About Shenzhen meimeichuangyi Medical Technology Co., Ltd. IPO and listing on GEM
Reply to the opinion implementation letter of the Audit Center
Sponsor (lead underwriter)
(floor 12 and 15, block B, Xinsheng building, No. 5, Financial Street, Xicheng District, Beijing)
Shenzhen Stock Exchange:
According to the requirements of the letter on the implementation of the opinions of the audit center on the application of Shenzhen meimeichuangyi Medical Technology Co., Ltd. for initial public offering and listing on the gem (audit letter [2022] 010312) issued by your office on March 25, 2022, Shenzhen meimeichuangyi Medical Technology Co., Ltd. (hereinafter referred to as the “company”, “issuer” and “meimeiyi”) together with Dongxing Securities Corporation Limited(601198) (hereinafter referred to as the “sponsor” or “sponsor”), Guangdong Xinda law firm (hereinafter referred to as the “issuer’s lawyer”), Tianjian Certified Public Accountants (special general partnership) (hereinafter referred to as the “reporting accountant”) in the principle of diligence, honesty and trustworthiness, The problems listed in the opinion implementation letter of the Audit Center have been checked one by one. The reply is as follows. Please review.
Unless otherwise specified, the abbreviation used in this reply has the same meaning as that in the prospectus of Shenzhen meimeichuangyi Medical Technology Co., Ltd. on initial public offering and listing on GEM (application draft) (hereinafter referred to as the “prospectus”).
This reply is in the following font:
The serial number of the problems listed in the implementation letter is in bold
Reply to the questions listed in the implementation letter
Explanations on supplements and amendments to the prospectus are in regular script and bold
Note: in this reply, if there is difference in mantissa between the sum of partial total and each addend, it is caused by rounding in calculation
catalogue
Question 1. Information disclosure 3 question 2. About market space 7 question 3. About historical evolution 12 question 4. About ESOP platform 18 question 5. About revenue recognition and the largest customer 6. Fairness of purchase price of raw materials 28 question 7. Financial information and operating conditions after the audit deadline thirty-four
Question 1. Information disclosure
The issuer shall exempt the disclosure of the name information of the largest customer, and ask the issuer to fully disclose the basic information of the largest customer other than the name, the cooperation history and business data between the issuer and it in the prospectus. The sponsor is requested to express clear opinions on whether the disclosure can reach the level necessary for investors to make investment decisions and whether it will affect investors’ decision-making and judgment on the value of the company.
[reply]
1、 The issuer shall exempt the disclosure of the name information of the largest customer, and ask the issuer to fully disclose the basic information of the largest customer other than the name, the cooperation history and business data between the issuer and it in the prospectus
(I) the issuer shall exempt the disclosure of the name information of the largest customer, and request the issuer to fully disclose the basic information of the largest customer except the name in the prospectus
In the prospectus, the issuer disclosed the basic information of the first largest customer except the name. The specific contents are as follows: the scale of the global household ventilator market has increased year by year. From 2016 to 2020, the global household ventilator market increased from US $1.707 billion to US $2.709 billion, with a compound annual growth rate of 12.23%. From 2016 to 2020, the global respiratory mask market grew from US $1.12 billion to US $1.62 billion, with a CAGR of 9.83%.
Customer a is one of the world’s largest manufacturers of household ventilators. In fiscal 2018, 2019 and 2020, the operating revenue exceeded US $2 billion and continued to grow, the net profit exceeded US $300 million and continued to grow, and the gross profit margin was more than 55% and relatively stable. The first largest customer has stable operation ability and strong profitability.
According to the above situation, customer a maintains a competitive advantage in the industry, with stable operation ability and strong profitability. (II) history and business data of the issuer and its cooperation
1. History of cooperation between the issuer and customer a
(1) The issuer disclosed the history of cooperation with the largest customer in the prospectus, as follows:
In 2008, Xiong Xiaochuan founded Shenzhen meimeichuangyi Technology Development Co., Ltd. and carried out business cooperation with customer a. In 2010, Xiong Xiaochuan established Meihao Co., Ltd., began to engage in the production of ventilator components, and gradually began to provide customer a with mold development and manufacturing. With perfect medical device production management system, precise mold manufacturing technology, strong product R & D strength, independent innovation and development of automatic production system, excellent product performance, rich production experience and strict quality control system, the company has been rated as the “best supplier” of customer a for 10 consecutive years and has established a good cooperative relationship with customer a.
The company is the core supplier of the core components of household ventilator mainly sold by customer a in the market. The life cycle of this generation of ventilator products has reached 6 years. At present, customer a plans to launch a new generation of household ventilator. The company is the core supplier of the core components of the new generation of ventilator. The company has participated in the development of materials, structures, molds, automation, production technology and quality standards of the whole set of structural components since 2017, and has begun mass production for customer a. The business between the company and customer a is stable and sustainable. (2) The issuer disclosed in the prospectus that the cooperation process with the first major customer is as follows:
The company signed a framework agreement with customer a to stipulate the general provisions such as quotation method, payment method and quality requirements. Customer a placed an order to the company according to its own production needs, and agreed on the product type, purchase quantity, purchase amount, delivery time and other specific contents.
The specific way for the company to obtain customer a’s order is as follows: the company’s salesperson logs in to the supplier system of customer a, receives the order in the system, checks the order information and enters the order information in the company’s SAP system. The company organizes production and delivery according to the order information. After delivery, upload the product compliance report, bill of lading and other information of relevant products in the supplier system and complete the order.
The company mainly adopts the cost plus mode, and determines the product price with customer a through business negotiation on the basis of fully considering the quotation of competitors.
Customer a is a listed company and has perfect supplier management and procurement management system. The issuer has passed the customer’s supplier audit system and entered its supply chain. The customer will conduct annual supervision and audit on the issuer every year and conduct supplier performance evaluation on the issuer every half a year.
In the course of operation, the issuer does not have any illegal situations such as unfair competition and commercial bribery. At the same time, the issuer has formulated internal management systems and effective measures to prevent commercial bribery, and the implementation of relevant systems is in good condition.
(3) The issuer disclosed the cooperation agreement with the largest customer in the prospectus as follows:
The issuer has established a long-term, stable and continuous cooperative relationship with customer a. Although the term of validity is included in the framework agreement between the issuer and customer a, the term will be revised and extended before the expiration. According to the amendment letter signed by the issuer and customer a, which takes effect on July 1, 2020, it is agreed to extend the validity of the sales framework agreement for 5 years to August 1, 2025.
The historical signing of the cooperation agreement between the issuer and customer a is as follows:
Contract signing time and validity
The validity period in August 2013 is 3 years. The customer can send a written notice at least 120 days before the expiration of the current validity period
Notice that the validity period will be extended for another two years.
In March 2016, the validity period was extended for another 6 months. The agreement will be terminated in September 2016.
In October 2016, the validity period will be extended for another year. The agreement will be terminated in October 2017.
The validity period in December 2016 will be extended for another three months. The agreement will be terminated in January 2018.
The validity period in August 2017 will be extended for another three months. The agreement will be terminated in April 2018.
The validity period in April 2018 will be extended for another three months. The agreement will be terminated in July 2018.
The validity period in July 2018 will be extended for another six months. The agreement will be terminated in December 2018.
The validity period in October 2018 will be extended for another six months. The agreement will be terminated in June 2018.
In June 2019, the validity period will be extended for another three months. The agreement will terminate in September 2019.
In August 2019, the validity period will be extended for another 12 months. The agreement will be terminated in August 2020.
In July 2020, the validity period will be extended for another five years. The agreement will be terminated in August 2025.
In July 2020, the time of the framework agreement signed by the issuer and customer a was extended for five years, mainly because the issuer has participated in the development of materials, structures, molds, automation, production technology and other aspects of the complete structural components of customer a’s new generation ventilator since 2017, and has begun mass trial production for customer a. According to the life cycle of its products, customer a guarantees the stability of the supply of new generation ventilator components by extending the validity period of the agreement. The validity period is longer than previous changes, which is reasonable.
2. Business data of issuer and customer a
The issuer disclosed the business data with the first largest customer in the prospectus. The details are as follows:
During the reporting period, the company’s sales revenue from customer a was 581825000 yuan, 602126300 yuan and 758188700 yuan respectively, accounting for 78.37%, 67.81% and 66.66% of the company’s operating revenue respectively. The sales revenue from customer a’s designated supplier order (hereinafter referred to as “indirect order”) is 289382 million yuan, 268975 million yuan and 227083 million yuan respectively, accounting for 3.90%, 3.03% and 2.00% of the operating revenue respectively. The total sales revenue from the direct and indirect orders of customer a is 610763200 yuan, 629023800 yuan and 780897000 yuan respectively, accounting for 82.27%, 70.84% and 68.65% of the company’s operating revenue respectively.
According to the publicly disclosed information of customer a, after conversion, the company’s sales revenue to customer a accounted for 6.89%, 7.21% and 7.15% of the operating cost of customer a from 2018 to 2020.
During the reporting period, customer a has the supply of designated raw materials, as follows:
Unit: 10000 yuan
Project purchase amount in 2021 purchase amount in 2020 purchase amount in 2019 purchase amount
Customer a specifies raw material supply 1384392755235868289
During the reporting period, the issuer has the situation that some raw materials are designated by customers. The purchase price of such raw materials is the market price, which is agreed by the issuer and the supplier. The issuer shall independently bear the risks of storage, loss, price fluctuation and so on. The purchase of raw materials designated by the customer and the sales of the company’s products are independent of each other. Both the issuer and the supplier sign purchase contracts with independent pricing.
During the reporting period, the main reasons for the purchase of raw materials designated by customers are as follows: (1) the company participated in the design and development process of new products, individual special raw materials were provided by suppliers designated by customers, and the information of such suppliers was included in the design and development records. In order to meet the requirements of medical device laws and regulations on the traceability integrity from design and development to production and sales, the suppliers for mass production procurement will be consistent with those used in the design and development stage in principle. (2) According to the laws and regulations of medical devices and the requirements of quality management system, generally, changes need to be re verified or confirmed and risk assessment. The long verification cycle of the change of special material supplier, the new change cost and the corresponding quality risk, etc. generally, customers will not change the special raw material supplier at will.
2、 The disclosure content can reach the level necessary for investors to make investment decisions
The issuer’s declassification is mainly in the form of proxy, and there is less information exempted from disclosure, which is not a key factor in the company’s production and operation and judging the company’s value. The issuer disclosed the historical growth of the household ventilator Market, and disclosed the specific situation, business cooperation and important business data of customer a. the disclosure can reach the level necessary for investors to make investment decisions, and does not constitute a major obstacle to investors’ decision-making. 3、 Verification opinions
(I) verification procedure
The sponsor has performed the following verification procedures:
1. Review the business contract between the issuer and its customers, the confidentiality system of the issuer, the confidentiality agreement between the issuer and its directors, supervisors, senior managers, core technicians and other employees, and verify and confirm the confidentiality mechanism, identification of business secrets and no disclosure of Secrets of the issuer;
2. Check the application documents for this issuance and listing publicly disclosed by the issuer and query the enterprise publicity system（ http://www.gsxt.gov.cn.
