Securities code: 002681 securities abbreviation: Shenzhen Fenda Technology Co.Ltd(002681) Announcement No.: 2022-003 Shenzhen Fenda Technology Co.Ltd(002681)
Announcement on the reply to the letter of concern of Shenzhen Stock Exchange
Shenzhen Fenda Technology Co.Ltd(002681) (hereinafter referred to as the “company” or “listed company”) recently received the letter of concern about Shenzhen Fenda Technology Co.Ltd(002681) issued by the second Department of management of listed companies of Shenzhen Stock Exchange (company department concern letter [2022] No. 3, hereinafter referred to as the “concern letter”), The company is required to make a written explanation on matters related to the sale of 100% equity of Shenzhen fuchengda Technology Co., Ltd. (hereinafter referred to as “fuchengda”).
After carefully implementing the issues mentioned in the letter of concern one by one, the company’s reply to the letter of concern is as follows:
Question 1. According to the asset appraisal report (Beiya Shi Ping Bao Zi [2021] No. 01-1080) issued by Beiya Shi Asset Appraisal Office (special general partnership), the appraisal is conducted with the asset-based method on September 30, 2021. The appraisal result of the total equity value of fuchengda shareholders is 502248800 yuan and the appreciation rate is 171.07%.
(I) there is a big difference between the purchase price in 2017 and the sale price, and the purchase price is 5.77 times of the sale price. Please explain in detail the rationality and fairness of the pricing of this transaction in combination with the operation and financial status of fuchengda;
reply:
1. Since 2017, great changes have taken place in the environment of the consumer electronics metal structure industry
(1) At the time of acquisition in 2017, the industry was in a period of rapid growth of metal structural parts
Around 2017, metal materials were widely used in consumer electronic terminal products such as medium and high-end smart phones, tablets, laptops and wearable devices because of their good texture, touch, high strength, good heat dissipation and fashionable appearance. With the metal trend led by apple, Samsung, Huawei, oppo, vivo and Xiaomi have also launched metal models. According to Gartner data, in 2013, the penetration rate of metal materials in global consumer electronic devices such as smartphones, ultrabooks, tablets and wearable devices was 15%, 65%, 65% and 20% respectively. This proportion is expected to increase to 39%, 88%, 80% and 45% respectively in 2017. The penetration rate of metal structural parts is increasing, and the industry is in a period of rapid growth.
(2) With the decline of the prosperity of the consumer electronics industry and the intensification of market competition, the profit margin of the metal structure industry has fallen sharply
In recent years, affected by factors such as increased market saturation, repeated epidemics, lack of core and excess mobile phone performance, consumers’ willingness and frequency of changing phones have decreased, and the shipment of smart phones has shown a downward trend. According to IDC research data, the global shipment of smart phones decreased by 6.7% year-on-year in the third quarter of 2021, and the demand of the overall consumer electronics industry is low. In addition, due to the substantial expansion of production capacity of metal structure manufacturers in the early stage, the overall overcapacity and intensified competition in the industry have resulted in a sharp decline in the profit margin of metal structure manufacturers, a sharp decline in the prosperity index of metal structure industry, and major adverse changes have taken place in the industry development environment.
2. During the acquisition and sale, fuchengda’s operating conditions changed significantly
(1) Operation and financial status when the company acquired fuchengda
The main financial data when the company acquired fuchengda are as follows:
Unit: 10000 yuan
Project 2016-12-31 2015-12-31
Total assets 73150.13 67002.43
Total liabilities 48150.13 32487.60
Total owner’s equity 25000.00 34514.82
Project 2016 2015
Operating income 74735.16 78217.33
Operating profit 18283.07 23423.06
Total profit 17084.97 23728.32
Net profit 14479.07 18055.36
Net profit attributable to shareholders of the parent company 14479.07 18004.53
Net cash flow from operating activities 22051.37 6502.31
Gross profit margin 33.64% 36.17%
Net interest rate 19.37% 23.08%
When the company acquired fuchengda in 2017, it benefited from a good industry development environment and fuchengda’s high-quality customer base. Fuchengda achieved operating revenue of RMB 782173300 and RMB 747351600 in 2015 and 2016 respectively, net profit of RMB 180.553600 and RMB 144.7907 million respectively, gross profit margin of 36.17% and 33.64% respectively, and net profit margin of 23.08% and 19.37% respectively, It shows good profitability.
In 2016, the operating revenue of fuchengda decreased by 34.8217 million yuan compared with that in 2015, mainly because fuchengda reduced the sales of some products and customers with low gross profit level in order to better serve the apple mobile phone supply chain system;
In 2016, the net profit of fuchengda decreased by 35.7629 million yuan compared with that in 2015, mainly due to the significant increase in the number of item numbers of Apple products undertaken by fuchengda, resulting in an increase of 14.1533 million yuan in technology R & D expenses in that year, but some products corresponding to R & D expenses will form revenue in 2017 and later years. In addition, Fuchengda voluntarily terminated the forward foreign exchange transaction contract signed with DBS Bank, which was included in the non operating expenditure of RMB 9.5208 million in 2016.
With the release of a number of new products on the 10th anniversary of apple in 2017, fuchengda’s layout in product R & D, team building and other aspects in 2016 has achieved initial results. By the end of March 2017, fuchengda had obtained 1.112 billion yuan in on-hand orders from major customers, including 1.108 billion yuan from apple and its EMS manufacturers, an increase of 66.12% compared with 2016, Showing a good development trend.
Based on fuchengda’s high-quality customer base, fast-growing orders on hand and fast-growing industry demand, when the company acquired fuchengda in 2017, when fuchengda adopted the income method, the revenue forecast is as follows: unit: 100 million yuan
Project 2017 2018 2019 2020 2021 2022
Income 12.33 17.13 22.51 27.52 32.49 32.49
Growth rate 65% 39% 31% 22% 18% 0%
Meanwhile, the original shareholders of fuchengda promised that the net profit of fuchengda after deducting non profits from 2017 to 2019 would not be less than 200 million yuan, 260 million yuan and 350 million yuan respectively.
To sum up, based on the good operating conditions and development prospects when acquiring fuchengda in 2017, and taking December 31, 2016 as the appraisal base date, Beijing zhongtianhua Asset Appraisal Co., Ltd. issued the appraisal report “zthzpbz [2017] No. 1036”. After the appraisal by income method, the value of all shareholders\’ equity of fuchengda is RMB 2898.5135 million. Referring to the above evaluation results, the transaction price is determined to be 2895 million yuan through negotiation, which is reasonable.
(2) Operation and financial status of the company when selling fuchengda
The main financial data when the company sells fuchengda are as follows:
Unit: 10000 yuan
Project: September 30, 2021 December 31, 2020
Total assets 117275.81 141378.44
Total liabilities 73234.90 66293.68
Total owner’s equity 44040.91 75084.75
Project from January to September 2021 to 2020
Operating income 55223.33 87331.85
Operating profit -21830.28 1759.84
Total profit -25198.98 1005.63
Net profit -30143.29 -370.27
Net profit attributable to shareholders of the parent company -30143.29 -370.27
Net cash flow from operating activities -15227.06 -7290.19
Gross profit margin -1.95% 10.40%
Net interest rate -54.58% – 0.42%
Due to the decline of market demand, the intensification of industry competition and the adverse impact of fuchengda’s performance gambling disputes on normal production and operation, the apple order volume of fuchengda’s core customers has declined year by year in recent years, and the revenue and gross profit margin have continued to decline. From January to September in 2020 and 2021, fuchengda achieved operating revenue of 873.3185 million yuan and 552.22333 million yuan respectively, net profit of -3.7027 million yuan and -30.14329 million yuan respectively, and gross profit margin of 10.40% and – 1.95% respectively. Compared with the acquisition in 2017, fuchengda faced serious operating difficulties and increasing losses, It has caused a serious drag on the overall operating performance of the listed company, and major adverse changes have taken place in the operating conditions and development prospects of fuchengda.
Although the company has taken various positive measures to put fuchengda’s production and operation on the right track, in view of the great difference between the metal structure industry and the company’s original main business, and the great difficulty in optimizing and integrating resources brought by cross industry mergers and acquisitions, the company can not reverse fuchengda’s continuous loss situation in the short term.
3. Rationality and fairness of the pricing of this transaction
(1) Pricing basis of this transaction
Facing the complex environment, the company has firmly “returned to its original intention and focused on its main business”
