Announcement on the 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.
Lvjing Holding Co.Ltd(000502) (hereinafter referred to as “the company”) received the letter of concern on Lvjing Holding Co.Ltd(000502) issued by Shenzhen Stock Exchange on January 29, 2022 (company department concern letter [2022] No. 90, hereinafter referred to as “concern letter”), and now reply to the relevant information as follows:
According to the performance forecast for 2021 disclosed by your company on January 28, 2022, your company expects the net profit attributable to the shareholders of the listed company in 2021 (hereinafter referred to as “net profit”) to be a loss of 17 million yuan to 21 million yuan, and the net profit after deducting non recurring profits and losses (hereinafter referred to as “net profit after deducting non recurring profits and losses”) to be a loss of 19 million yuan to 23 million yuan, The income is expected to be 150 million yuan to 175 million yuan, and the income after deduction is expected to be 140 million yuan to 165 million yuan. The change in revenue during the reporting period was mainly due to the company’s cash acquisition of 51% equity of Sanhe Yali Information Technology Co., Ltd. in 2021. Shenzhen Hongyi Construction Engineering Co., Ltd., a wholly-owned subsidiary of the company, actively carried out special engineering construction business of data center, and the company’s revenue increased significantly compared with the same period of last year. The main reasons for the performance loss in the reporting period are the provision of asset impairment for the parking space inventory of Foshan Ruifeng Investment Co., Ltd., a holding subsidiary, and the company’s expenses during the reporting period, including the expenses of the company’s major asset restructuring intermediaries.
Our department is highly concerned about this. Please verify and explain the following problems:
1. In the first half and the third quarter of 2021, your company achieved operating revenue of 11.7381 million yuan and 97.5144 million yuan respectively. In the first three quarters, your company achieved cumulative revenue of 109 million yuan, an increase of 797.03% over the same period of the previous year. In the first half and the first three quarters of 2021, the net profit attributable to the shareholders of the listed company (hereinafter referred to as “net profit attributable to the parent”) decreased by – 281.59% and – 28.54% respectively year-on-year. According to the reply announcement on the letter of concern to Shenzhen Stock Exchange (hereinafter referred to as the “reply”) disclosed by your company on December 23, 2021, the reason for the sharp increase of the company’s operating revenue in the third quarter is that the subsidiary Shenzhen Hongyi increased the business revenue of mechanical and electrical installation engineering by 73.8265 million yuan. The gross profit margin of this business is low and can not cover the period expenses, Therefore, the net profit of your company in the first three quarters was negative.
Please explain the reason and rationality of the continuous and substantial growth of operating revenue in the fourth quarter, whether the gross profit margin of main business in the fourth quarter deviated from the average level of the same industry, and the specific situation and compliance of your company for the impairment of parking space inventory of the holding subsidiary Foshan Ruifeng Investment Co., Ltd. The annual audit accountant shall check and give opinions.
[company reply]:
(I) reasons and rationality for the continuous and substantial growth of operating revenue in the fourth quarter
The company’s operating revenue in the fourth quarter was 64 million yuan, mainly due to the merger of the Internet data center service revenue of 13 million yuan of Sanhe Yali Information Technology Co., Ltd. (hereinafter referred to as “Sanhe Yali”) for three months in the fourth quarter, And Shenzhen Hongyi Construction Engineering Co., Ltd. (hereinafter referred to as “Shenzhen Hongyi”), a wholly-owned subsidiary, continued to carry out the electromechanical installation engineering business of the data center in the fourth quarter, with a newly recognized electromechanical installation engineering business income of 48 million yuan (the above data has not been audited).
It is reasonable that the company’s operating revenue continued to grow significantly in the fourth quarter.
(II) whether the gross profit margin of main business in the fourth quarter deviates from the average level of the same industry
In 2021, the company successively acquired 100% equity of Shenzhen Hongyi and 51% equity of Sanhe Yali, transformed to the field of Internet data center, and gradually deepened the field of Internet data center, building the company into a data center service provider of the whole industry chain. The business income related to Internet data center has become the main source of income of the company this year.
In the fourth quarter, the company’s main business income mainly came from the income of its subsidiary Sanhe Yali Internet data center service business (providing customers with cabinet rental and other services) and the income of Shenzhen Hongyi’s electromechanical installation engineering business. The company’s main business gross profit margin was about 7%, of which Sanhe Yali’s gross profit margin was about 24% and Shenzhen Hongyi’s gross profit margin was about 3%. The gross profit margin of similar businesses of Listed Companies in the settled contract industry is compared, and the specific data are as follows:
1. Recent gross profit margin of Internet data center service business of three listed companies:
Serial number securities code securities abbreviation gross profit margin 1 GDS O Wanguo data 22.1% 2 Vnet O Century Internet 24.0% 3 300738 Sz Guangdong Aofei Data Technology Co.Ltd(300738) 27.76% average 24.62% 4 Sanhe Yali 24%
Note: the above Wanguo data and Century Internet financial data are taken from the third quarter financial report of 2021 disclosed on the other party’s official website; Guangdong Aofei Data Technology Co.Ltd(300738) financial data are taken from the 2020 annual report of listed companies.
Sanhe Yali’s gross profit margin in the fourth quarter was equivalent to the industry average.
2. Gross profit margin of similar electromechanical installation engineering business of the two listed companies in 2020:
Sequence securities code securities abbreviation sub product gross profit rate No
1 600667. General contracting of SH Wuxi Taiji Industry Limited Corporation(600667) project 3.45% 2 600850 SH Cetc Digital Technology Co.Ltd(600850) data center intelligent solution 6.07% average 4.76% 3 000502 SZ * ST Lvjing electromechanical installation engineering business 3.00%
Wuxi Taiji Industry Limited Corporation(600667) the general contracting business of the project is mainly the supervision, project management and general contracting business of electronic high-tech engineering construction projects. The above gross profit margin is slightly higher than that of Shenzhen Hongyi. The main reason is that Shenzhen Hongyi currently operates the subcontracting business of mechanical and electrical installation. As a subcontracting business, its gross profit margin is generally lower than that of the general contracting business of the industry.
The intelligent solution business of Cetc Digital Technology Co.Ltd(600850) data center is mainly the business of consulting and design, general contracting management, engineering construction, operation and maintenance and operation services in the field of data center and building intelligence. The gross profit of the above business is significantly higher than that of Shenzhen Hongyi. The intelligent solution business of Cetc Digital Technology Co.Ltd(600850) data center mainly includes the consulting and design of data center with high gross profit margin Operation and maintenance and operation services.
Shenzhen Hongyi is a professional mechanical and electrical installation business contracting enterprise with grade III qualification for professional contracting of construction mechanical and electrical installation engineering. However, Shenzhen Hongyi has not been established for a long time, its bargaining power is weak, and its business has not yet formed a scale effect. With the emergence of the scale effect of Shenzhen Hongyi’s business and the strengthening of project cost control and supplier performance control, Shenzhen Hongyi’s profitability can be further improved.
(III) specific conditions and compliance of the company’s provision for asset impairment of parking space inventory of its holding subsidiary Foshan Ruifeng Investment Co., Ltd
[company reply]:
In order to objectively reflect the company’s financial situation and asset value, the company has analyzed and evaluated the net realizable value of inventory assets as of December 31, 2021 in accordance with the accounting standards for business enterprises and the company’s accounting policies. Affected by the price fluctuation of the real estate market, considering the prudent market strategy of the company and the abundant car parking spaces in the community where the parking space inventory assets are located and the surrounding communities, the parking spaces of Foshan Ruifeng Investment Co., Ltd. (hereinafter referred to as “Foshan Ruifeng”), the holding subsidiary of the company, have some signs of price decline, and the cost is higher than the expected recoverable amount, The company has accrued asset impairment for the parking space inventory of Foshan Ruifeng according to the lower of inventory cost and net realizable value, as follows:
The parking space inventory of Foshan Ruifeng is the underground parking space of Yuhui garden, Sangui Avenue, Sangui village committee, Beijiao Town, Shunde District, Foshan City, Guangdong Province.
Yuhui garden extends to neijie street in the East and south, Jinggu line in the West and Sangui Avenue in the north. It is mainly surrounded by Sangui village community, which is far away from the large commercial complex and has a general commercial prosperity; Near Sangui Avenue bus station, the convenience of public transportation is general.
Yuhui garden is close to Shunde country garden, covering an area of less than 40000 square meters. The project is positioned as a customer group just in need and just changed. It is concentrated in Beijiao and Panyu Zhongcun regional wage earners, small owners in major business districts or professional markets. The average transaction price of second-hand houses is 15000 / ㎡, and the occupancy rate of the community is low, mainly for the retired elderly.
1. Parking space matching of the project
Yuhui garden has 700 owners, supporting 610 underground parking spaces, including 493 available parking spaces and 117 civil air defense parking spaces. 114 have been sold before 2021.
2. The project has sufficient parking spaces and low ground parking fees
Outside Yuhui garden is Sangui village community, where parking is convenient, cheap and even free. The supply of temporary aboveground parking spaces at the gate of Yuhui Garden community is also sufficient. Parking is convenient and cheap. The parking fee is capped at 6 yuan / day, and the rental rate is not saturated.
3. There is little demand for parking spaces for community owners
After investigation, the resident population of the community is mainly the retired elderly, with less parking demand. Self occupied office workers have basically purchased parking spaces. In addition, some owners are mostly holiday sojourners, who live for a short time, and the parking demand is more inclined to the ground parking space of stop and go. Therefore, the community owners generally have less demand for parking spaces.
4. Surrounding competitive parking spaces
Shunde country garden adjacent to Yuhui garden is a large community covering an area of 3.5 million square meters. It has been developed for nearly 30 years since 1992. It has a high occupancy rate, mature community property management and high owner recognition. The average transaction price of second-hand houses is 16000 / ㎡, and the price of parking spaces is 120000-150000 yuan / piece. However, there are many reserved parking spaces on the ground of the community. The owners of the community can choose to rent the aboveground parking spaces in the form of monthly rent, and the sales of underground parking spaces are slow. In terms of the second-hand market, the owners offer more and sell them in packages with residential parking spaces. The quotation of parking spaces is not reflected separately. The second-hand transaction of a single parking space is very rare.
5. Sales of parking spaces in Yuhui Garden
There are 493 underground parking spaces available for sale in Yuhui garden, and 114 have been sold before 2021. The remaining parking spaces have been sold at the average price of RMB 2.01 million in the third quarter of 2021 to the fourth month of 2021. The remaining parking spaces have been sold at the average price of RMB 1.02 million in the third quarter of 2021.
For the parking space sold in the fourth quarter, the buyer has paid the deposit at the end of July 2021. It is considered that the price difference will be made up in December 2021 after half a year.
Therefore, after comprehensively considering the real estate market, the shortage of car parking in the community where the parking space inventory assets are located and the monthly rent price of the surrounding community, and combined with the impairment calculation of the parking space inventory for the purpose of financial reporting this time, it is necessary to consider the net realizable value of all remaining parking spaces. The calculation formula is as follows:
Net realizable value of inventory parking spaces = number of parking spaces × (market price of single parking space inventory) × Realization discount rate – disposal cost of single parking space)
1. Number of parking spaces: 277
2. Market price of parking space inventory: the average selling price of 102 parking spaces sold is 64800 yuan / piece. 3. Realization discount rate: comprehensively considering the real estate market, the car parking demand of the community where the parking space inventory is located and the surrounding communities and the needs of the company’s transformation, based on the principle of prudence, The realization discount rate selected for this impairment calculation refers to the provisions that the court asset auction shall not be less than 70%, and the realization discount rate is 70%.
Realizable value of single parking space = 64800 yuan × 70% = 45360 yuan
4. Disposal expenses: external expenses specifically include value-added tax, urban construction tax, education fees and surcharges, transaction stamp tax, land value-added tax, sales expenses, etc. after calculation, the disposal expenses of a single parking space is about 7400 yuan:
Net realizable value of inventory parking spaces = number of parking spaces × (market price of single parking space inventory) × Realization discount rate – disposal cost of single parking space)
=277 × （6.48*70%- 0.74）
=277 × 3.8 (rounding)
=10.526 million yuan
Impairment amount of inventory parking space = 1601.75-1052.6
=5.4915 million yuan.
The specific situation of the company’s provision for asset impairment of parking space inventory of Foshan Ruifeng, a holding subsidiary, needs to be confirmed after the evaluation report is issued by the professional evaluation institution and audited by the annual audit accountant.
Therefore, the company’s provision for asset impairment of parking space inventory of Foshan Ruifeng, a holding subsidiary, is in line with relevant regulations.
[accountant’s reply]:
(I) on February 23, 2022, through consultation with the company, we will no longer serve as the company’s 2021 audit institution. Prior to this, we planned to implement the audit process for matters related to the company’s operating revenue and gross profit margin
