About Shanghai Titan Scientific Co.Ltd(688133)
Application documents for issuing shares to specific objects
Reply to the opinion implementation letter of the Audit Center
Sponsor (lead underwriter)
Shanghai Stock Exchange, North block of excellence Times Plaza (phase II), No. 8, Zhongxin Third Road, Futian District, Shenzhen, Guangdong:
We have received the letter of implementation of the opinions of the audit center on Shanghai Titan Scientific Co.Ltd(688133) issuing shares to specific objects (hereinafter referred to as the “implementation letter”) issued by your exchange on January 11, 2022, Shanghai Titan Scientific Co.Ltd(688133) (hereinafter referred to as ” Shanghai Titan Scientific Co.Ltd(688133) “, “issuer” and “company”) Citic Securities Company Limited(600030) (hereinafter referred to as “sponsor”, Citic Securities Company Limited(600030) “) and other relevant parties have implemented and verified the problems listed in the implementation letter one by one. Now, the reply to the problems in the implementation letter is as follows, please review. Unless otherwise specified, the abbreviations or terms in the response report of this implementation letter shall have the same meanings as those in the prospectus (application draft). explain:
1、 Unless otherwise specified, the abbreviations or terms in the response report of this implementation letter shall have the same meanings as those in the prospectus (application draft).
2、 The font in this reply report represents the following meanings:
Bold (not bold): implement the issues listed in the letter
Song typeface (not bold): reply to the questions listed in the implementation letter
Italics (BOLD): amendments and supplements to the prospectus and other application documents
Italics (not bold): references to the prospectus and other application documents
catalogue
1. Information disclosure four
1. Information disclosure
The issuer is requested to make supplementary disclosure in the risk prompt part: (1) the main factors affecting the efficiency prediction of the raised investment project and the main risks of the project implementation; (2) The impact of this raised investment project on the company’s business model and business structure. reply:
According to the requirements of the implementation letter, the issuer has comprehensively sorted out the contents of the chapter “risk factors related to this issuance” in the prospectus, supplemented and modified some contents, The issuer has supplemented and disclosed the following in “III. factors that may have a significant adverse impact on the implementation process or implementation effect of the raised investment project” of “Chapter V risk factors related to this offering” in the prospectus:
(x) main factors affecting the efficiency prediction of raised investment projects and main risks of project implementation
On the basis of historical operation statistics, current actual operation and the company’s operation and development plan, the company comprehensively considers the market development trend to predict the overall benefits of the project in the year when the project reaches production capacity. The factors affecting the benefit prediction of the raised investment project include sales revenue, operating cost, inter period expenses, taxes, surcharges and income taxes, among which the sales revenue is mainly affected by the production capacity after the project reaches production capacity Influence of sales volume and unit price; Operating costs are mainly affected by raw materials, entrusted processing fees, labor costs, packaging expenses, transportation expenses, depreciation and amortization expenses, etc; The period expenses are determined by reference to the historical level of the company, mainly including sales expenses, management expenses and R & D expenses; Taxes and surcharges include urban maintenance and construction tax, education surcharge and local education surcharge. Urban maintenance and construction tax is calculated at 7%, education surcharge is calculated at 3%, and local education surcharge is calculated at 2%; The income tax expense is calculated at the income tax rate of 25%. The above main factors affecting the efficiency prediction of raised investment projects are sales revenue and operating costs, including production capacity, production and sales rate, sales volume and unit price, raw material price, depreciation and amortization expenses, etc.
As the above factors have an impact on the efficiency calculation of the company’s raised investment projects, the company has the following risks in the process of project implementation:
1. Risk that the new production of raised investment projects is less than expected or the production capacity cannot be digested
The scientific service R & D transformation functional platform in the raised investment project plans to produce 17 kinds of products. It is expected to reach production five years after the construction of the raised investment project. After that, the proposed production capacity and corresponding sales revenue are high. Especially for biological reagents (kits), transfection reagents / immunomagnetic beads, spectral mass spectrometry and chromatographic reagents, mass spectrometers, high-performance chromatographs, spectrometers and high-end biological instruments, due to certain sales channels for product R & D and production, the new output of relevant products may be less than expected or the production capacity may not be digested, It will adversely affect the realization of the income of the raised investment project.
2. The risk that the unit price and cost of the project invested by raised funds are lower than expected, resulting in the decline of gross profit margin
In the benefit calculation of the raised investment project, in terms of product unit price, the company has many types of scientific research reagent products, and the average sales unit price is greatly affected by the change of the company’s product structure. In the benefit calculation of the project, the estimated product unit price of the raised investment project is calculated based on the overall average price, order price and market price of similar products in recent years; In terms of cost, raw materials, entrusted processing fees, labor costs, packaging expenses and transportation expenses are estimated according to the proportion of the cost of the company’s existing similar products in revenue. During the implementation of the raised investment project, if the industry competition intensifies and the downstream market demand changes, the average sales price of the company’s products may not meet the expectations, and the purchase price of raw materials, labor costs and other expenses may increase, resulting in the decline of the product gross profit margin, the risk that the benefit calculation is not as expected, and the risk of the decline of the company’s comprehensive gross profit margin after the implementation of the project.
3. Risk of significant increase in depreciation and amortization after the implementation of the investment project with raised funds
Most of the raised funds are used for project investment. After the raised funds are in place, the company’s investment in workshop and warehouse construction, office building and equipment will be increased. After the project is completed, the fixed assets and intangible assets will increase significantly. Under the condition that the existing accounting policies remain unchanged, after the raised investment project is put into operation, the company is expected to add 30.8635 million yuan of depreciation and amortization every year, accounting for 2.23% of the company’s operating revenue in 2020 and 26.28% of the company’s total profit. If the income scale of the raised investment project does not meet the expectations, it will have a negative impact on the company’s future performance, The company faces the risk of reducing performance due to a significant increase in depreciation and amortization after the implementation of raised investment projects.
To sum up, if there are major adverse changes in product R & D, market development and external economic environment during the implementation of the raised investment project, there may be new production that is less than expected, production capacity cannot be digested, gross profit margin decline and depreciation and amortization reduce performance, so that the overall benefit of the raised investment project is lower than expected.
（11） Risk of changes in the company’s business model and business structure due to the implementation of the raised investment project. The raised investment project plans to realize the independent production of scientific research reagents and instruments through the “scientific service R & D and transformation functional platform”, as a supplement to the company’s existing OEM production mode and expand the sales revenue of independently produced products; Through the “strategic reserve base of scientific research materials” and the “customs declaration platform for import and export of scientific research materials”, the import and export sales business is realized, and the sales revenue of third-party brands is expanded.
In terms of business model, the company will increase the independent production mode as the raised investment project reaches the production capacity. Since OEM production and independent production have their own advantages, the company plans to cooperate and combine the two modes after the raised investment project reaches the production capacity. It is expected that OEM will still be the main mode, but it does not rule out that the income proportion of independent production mode will be higher than that of OEM production mode due to the good sales of independent production products in the future.
In terms of business structure, with the production of raised investment projects, the sales revenue of the company’s independent brands and third-party brands will increase, and the company expects that the proportion of the two will maintain the current equilibrium state. However, it does not rule out that due to the intensification of market competition, the company’s slow technical iteration, the optimization of production process and insufficient capacity digestion, the sales revenue growth of independent brands in the future will be lower than expected, As a result, the sales revenue is dominated by third-party brands. Therefore, the company has the risk of changes in its business model and business structure. Attachment: general opinions of the sponsor on the company’s reply
We have checked the company’s reply in this reply material to confirm and ensure that it is true, complete and accurate.
(there is no text on this page, which is the signature page of the reply to the opinion implementation letter of the examination center on Shanghai Titan Scientific Co.Ltd(688133) application documents for issuing shares to specific objects)
Shanghai Titan Scientific Co.Ltd(688133) mm / DD / yy
Statement of the chairman of the issuer
I have carefully read Shanghai Titan Scientific Co.Ltd(688133) all the contents of the reply to this implementation letter and confirm that the contents of the reply report are true, accurate and complete, and there are no false records, misleading statements or major omissions. chairman:
Xie Yingbo
Shanghai Titan Scientific Co.Ltd(688133) mm / DD / yyyy (there is no text on this page, which is the signature page of the reply to the opinion implementation letter of the audit center on the application documents for Shanghai Titan Scientific Co.Ltd(688133) issuing shares to specific objects) sponsor representative:
Ju Hongcheng, yuan Binlong
Citic Securities Company Limited(600030) mm / DD / yy
Statement of the chairman of the sponsor
I have carefully read Shanghai Titan Scientific Co.Ltd(688133) all the contents of the reply report of this implementation letter, understood the verification process of the problems involved in the report, the core and risk control process of the company, confirmed that the company performed the verification procedures in accordance with the principle of diligence, and there are no false records, misleading statements or major omissions in the reply report of the inquiry letter, and I am deeply concerned about the authenticity, accuracy Integrity and timeliness shall bear corresponding legal liabilities. chairman:
Zhang Youjun
Citic Securities Company Limited(600030) mm / DD / yy
