Gem risk tip: after this stock issuance, it is planned to be listed on the GEM market, 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.
Hubei Zhongyi Technology Co., Ltd
(No. 47, South Mengze Avenue, economic development zone, Yunmeng County)
Prospectus for initial public offering and listing on GEM
Sponsor (lead underwriter)
27th floor and 28th floor, building 2, international trade building, No. 1, Jianguomenwai street, Chaoyang District, Beijing
Issuer statement
Any decision or opinion made by the CSRC and the exchange on this offering does not indicate that they have guaranteed the authenticity, accuracy and completeness of the registration application documents and the information disclosed, nor that they have made substantive judgments or guarantees 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 they have prepared and issued for the public offering of the issuer.
Overview of this offering
Type of shares issued: RMB ordinary shares (A shares)
Number of shares issued: 16837000
The par value of each share is RMB 1.00
The issue price per share is 163.56 yuan
Issue date: April 12, 2022
The stock exchange to be listed and the gem of Shenzhen Stock Exchange
Total share capital after issuance 67347175 shares
Sponsor (lead underwriter) China International Capital Corporation Limited(601995)
Signing date of prospectus: April 18, 2022
Tips on major issues
The company specially reminds investors to pay special attention to the following important matters before making investment decisions, and carefully read the text of this prospectus. 1、 Commitments of relevant responsible parties
In accordance with the requirements of China Securities Regulatory Commission, Shenzhen Stock Exchange and other regulatory bodies, the company and relevant responsible subjects have issued relevant commitments under specific circumstances and conditions, including shareholders’ commitment to share locking, commitment to shareholding intention and reduction intention, measures and commitments to stabilize stock price, commitment to share repurchase and share repurchase of fraudulent issuance and listing, measures and commitments to fill diluted immediate return, commitment to profit distribution policy Commitment to bear compensation liability according to law, remedial measures and commitments for failure to fulfill commitments, etc. For details, please refer to “(VI) commitments related to investor protection” in “I. contents of documents for future reference” in “annex to section 13” of this prospectus. 2、 Accumulated profit distribution plan before issuance
After the first extraordinary general meeting of shareholders in 2020 deliberated and approved, after the company’s issuance and listing plan is approved and implemented by the CSRC, the accumulated profits available for distribution to shareholders before the issuance will be shared by the new and old shareholders after the issuance according to their shareholding ratio. 3、 Risk warning (I) business risk caused by share inheritance and change of actual controller
Mr. Wang Hanping, the former controlling shareholder and actual controller of the company, died on April 6, 2021. Mr. Wang Li inherited 56.38% of the shares of the company originally held by Mr. Wang Hanping according to a valid will and became the new controlling shareholder and actual controller of the company. As the founder of the company, Mr. Wang Hanping has played an important role in introducing management and technical talents for the company, formulating the company’s business policy and development strategy, and improving the company’s governance system and governance structure. Mr. Wang Li previously lacked enterprise operation and management experience, such as the new controlling shareholder and actual controller will adopt different business policies, development strategies and management ideas in the future If the development strategy and management ideas do not meet the market demand and the actual situation of the company, it may have an adverse impact on the future operation of the company.
As of the signing date of this prospectus, there is no dispute or potential dispute over 56.38% of the shares of the company held by Mr. Wang Li. The concerted action agreement signed by Mr. Wang Li and Ms. Wang Xiaoxia is legal and effective, and the actual control of the company is clear and stable. Mr. Wang Li has issued a letter of commitment to maintain the stability of the actual control of the company, Wang Xiaoxia, a shareholder holding more than 5% of the company’s shares, and Zhongyi investment have issued a letter of commitment to maintain the stability of the company’s actual control, but they still do not rule out that uncontrollable factors may affect the stability of the company’s control in the future, which may have an adverse impact on the company’s future operation. (II) as for the high concentration of customers, there is a certain risk of dependence on the main customers Contemporary Amperex Technology Co.Limited(300750) with regard to customers
From 2019 to 2020 and from January to June 2021, the proportion of products sold to Contemporary Amperex Technology Co.Limited(300750) accounted for 7.10%, 35.46% and 46.93% of the company’s operating revenue respectively, and the proportion of products sold to Contemporary Amperex Technology Co.Limited(300750) accounted for 14.77%, 50.31% and 47.80% of the company’s total gross profit respectively. The company’s sales revenue to Contemporary Amperex Technology Co.Limited(300750) increased significantly in 2020, and the proportion of sales revenue to Contemporary Amperex Technology Co.Limited(300750) also increased significantly, The company has a high concentration of customers.
If the operation of Contemporary Amperex Technology Co.Limited(300750) or the cooperation between the company and Contemporary Amperex Technology Co.Limited(300750) changes in the future, which has a significant adverse impact on the company’s business, and the company fails to resolve the relevant risks in time, the company’s operating performance and the sustainability of performance growth will be affected to a certain extent.
(III) risks of energy consumption dual control policy on the issuer’s production and operation and raised investment projects
In September 2021, the company received the implementation plan for double control target responsibility assessment of energy consumption of provincial key energy users in the 14th five year plan issued by Hubei Provincial Development and Reform Commission forwarded by Yunmeng County Development and Reform Bureau. According to the implementation plan, the company and Zhongke copper foil meet the standards of key energy users included in the dual control assessment and management scope of energy consumption in Hubei Province.
If the company and Zhongke copper foil fail to complete the total energy consumption and intensity targets in the follow-up assessment, or the total energy consumption target is completed but the intensity target is not completed, and the assessment result is evaluated as “incomplete”, it may face the risk of compulsory implementation of energy audit, ordering rectification within a time limit, and delaying the approval of energy-saving review of new high energy consumption projects. (IV) production 4.5 μ M risk of large obstacles encountered by lithium battery copper foil
Following the requirements of battery manufacturers to improve energy density and reduce cost μ M after lithium copper foil, 4.5 μ M lithium battery copper foil is expected to become one of the mainstream products in the future, and there is a certain substitution risk for the company’s existing main product specification lithium battery copper foil. Achieve 4.5 μ M copper foil batch production needs to meet the technical requirements of additives, core equipment, process technology and so on. At present, the downstream leading enterprise Contemporary Amperex Technology Co.Limited(300750) has started to apply 4.5 μ M lithium copper foil. If production 4.5 μ M copper foil encounters great obstacles, so it can not timely respond to the needs of the market and customers for advanced processes and products, and the company fails to overcome relevant obstacles and resolve risks in time, which will have a certain impact on the company’s market competitiveness and production and operation performance. (V) risk of industrial policy change
Lithium copper foil, one of the company’s main products, is mainly used in the downstream new energy vehicle industry. With the gradual maturity of the industrial chain of China Shanxi Guoxin Energy Corporation Limited(600617) automobile industry and the adjustment of the national subsidy policy, the industry is changing from the vigorous development stage brought by policy subsidies to the sustainable growth stage based on market demand and driven by technological innovation. If the current decline of state subsidies exceeds expectations or other major adverse changes occur in relevant industrial policies, the development of new energy vehicle industry will be affected to a certain extent, which will have an adverse impact on the sales of lithium battery copper foil products of the company. (VI) risk of intensified market competition
Since 2014, China Shanxi Guoxin Energy Corporation Limited(600617) automobile industry has entered a period of rapid development, driving the demand for power batteries, and power battery enterprises have expanded their production, thus driving the expansion of cathode material collector and its upstream enterprises. Affected by the increasingly fierce market competition, the change of subsidy policies for new energy vehicles, the adjustment of product structure and other reasons, enterprises in the industry have accelerated technology R & D, optimized processes and increased production capacity to obtain technical and price advantages. Subsequently, the scale of lithium-ion copper foil industry has developed rapidly: with the rapid development of lithium-ion batteries, especially power batteries in China, according to GGII, the shipment volume of China’s lithium-ion copper foil industry continued to develop rapidly at a growth rate of 20% from 2015 to 2020. From 2018 to 2020, the output of lithium battery copper foil in China increased from 119000 tons to 145000 tons. The capacity in the industry continued to expand, and the capacity utilization rate decreased from 73.4% to 67.3%.
In terms of market competition, downstream customers continue to focus on power battery enterprises, and ultra-thin lithium batteries have become the focus of the competitive layout of leading enterprises. According to GGII, by 2020, the market share of the top five suppliers in the lithium copper foil industry has reached 67.4%, and the market competition is fierce.
The gross profit margin of lithium copper foil of the company is greatly affected by the market competition of the industry, customer and product structure, technical development difficulty and other factors. If the industry competition intensifies in the future, the company’s business scale, customer resources, product price and other aspects change greatly, or the company cannot continue to maintain its competitive advantage in innovation and technology, the company will face the risk of decline in gross profit margin due to adverse factors such as the decline in the sales price of main products, the rise in the price of raw materials and the rise in labor cost. (VII) risk of fluctuation of processing fee and decline of operating performance
There are many enterprises producing electrolytic copper foil in the industry, with large market demand and full competition. At present, companies in the same industry are expanding their production to seek scale expansion and technological iteration and upgrading. At the same time, relevant policies in the downstream new energy vehicle industry may also fluctuate. The intensification of industry competition, the overtaking of industry status by competitors, the decline of new energy subsidy policy again, resulting in the decline of prosperity of copper foil industry and other related factors may have an adverse impact on the company’s product processing fees. The company’s overall operating performance is sensitive to the fluctuation of processing fees. According to the calculation, if the processing fees drop by 10%, the company’s net profit will drop by 29.35% in 2020. Therefore, the decline of processing fees will have an adverse impact on the company’s business growth and product sales, resulting in the risk of decline in the company’s operating performance. (VIII) price fluctuation risk of raw materials
The company uses copper as the main raw material for the production of electrolytic copper foil, and the product pricing adopts the mode of “copper price + processing fee”. As the proportion of raw materials in the unit cost of standard copper foil and lithium battery copper foil products is basically in the range of 70% – 85% (the proportion of raw material costs is different due to different specific products), according to the sensitivity analysis and calculation, the rise or fall of copper price is less than 30%, and the corresponding decline or rise of the company’s gross profit margin is less than 5%. Therefore, the fluctuation of copper price will affect the company’s operating revenue, cost and gross profit margin, thus affecting the company’s performance. If the copper price in the market fluctuates sharply in the short term, the sales price of the company’s products fails to reflect the change of the copper price in time, which will have an adverse impact on the company’s performance. In the first half of 2021, the market copper price continued to rise, and the fluctuation range of the average price increased compared with that in 2020. If the company fails to timely transmit the impact of copper price fluctuation on the purchase unit price to the sales side and reflect it in the sales unit price, it will have an adverse impact on the company’s performance. (IX) safety production risk
There is a certain risk of accidents due to improper operation in the company’s production activities. Safety accidents may cause personal casualties, property damage, etc., and may cause the company to be punished, affecting the company’s financial status and operating results. (x) technological innovation risk
With more and more enterprises entering the copper foil industry, the industry competition is intensifying. At the same time, the rapid development of downstream industries also makes customers put forward higher requirements for the quality and process of electrolytic copper foil. In the future, if the company cannot continue to maintain technological innovation and process improvement, timely respond to the needs of the market and customers for advanced processes and products, or the technological innovation is less than expected, it will have an adverse impact on the company’s market competitiveness and production and operation performance. （11） Operational risks caused by “covid-19 epidemic”
After the covid-19 epidemic, in order to control the spread of the epidemic, Chinese governments at all levels have taken a variety of temporary measures, such as city closure, travel restrictions, road control, delaying the date of resumption of work and so on. The company’s production and operation site is located in Xiaogan City, Hubei Province. During the severe epidemic, the company’s raw material procurement and logistics, production and delivery plans were delayed to a certain extent, and the resumption time of the company’s suppliers and customers was also delayed due to the impact of the epidemic. If the epidemic continues or the scope of influence expands further in the future, it may have an adverse impact on the normal operation of macro-economy and the business development of the company. （12） Operating performance fluctuation risk
The net profit of the company during the reporting period was 658848 million yuan, 40.741 million yuan, 1239739 million yuan and 191191 million yuan respectively. The net profit of the company in 2019 declined significantly compared with that in 2018, which was mainly affected by the changes in the market operating environment of the electrolytic copper foil industry and the low yield during the commissioning stage of the company’s new production line. If the prosperity of electrolytic copper foil industry or important customers change in the future, the company’s operating performance may still fluctuate. （13） Operating cash flow risk
Cash generated from operating activities of the company during the reporting period
