANGXUN and other major customers increased significantly, No sign of significant impairment was found. Shenzhen Sdg Information Co.Ltd(000070) on each balance sheet date, various impairment tests have been carried out in accordance with the relevant provisions of the accounting standards for business enterprises and the company’s business conditions, and the bad debt and impairment provision have been withdrawn according to the test results. There is no case that the provision for impairment provision is insufficient and unreasonable.
(II) affected by the epidemic situation and product quality litigation, tefa Dongzhi’s business performance declined in 2020, and the provision for impairment has been withdrawn in accordance with relevant regulations.
Tefa Dongzhi’s core customers were sanctioned by the United States, the demand for orders decreased, and the poor management of the then management team led to quality control litigation and inventory in 2020, resulting in signs of impairment of some accounts receivable and inventory in 2020.
Shenzhen Sdg Information Co.Ltd(000070) carry out impairment test in accordance with the relevant provisions of the accounting standards for business enterprises and business conditions, and withdraw bad debt and impairment reserves according to the test results. In 2020, withdraw 69.64 million yuan of bad debt reserves for accounts receivable and 165.8 million yuan of inventory falling price. By the end of 2020, withdraw 70.66 million yuan of bad debt reserves for accounts receivable and 210.5 million yuan of inventory impairment, There is no case where the provision for impairment is insufficient or unreasonable.
Question 4. Other matters that your company thinks should be explained.
Reply: there are no other matters to be explained.
It is hereby announced.
Shenzhen Sdg Information Co.Ltd(000070)
Board of directors
February 18, 2022
