Stock abbreviation: Konfoong Materials International Co.Ltd(300666) Stock Code: Konfoong Materials International Co.Ltd(300666) SZ bond abbreviation: Jiangfeng convertible bond Code: 123123 SZ Konfoong Materials International Co.Ltd(300666)
Scheme for issuing shares to specific objects
Demonstration analysis report
(Revised Version)
March 2022
Konfoong Materials International Co.Ltd(300666) (hereinafter referred to as “company”, “listed company”, ” Konfoong Materials International Co.Ltd(300666) ) is a company listed on the growth enterprise market of Shenzhen Stock Exchange. In order to meet the capital requirements for the implementation of the company’s business strategy and business development, further enhance the company’s capital strength, optimize the capital structure and improve the profitability, according to the company law of the people’s Republic of China (hereinafter referred to as the “company law”) and the Securities Law of the people’s Republic of China (hereinafter referred to as the “Securities Law”) According to the provisions of relevant laws, regulations and normative documents such as the measures for the administration of securities issuance and registration of companies listed on the gem (for Trial Implementation) (hereinafter referred to as the “measures for the administration of registration”), the company plans to issue shares to specific objects, raise funds for capacity construction projects, R & D center construction projects, supplement working capital and repay loans. one
1、 Background and purpose of this offering
(I) background of this issuance
1. National and local governments strongly support the development of high-purity metal sputtering target industry
As a sub industry of electronic materials, high-purity metal sputtering target industry is a strategic emerging industry encouraged and supported by the state. The 13th five year plan for the development of national strategic emerging industries issued by the State Council proposes that by 2020, China will strive to make a number of new material varieties enter the global supply chain, and the self-sufficiency rate of major key materials will reach more than 70%, so as to preliminarily realize China’s strategic transformation from a large material country to a strong material country. The proposal of the Central Committee of the Communist Party of China on formulating the 14th five year plan for national economic and social development and the long-term goal for 2005 also proposes to accelerate the growth of strategic emerging industries, including new material industries, and promote the development of advanced manufacturing clusters. In the guiding opinions on expanding investment in strategic emerging industries, cultivating and expanding new growth points and growth poles jointly issued by the national development and Reform Commission, the Ministry of science and technology, the Ministry of industry and information technology and the Ministry of Finance in 2020, it is proposed to stabilize the industrial chain and supply chain in key areas such as microelectronics manufacturing and accelerate breakthroughs in high-purity targets and other fields.
At the local policy level, as an important manufacturing base of integrated circuits in Zhejiang Province and even the whole country, Ningbo has formed a complete industrial chain of integrated circuits covering material enterprises, design enterprises, manufacturing enterprises, packaging and testing enterprises, equipment and service enterprises and application enterprises, and has formed an industrial co construction system with Hangzhou, Shanghai and other places. The local governments of Ningbo, Yuyao, Jiaxing and Haining give strong support to the development of IC industry chain at the policy level. 1. Unless otherwise specified in this demonstration and analysis report, relevant terms have the same meaning as in the plan for Konfoong Materials International Co.Ltd(300666) issuing shares to specific objects (Revised Version).
2. The rapid development of domestic semiconductor target industry puts forward higher requirements
As one of the core materials for manufacturing integrated circuits, semiconductor chips set strict standards for the metal material purity and internal microstructure of high-purity metal sputtering targets for semiconductors. Target enterprises need to master the key technologies in the production process and make products that meet the process requirements after long-term practice. Under the influence of development history and technical constraints, semiconductor target manufacturers in the United States and Japan still occupy a leading position in the global market. With the rapid development of China’s integrated circuit industry, China’s sputtering target suppliers urgently need to further break through the technical and capacity constraints and gradually reduce the dependence of China’s integrated circuit industry on imported targets.
(II) purpose of this issuance
1. Break through the bottleneck of production capacity and grasp the good opportunity of domestic substitution of semiconductor targets
With the continuous growth of the application market in the fields of Internet of things, cloud computing, big data, artificial intelligence, driving assistance, Siasun Robot&Automation Co.Ltd(300024) and UAV, the overall market scale of the global integrated circuit industry shows a growth trend. Among them, China’s integrated circuit industry has achieved rapid development thanks to factors such as huge market demand, stable economic growth and favorable industrial policy environment. Benefiting from the accelerated development trend of China’s integrated circuit industry, the breakthrough and maturity of Chinese sputtering target supplier technology in the semiconductor field, and the cost advantage of localization, there is a large domestic substitution space in the semiconductor sputtering target field in the future, which is expected to gradually reduce the dependence on imported targets.
In recent years, the company’s semiconductor targets account for the highest proportion of operating revenue, with rapid increase in sales and strong downstream demand. However, the capacity utilization rate of the company’s main semiconductor target products is at a high level. It is planned to expand the production scale through the implementation of this raised investment project, so as to timely grasp the good opportunities for the rapid development of integrated circuit industry and domestic substitution of semiconductor targets.
2. Build R & D platform, absorb R & D talents and improve the technical level of the company
With the technological progress of the integrated circuit industry, downstream customers have put forward higher requirements for the supply of ultra-high purity materials and the development and processing of various special ultra-high purity metal and alloy target products Konfoong Materials International Co.Ltd(300666) still faces the competition pattern that some targets are dominated by suppliers from Japan and other countries, and even monopolize the market. It is planned to continue to develop and break through various special ultra-high purity metal and alloy target products by building R & D centers and absorbing R & D talents, so as to improve the international competitiveness of products.
3. Enhance the company’s capital strength, reduce the asset liability ratio and improve the anti risk ability
In the future, with the further mass production of target products in the fields of VLSI and flat panel display, the production and operation scale of the company will continue to expand and there is a demand for working capital. The funds raised in this issuance are used to supplement working capital and repay loans, which can effectively alleviate the company’s working capital demand, reduce the company’s asset liability ratio, reduce financial expenses, optimize the capital structure and improve the anti risk ability, which is conducive to the company’s sustainable, stable, healthy and long-term development.
2、 The necessity of this issuance of securities and its variety selection
(I) the type of securities to be issued and the issuing method
The type of securities issued by the company this time is to issue shares to specific objects. The type of shares issued this time is RMB ordinary shares (A shares) listed in China, with a par value of RMB 1.00 per share. The issuance method is to issue shares to specific objects.
(II) necessity of selection of securities issued this time
1. Deepen the existing business layout, optimize the capital structure and improve the ability to resist risks
The total amount of funds raised by the company in issuing shares to specific objects this time shall not exceed 1650 million yuan (including this amount). After deducting the issuance expenses, the net amount of funds raised will be used for capacity construction projects, R & D center construction projects, supplementing working capital and repaying loans. The company is a leading enterprise in the field of local high-purity metal sputtering targets. It has certain international competitiveness in the field of semiconductor targets with the highest technical threshold, has achieved large-scale mass production, and has become a supplier of world-famous semiconductor manufacturers such as TSMC, SK Hynix, Semiconductor Manufacturing International Corporation(688981) , Lianhua electronics and so on.
With the industry trend of accelerating the localization of key materials, the company’s investment project with raised funds can further consolidate the company’s business layout in the existing advantageous fields, expand the existing scale advantages and technical advantages, and improve the existing capital structure.
The investment amount of the project invested by the raised funds of the company is large, so it is difficult for the company to meet the investment needs of the project through its own funds. Therefore, the company plans to obtain necessary financial support by issuing shares to specific objects, enhance the company’s capital strength, and optimize the asset liability structure, so as to improve the company’s overall anti risk ability.
2. Equity financing is suitable for the development needs of the company at this stage
Compared with the development of corporate debt financing, debt financing is more suitable for the current stage of corporate development. The limitations of debt financing mainly include high short-term debt repayment pressure and high interest expenditure, which affect the stability of the company’s overall asset liability structure and net profit level. Equity financing can avoid the above limitations, which is conducive to the company’s long-term strategic layout, optimize the capital structure, reduce the financial risks that the company may face in the future, and ensure the smooth implementation of investment projects.
In conclusion, it is necessary for the company to issue shares to specific objects this time.
3、 Appropriateness of the selection scope, quantity and standard of the issuing object
(I) appropriateness of the selection scope of the issuing object
The issuing objects of this issuance are no more than 35 legal persons, natural persons or other legal investment organizations that meet the conditions specified by the CSRC, including the controlling shareholder Mr. Yao Lijun. Securities investment fund management companies, securities companies, qualified foreign institutional investors and RMB qualified foreign institutional investors who subscribe for more than two products under their management shall be regarded as one issuance object; As the issuing object, trust companies can only subscribe with their own funds.
In addition to Mr. Yao Lijun, the final issuing object shall be authorized by the general meeting of shareholders of the company. After obtaining the registration approval of the CSRC, the board of directors and the sponsor (lead underwriter) shall reasonably determine the issuing object according to the purchase quotation of the issuing object and the principle of price priority in accordance with the provisions of relevant laws, administrative regulations, departmental rules and normative documents. If the national laws and regulations have new provisions on the issuing object of issuing shares to specific objects, the company will adjust according to the new provisions.
All issuers of shares issued to specific objects this time are subscribed in cash.
The selection scope of this issuance object complies with the relevant provisions of laws and regulations such as the measures for the administration of registration, and the selection scope of issuance object is appropriate.
(II) appropriateness of the number of objects of this issuance
The final objects of this issuance are no more than 35 specific objects in compliance with relevant laws and regulations, including Mr. Yao Lijun, the controlling shareholder of the company.
The number of objects to be issued this time complies with the relevant provisions of laws and regulations such as the measures for the administration of registration, and the number of objects to be issued is appropriate.
(III) appropriateness of standards for the objects of this issuance
The issuing object should have certain risk identification ability and risk bearing ability, and have corresponding capital strength.
The standards of the objects of this issuance comply with the relevant provisions of laws and regulations such as the measures for the administration of registration, and the standards of the objects of this issuance are appropriate.
To sum up, the selection scope, quantity and standards of the issuing objects meet the requirements of relevant laws and regulations.
4、 Rationality of the pricing principles, basis, methods and procedures of this offering
(I) pricing principle and basis of this offering
The pricing benchmark date of this issuance is the first day of the issuance period. The issue price shall not be lower than 80% of the average trading price of the company’s shares 20 trading days before the pricing benchmark date, and shall not be lower than the par value of each share. Average stock trading price in the 20 trading days before the pricing benchmark date = total stock trading volume in the 20 trading days before the pricing benchmark date ÷ total stock trading volume in the 20 trading days before the pricing benchmark date.
In case of ex right and ex interest matters such as cash dividends, bonus shares and capital reserve converted into share capital between the pricing base date and the issuance date, the reserve price of this issuance will be adjusted accordingly according to the following methods. The adjustment formula is:
Distribution of cash dividends: P1 = p0-d;
Bonus shares or converted into share capital: P1 = P0 ÷ (1 + n);
Two items are carried out simultaneously: P1 = (p0-d) ÷ (1 + n).
Where: P0 is the base price before adjustment, D is the cash dividend distributed per share, n is the share distribution rate or conversion rate, and P1 is the base price after adjustment.
The final issue price of this offering will be determined by the board of directors of the company in accordance with the authorization of the general meeting of shareholders and the recommendation institution (lead underwriter) in accordance with the provisions of relevant laws, administrative regulations, rules and normative documents after the company’s application for this offering is reviewed and approved by Shenzhen Stock Exchange and the decision of consent to registration made by the CSRC, It shall be determined through negotiation according to the subscription quotation of investors.
Mr. Yao Lijun does not participate in the bidding process of this issuance, accepts the bidding results of other issuing objects, and subscribes for the shares issued by the company at the same price as other issuing objects.
If the issuing price of this issue cannot be generated through bidding, Mr. Yao Lijun will continue to participate in the subscription of the shares issued this time and subscribe for the shares issued this time at the bottom price of this issue (i.e. 80% of the average trading price of the company’s shares 20 trading days before the pricing benchmark date).
The pricing principle and basis of this offering are in line with the relevant provisions of laws and regulations such as the registration management measures, and the pricing principle and basis of this offering are reasonable.
(II) pricing method and procedure of this offering
The pricing methods and procedures of this offering are in accordance with the relevant provisions of the registration management measures and other laws and regulations. The board of directors will be convened and the relevant announcements will be disclosed on the website of Shenzhen Stock Exchange and the media meeting the requirements of China Securities Regulatory Commission, and it is proposed to submit them to the general meeting of shareholders of the company for deliberation.
The pricing method and procedure of this offering comply with the relevant provisions of laws and regulations such as the registration management measures, and the pricing method and procedure of this offering are reasonable.
To sum up, the pricing principles, basis, methods and procedures of this offering comply with the requirements of relevant laws and regulations, and are compliant and reasonable.
5、 Feasibility of this issuance method
(I) the issuance method is legal and compliant
1. This issuance meets the issuance conditions stipulated in the securities law
(1) This offering complies with the relevant provisions of Article 9 of the Securities Law: the issuance of securities to specific objects shall not be made by means of advertising, public persuasion or disguised disclosure.
(2) This offering complies with the relevant provisions of Article 12 of the Securities Law: when issuing new shares, a listed company shall meet the conditions specified by the securities regulatory authority under the State Council approved by the State Council. The specific management measures shall be formulated by the securities regulatory authority under the State Council.
2. The company does not have any relevant circumstances in Article 11 of the measures for the administration of registration that listed companies shall not issue shares to specific objects
(1) Arbitrarily changing the purpose of the previously raised funds without correction, or without the approval of the general meeting of shareholders;
(2) The preparation and disclosure of the financial statements for the most recent year do not comply with the accounting standards for business enterprises or relevant information disclosure rules in major aspects; An audit report with a negative opinion or unable to express an opinion on the financial and accounting report of the most recent year; The last year’s financial and accounting report has been issued with qualified audit report
