Gem investment risk tips
After this stock issue, it is planned to be listed on the gem, which has high investment risk. GEM companies have the characteristics of large investment in innovation, uncertainty about the success of the integration of new and old industries, still in the growth stage, high operation risk, unstable performance and high delisting risk. Investors are facing greater market risks. Investors should fully understand the investment risks of the gem and the risk factors disclosed by the company, and make investment decisions prudently. Super Dragon Engineering Plastic Co., Ltd
(Longtan Jubao Industrial Zone (Village), Aotou Town, Conghua, Guangzhou)
Prospectus for initial public offering and listing on GEM
Statement: the issuance application of the company still needs to be performed by Shenzhen Stock Exchange and China Securities Regulatory Commission. This prospectus (Registration draft) has no legal effect on the issuance of shares and is only for pre disclosure. Investors shall take the officially announced prospectus as the basis for investment decisions.
Sponsor (lead underwriter)
(floors 10-19, South Tower, energy building, No. 2026, Jintian Road, Futian street, Futian District, Shenzhen)
Statement and commitment
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. The issuer and all directors, supervisors and senior managers promise that there are no false records, misleading statements or major omissions in the prospectus and other information disclosure materials, and bear corresponding legal liabilities.
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 corresponding legal liabilities.
The person in charge of the company, the person in charge of accounting and the person in charge of the accounting agency 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.
Overview of this offering
Type of shares issued: RMB ordinary shares (A shares)
The number of shares issued this time is 11952152 shares. The shares issued this time come from the company's public issuance of new shares, accounting for 25.01% of the total share capital after issuance
Public offering arrangements this offering does not involve arrangements for shareholders to publicly offer shares
The par value of each share is RMB 1.00
The issue price per share is 30.00 yuan
Expected issue date: March 2, 2022
Stock exchange to be listed Shenzhen Stock Exchange gem
The total share capital after issuance is 47.78 million shares
Sponsor (lead underwriter) China Greatwall Securities Co.Ltd(002939)
Signing date of prospectus: February 28, 2022
Tips on major issues
The company specially reminds investors that before making investment decisions, they must carefully read the text of this prospectus and pay special attention to the following important matters. 1、 Important commitments related to this offering
The company reminds investors to read the commitments made by the company, the actual controller of the company, other shareholders, directors, supervisors, senior managers, other core personnel, as well as the sponsors and securities service institutions related to the issuance, For details of relevant commitments, see "v. commitments related to investor protection" in "section 10 investor protection" of this prospectus, which will be used as an annex to this prospectus. 2、 The company specially reminds investors to pay attention to the following risks in the "risk factors" (I) risks of macroeconomic changes
Household appliances and automobiles are the two main downstream application industries of the issuer's modified plastic products. With the development trend of product fashion and thinness, modified plastics are more and more widely used in household appliances and automotive products, especially in the field of household appliances, which has become an important core material. In recent years, modified plastics have benefited from the growth of downstream household appliances and automobile industries and the expansion of their application scope (5g communication, electronics and electrical, medical treatment, etc.), and the market demand has increased rapidly. However, if the decline of the macroeconomic situation, the deterioration of the global trade environment and the cancellation of relevant national subsidy policies lead to the decline of the prosperity of the customer's industry or its downstream industries or serious overcapacity, the chain reaction may reduce the customer's demand for the company's products and adversely affect the company's operating performance. Especially in the past two years, affected by the situation outside China and the covid-19 epidemic, the overall sales scale of the downstream automobile industry and household appliance industry has declined. Although the long-term trend of the above industries is generally good and the household appliance industry has resumed growth, in the short term, if the automobile industry and household appliance industry reduce the demand for modified plastics, Will adversely affect the company's performance. (II) working capital turnover risk
From 2018 to June 2021, the net cash flows from the company's operating activities were -194022600 yuan, - 169140500 yuan, - 1320565 million yuan and -456171 million yuan respectively. The net operating cash flow of the company is relatively low. On the one hand, the business of the company developed rapidly during the reporting period. At the same time, sales collection and purchase payment have different credit periods. Notes receivable and accounts receivable increase year by year with the growth of sales revenue; On the other hand, bills are mainly used for settlement between the company and customers. Bank acceptance bills and commercial acceptance bills with general credit rating are not derecognized at the time of discount and are included in the cash inflow generated by financing activities. If the net cash flow of the company's operating activities cannot be effectively improved in the future, there will be certain risks in the turnover of working capital.
In addition, the modified plastics industry is a capital intensive and technology intensive industry. With the expansion of the company's business scale, the company's demand for working capital is also increasing. If the company cannot further enhance its financial strength and improve the net cash flow of operating activities in the future to meet the capital needs of the company's development, It may have an adverse impact on the further development of the company in the future, and even produce liquidity risk. (III) risk of price fluctuation of main raw materials
The main raw materials used in the company's products are synthetic resins such as polypropylene. These raw materials are petroleum derivatives. The price of basic raw materials such as petroleum and the market supply and demand situation have a significant impact on the price change of the company's main raw materials. With the change of market environment, the company's future purchase price of raw materials is uncertain. The material cost accounts for more than 90% of the company's production cost, and the purchase price of raw materials has a great impact on the company's profitability. As the company and its main customers adopt the stage pricing model, the transmission of upstream raw material price changes lags behind to some extent. At the same time, there may be differences between the adjustment range of product price and the fluctuation range of raw material price. The price changes of upstream raw materials usually do not quickly transmit to downstream customers. Therefore, The fluctuation of raw material prices will have a certain impact on the company's gross profit margin. From the second half of 2017, the market price of PP and other synthetic resins fluctuated and the price continued to rise. Affected by this, the gross profit margin of the company's modified plastic business in 2018 was 15.24%, down 1.42 percentage points from 2017. In the future, if the price of the company's main raw materials fluctuates sharply, and the company can not effectively transfer the pressure of rising raw material prices to the downstream, or can not offset the pressure of rising costs through technological innovation, or fails to do a good job in inventory management in the process of price decline, it will have a significant adverse impact on the operation and development of the company, Even lead to a sharp decline in performance. (IV) risk of bad debt loss of accounts receivable
At the end of each reporting period, the book value of the company's accounts receivable was 245852000 yuan, 260254400 yuan, 317621500 yuan and 273233600 yuan respectively. The company's accounts receivable increased with the growth of operating income, accounting for 30.64%, 30.02%, 29.69% and 25.87% of the company's assets respectively. In the future, with the further growth of sales scale, the company's accounts receivable may continue to rise. At present, the main customers of the company's accounts receivable have high credit, and the collection of accounts receivable after the period is good. At the end of each reporting period, the balance of accounts receivable within one year accounts for 98.90%, 98.29%, 98.86% and 98.02% respectively. However, if customers have difficulties in production and operation in the future, the credit situation will deteriorate or the cooperative relationship with the company will deteriorate, The company may face the risk of bad debts and bad debts due to the large balance of accounts receivable, which will have an adverse impact on the company's performance. (V) risk of temporary building demolition
During the reporting period, the company built workshops, warehouses and other temporary buildings for production and operation on the plot of Aotou Town, Conghua District corresponding to Yue (2017) Guangzhou real estate property right No. 09217849, with a total construction area of 1156480 square meters. The design capacity of these temporary buildings is 10000 tons of modified plastics, which does not belong to the issuer's main production and business premises.
On March 27, 2020, the people's Government of Aotou Town, Conghua District issued the statement on the use of the temporary business premises of Guangzhou jusailong Engineering Plastics Co., Ltd., confirming that the company has not violated the laws and regulations on land resources, urban and rural planning management and construction since January 1, 2017 Punishment due to the provisions of laws and regulations or other normative documents; The above temporary buildings are historical buildings and are not included in the demolition plan of Aotou town. It is expected that they will not be demolished in the next five years. However, if there are changes in government planning in the future, there is a risk that the above temporary buildings need to be demolished. (VI) risks of investment projects with raised funds
The project invested by the raised funds has been fully analyzed and demonstrated by the company, and the project has good technical accumulation and market foundation. However, the feasibility analysis is based on the current market environment, technology development trend, existing technology foundation and other factors. If these factors change significantly, there are certain uncertainties in whether the construction plan of the project invested by the raised funds can be completed on time, the implementation process and implementation effect of the project. If there are significant adverse changes in the market demand or industrial policies of downstream industries in the future, it will have an adverse impact on the expected return of the project. In addition, if the actual income of the raised investment project is significantly lower than expected, the company will face the risk of decline in net profit due to the increase of depreciation of fixed assets and amortization of intangible assets. (VII) business risk caused by New Coronavirus pneumonia
At the beginning of 2020, the outbreak of New Coronavirus pneumonia broke out around the world. Governments around the country have introduced and implemented strict measures to prevent and control the epidemic, such as delayed reemployment, restrictions on logistics and abortion, and so on. As of the signing date of the prospectus, although China's New Coronavirus epidemic has been effectively controlled, China's restrictions on human flow and logistics have been lifted, and the company has resumed normal production and operation. However, there is still a great deal of uncertainty in the global epidemic and prevention and control. The spread of overseas epidemic also brings risks to imported Chinese cases. If the overseas epidemic cannot be effectively controlled in the future, causing repeated outbreaks in China, it may still have an adverse impact on the company's performance. (VIII) risk of demand fluctuation in downstream market
Since its establishment, the company has been focusing on the R & D, production and sales of modified plastics. Its products are mainly used in household appliances, automobile industry, electronic communication, medical supplies and other fields. As a very important raw material of industrial products, the demand for modified plastics has a high correlation with the prosperity of the downstream market. During the reporting period, the rapid development of downstream industries represented by household appliances and automobiles has correspondingly driven the development of the company's business. However, if the downstream industries are adversely affected by many factors such as macroeconomic, import and export trade environment and exchange rate fluctuations, their demand for the products of the company's industry will be reduced and the company's operating results will be adversely affected. (IX) risk of intensified industry competition
At present, China has a large number of modified plastics production enterprises and fierce industrial competition. Compared with developed countries such as the United States, Europe and Japan, there is still a certain gap in the overall technical capacity. With the deepening of economic globalization, multinational corporations are optimistic about the huge demand of the Chinese market. For the purpose of strengthening the market position and optimizing the allocation of resources, they strengthen the localization development and production in China. These foreign companies rely on their advantages in technology, brand, capital and talents, and are in a leading position in the application field of modified plastics in China.
Although downstream enterprises are gradually coping with possible supply risks through the localization of raw materials due to many macro reasons such as the Sino US trade war, in recent years, China has also seen a number of excellent enterprises that can compete with large international enterprises. Several of them have a certain scale and have landed in the capital market. With the promotion of industrial integration, The position of these advantageous enterprises will be further highlighted, and the industry may present a situation of all-round competition in terms of scale, technology and capital strength. In terms of market share, based on the market output of modified plastics from 2017 to 2019, the market share of Kingfa Sci.& Tech.Co.Ltd(600143) is about 8%, that of Shanghai Pret Composites Co.Ltd(002324) , Shandong Dawn Polymer Co.Ltd(002838) , Qingdao Gon Technology Co.Ltd(002768) and Shenzhen Wote Advanced Materials Co.Ltd(002886) and Nanjing Julong Science & Technology Co.Ltd(300644) .'s market share is about 0.5%. In contrast, the market share of the company is 0.61%, which is far from that of Kingfa Sci.& Tech.Co.Ltd(600143) , Shanghai Pret Composites Co.Ltd(002324) and other competitors. At the same time, with the continuous improvement of the performance, quality and supply capacity of modified plastic products in the downstream market, the market competition will become more and more competitive
