On March 30, Weijie Chuangxin, a supplier of head mobile phone brand manufacturers such as Xiaomi, oppo and vivo, officially launched the IPO subscription of Kechuang board.
According to the relevant report of canalys, from January to June 2021, the market share of Xiaomi, oppo and vivo in China reached 61.27%, while the market share of glory reached 14% in the second quarter of 2021, with significant head effect. Affected by this, Weijie Chuangxin, as a supplier, was also forced to suffer from “key customer dependence”. The prospectus (the first draft, the same below) shows that from 2018 to the first half of 2021, the proportion of vijiechuangxin major customers in the total sales of each period was 99.80%, 95.91%, 98.68% and 99.08% respectively.
In addition, as the supplier of the core module “RF front-end” necessary for mobile terminal equipment to realize cellular network connection, Wi Fi, Bluetooth, GPS and other wireless communication functions, Weijie Chuangxin said in the prospectus that “it does not have the complete capability of 5g high integration RF front-end architecture scheme”, which also attracted attention.
On how to deal with the dependence of key customers and the upgrading of 5g technology, the reporter of daily economic news sent an interview letter to Weijie Chuangxin and called the Secretary office. The staff of the other party said that the company would not respond before listing.
it was only in the first half of last year that the loss turned into profit
Due to the concentration of top brand manufacturers and high market share, Vijay Chuangxin’s dependence on key customers is very obvious. From 2018 to the first half of 2021, the sales amount of Vijay Chuangxin to the top five customers was 283 million yuan, 558 million yuan, 1786 million yuan and 1686 million yuan respectively, accounting for 99.80%, 95.91%, 98.68% and 99.08% of the total sales of each period respectively.
Huaxinke, taikeyuan and Shenzhen Huansheng are the top five customers of Weijie Chuangxin in recent three years, and the corresponding end customers of Zhonghua Xinke are Xiaomi and Wingtech Technology Co.Ltd(600745) ; Taikeyuan corresponds to Huaqin communication, Longqi technology, Wingtech Technology Co.Ltd(600745) , and Chuanyin shares; Shenzhen Huansheng is oppo and waterward.
It is worth noting that the contact between Weijie Chuangxin and terminal key customers is more than that. In 2020, Huawei’s Hubble investment, oppo mobile, vivo mobile and Xiaomi fund became the investors of Weijie Chuangxin.
Under “dependence”, if key customers are lost, the impact on the company’s performance is self-evident. Before listing, this situation had already appeared. Company a, which was the fourth largest customer of Weijie Chuangxin in 2019 and 2020, had disappeared in the first half of 2021. Between 2019 and 2020, company a brought a sales amount of 27.204 million yuan and 266274 million yuan to Weijie Chuangxin. In this regard, Weijie Chuangxin said in its annual report that from January to June 2021, the company did not generate sales revenue for company A.
Relying on well-known major customers all year round, Weijie Chuangxin’s performance is very bright. From 2018 to the first half of 2021, the revenue of Weijie Chuangxin was RMB 284 million, RMB 581 million, RMB 1.81 billion and RMB 1.701 billion respectively; From 2019 to the first half of 2021, it increased by 104.71%, 211.38% and 136.75% respectively year-on-year.
The high-speed performance growth failed to drive the profitability of Weijie Chuangxin. From 2018 to the first half of 2021, the net profit attributable to the parent of Weijie Chuangxin was -338588 million yuan, – 299941 million yuan, – 777291 million yuan and 4.2586 million yuan respectively. It was not until the first half of 2021 that Weijie Chuangxin turned loss into profit.
share based payment expenses totaling 763 million
For the reasons for the loss, Weijie Chuangxin said that during the reporting period, the company recognized a large amount of share based payment expenses as recurring profits and losses, which had a great impact on the amount of the company’s net profit.
From 2018 to 2020, the share based payment expenses of Weijie Chuangxin were 109452 million yuan, 380475 million yuan and 17356155 million yuan respectively. In 2019 and 2020, excluding the impact of share based payment, the net profit attributable to the shareholders of the parent company after deducting non recurring profits and losses was positive.
According to the disclosure in the prospectus (application draft), in 2020, Weijie Chuangxin implemented three equity incentives, and a total of 763 million yuan of share payment expenses were confirmed. According to the application draft of Weijie Chuangxin prospectus, the net profit attributable to the shareholders of the parent company in 2020 was -667 million yuan due to the impact of high share payment fees.
However, on May 18, 2021, after the Ministry of Finance issued the application case of share based payment standards, Weijie Chuangxin said in the draft of the prospectus that the company, in combination with the above documents, passed a correction proposal at the seventh meeting of the third board of directors on October 17, 2021: for the share based incentive business in 2018 and 2020, the share based payment fee shall be confirmed at one time on the grant date, The correction is to allocate and recognize the fair value of the company’s shares on the grant date on each balance sheet date in the waiting period.
This adjustment narrowed the net profit attributable to the parent company of Weijie Chuangxin from -667 million to -777291 million yuan in 2020. Weijie Chuangxin predicts that the share based payment expenses to be recognized from 2022 to 2025 will be 1336292 million yuan, 735222 million yuan, 465322 million yuan and 2.8688 million yuan respectively, which will directly lead to the risk of low or negative net interest rate.
For equity incentive, Weijie Chuangxin said in the prospectus: “the company has comprehensively encouraged the company’s managers, core technicians and key personnel.”
In the smartphone market with fierce competition and high-speed technology iteration, the importance of R & D capability goes without saying. However, under the 5g wave, Weijie Chuangxin, whose main products are RF power amplifiers that directly affect the communication quality and endurance of mobile communication equipment, said: “it does not have the complete ability of 5g high integration RF front-end architecture scheme, and faces the risk of higher technical challenges in the process of 4G to 5g iteration.”
The annual report shows that Weijie Chuangxin sells 4G integrated PA module products. From 2018 to the first half of 2021, the revenue of 4G PA module accounted for 92.16%, 96.09%, 88.59% and 71.57% respectively, which is the main source of its sales revenue; 5g high integration PA modules were shipped in a small amount in 2020. In 2020 and the first half of 2021, the revenue of 5g PA modules accounted for 10.54% and 25.70% respectively.
