Recently, China's well-known animation enterprise Jiangsu force Digital Technology Co., Ltd. (hereinafter referred to as force digital) is sprinting the gem. According to the prospectus (application draft, the same below), force digital has participated in the 3D content production of many popular games, animations and films such as fifa20, King glory, yin and Yang division, demon capture 2, and its business ability is good in China.
In the years when China's original animation "Rose", force digital was also actively transforming from "OEM" business to original business, and also invested in virtual idol business. However, the force figures fell badly. As a result, there is an outstanding loss of more than 300 million yuan and a commitment not to add new original projects.
After basically giving up originality, force digital has focused its business growth on the needs of other industries except the game and animation industries - 3D digital people. Its customers include well-known units such as Shanghai Pudong Development Bank Co.Ltd(600000) , Xinhua news agency and Shangtang technology. However, in 2020, the revenue of application business from other industries accounted for only 4.08% of the revenue of main business. In the future, how much cake can force digital eat from "other industries"?
The transformation was frustrated, and the outstanding loss exceeded 300 million yuan
The main revenue of force digital comes from 3D digital content production services. Generally speaking, it is OEM. In the first half of 2021, force digital achieved a revenue of 193 million yuan, a net profit of 28.059 million yuan and a net interest rate of 14.55%.
"Soldiers who do not want to be generals are not good soldiers", and the force figures are not willing to be only a "foundry" with meager profits. Since 2014, as capital began to flow into the animation market, force digital has also taken advantage of the trend to make a big transformation to the original business. However, the transformation strategy finally failed.
In 2015, force digital and other partners jointly invested and established Nanjing Fancheng film and television culture investment center (limited partnership) (hereinafter referred to as Nanjing Fancheng). Among them, the share held by force digital is 24.56%, which is the inferior partner of Nanjing Fancheng. After its establishment, Nanjing Fancheng invested in many film projects of force digital, but these projects either had poor box office (broadcast revenue) or ran aground directly.
Among them, the first original digital content creation project of force digital, "Mommy duck", was released in the cinema in 2018. The production cost of the project was as high as 232 million yuan, and the final box office was only 34.912 million yuan, which could not even cover the publicity and distribution cost. According to the prospectus, force digital terminated all original projects except the big monster in the Forbidden City after the failure of "Mommy duck", which had not generated revenue during the reporting period.
In addition to the original business, force digital also took the equity of one star international cultural media (Beijing) Co., Ltd. in 2016. The subsidiary mainly engaged in the production and operation of 3D virtual idols, which was later cancelled because the business development was not as expected. During the reporting period, force digital cancelled 11 subsidiaries, most of which were related to their new businesses.
The failure of the new business has left many sequelae to force digital. According to the prospectus, since the benefits of several projects invested by Nanjing Fancheng are less than expected, according to the agreement, the force figure still needs to pay Nanjing Fancheng 32.3151 million yuan (as of the end of June 2021).
In addition, due to the huge loss of the "Mommy duck" project and the full provision for falling price of the terminated project, the net profit of the force has been seriously affected. By the end of June 2021, the undistributed profit of the combined caliber of force digital was -309 million yuan, which means that if force digital is listed, it may not be able to distribute profits in the short term.
According to the prospectus, from 2018 to 2020, the net profit attributable to the parent company was -286 million yuan, 13.8202 million yuan and 62.9021 million yuan respectively. By the end of June 2021, the balance of force digital cash and cash equivalents was 219 million yuan.
After suffering, the force figures also recognize the reality. In response to the inquiry of the exchange, force digital said, "the implementation of Mommy duck makes the company's management realize that the advantages accumulated by the company in the field of 3D digital content production cannot be directly extended to other links of the 3D digital content production service industry chain."
In addition, force digital also promises to focus on the development of 3D digital content production service business in the future; In addition to the "big monster in the Forbidden City" project, there will be no new projects related to original digital content creation and investment business.
How much "cake" can you bring by betting on 3D digital man business?
The listing standard selected by force digital is "the estimated market value is no less than 1 billion yuan, the net profit in the latest year is positive and the operating revenue is no less than 100 million yuan". In this regard, the force figures warned that there may be a risk that the market value does not meet the listing conditions and lead to the failure of the issuance.
In fact, the force figure also meets another listing standard: the net profit in the last two years is positive, and the cumulative net profit is no less than 50 million yuan. According to the prospectus, the total net profit deducted by force digital in 2019 and 2020 reached 50.647 million yuan.
What are the considerations behind the choice of listing standards? Perhaps the force is more confident in its share price than its performance growth potential? In this regard, the reporter of "daily economic news" asked the Department of digital securities of the force for confirmation, but as of press time, no reply had been received.
In terms of business types, the application fields of force digital 3D OEM business include two main fields: Games and animation, as well as banking, news, retail and other industries. Among them, the fast-growing business areas of force digital are the game industry and other industries. In 2020, the year-on-year growth rate of the revenue of these two businesses reached 22.81% and 93.44% respectively, and the revenue of the animation industry is shrinking.
In the story of force digital, the 3D digital human business applied to other industries is the company's next growth point. From 2019, force digital began to expand its 3D digital human business and successively undertook Shanghai Pudong Development Bank Co.Ltd(600000) 3D digital human, baidu 3D digital human, Xinhua News Agency 3D anchor, Shangtang technology 3D digital human and other projects.
"The service-oriented industries represented by finance, media, education and e-commerce pay more and more attention to the concept of humanized interaction... In the future, the company will combine its 3D digital content production experience and technical achievements with the customized needs of customers in different industries, so as to obtain customers in a wider range of industries." The force is represented numerically.
However, how much "cake" can "other industries" bring to the force digital and digital creative industries? According to the prospectus, in 2020, the revenue from other industries accounted for only 4.08% of the main business revenue, and the gross profit margin was 37.45%.
At present, compared with the game industry, the application businesses of other industries of force digital are very dependent on large customers. In response to the inquiry of Shenzhen Stock Exchange, force digital said that among the 37 application projects in other industries in 2020, the revenue realized by the top five projects accounted for 77.05%, the revenue brought by the top five customers accounted for 86.34%, and the sales revenue of the first largest customer accounted for 51.67%.
Excluding the sales revenue of the largest customer, the revenue of application business in other industries of force digital will not increase but decrease in 2020.
In addition, the largest customer mentioned above is Jiangsu Zhongzhi Tengfei Information Technology Co., Ltd. the actual controller of this company is Wei Wei, the spouse of Zhou Jie, the director and deputy general manager of force digital. Moreover, Zhou Jie is also the younger brother of Zhao Rui, the chairman, general manager and actual controller of force digital.
According to the reply of force digital to Shenzhen Stock Exchange, in 2020, force digital undertook the Jinling map project of Jiangsu Zhongzhi Tengfei Information Technology Co., Ltd., realizing an income of 6.8754 million yuan and a gross profit margin of 30.75%. This gross margin level ranked the bottom among the top five customers in other industries that year. In addition, Jiangsu Zhongzhi Tengfei Information Technology Co., Ltd. did not pay all the payment. By the end of June 2021, the accounts receivable of force digital to Jiangsu Zhongzhi Tengfei Information Technology Co., Ltd. was 5.911 million yuan.
The reporter of "daily economic news" found on the official website of "Zhongzhi take-off" that the business of the enterprise includes industry and manufacturing, intelligent IOT visualization and digital media. In this regard, the reporter asked the force digital to verify whether its main business overlapped with the digital media business of "Zhongzhi take-off", but did not get a reply.
It is worth mentioning that in 2018, the force suffered a large loss, and Zhou Jie also lent 5.26 million yuan and 6.8055 million yuan from the company in 2018 and 2019 respectively. Force figures explained that Zhou Jie's inter-bank lending funds are for personal capital needs, including personal and family capital turnover and friends' temporary loan needs. At present, the money has been fully repaid and interest has been paid.
