On January 23, Red Phase Inc(300427) (300427. SZ) disclosed the performance forecast for 2021. It is estimated that the net profit attributable to the shareholders of the listed company in 2021 will be a loss of 620 million yuan to 680 million yuan.
Image source: Red Phase Inc(300427) announcement
Red Phase Inc(300427) was established in Xiamen in 2005 and landed on the gem in 2015. It is mainly engaged in the R & D, production, sales and related technical services of power detection and power equipment, railway and rail transit traction power supply equipment, military electronics and other products, and holds and operates new energy power generation projects. According to the 2020 annual report, the main businesses of Red Phase Inc(300427) are divided into power equipment manufacturing, railway and rail transit, military industry and new energy, accounting for 43.1%, 39.1%, 10.1% and 7.7% of revenue respectively.
Since its listing, the net profit of Red Phase Inc(300427) has increased from 70.94 million yuan in 2015 to 235 million yuan in 2019. There is a slight decline in 2020, but there is still a profit of 232 million yuan. Therefore, This performance forecast means that Red Phase Inc(300427) has suffered its first loss since its listing.
The reasons given by Red Phase Inc(300427) mainly include two aspects:
the first is that in 2021 Red Phase Inc(300427) , Yinchuan Wolong, a subsidiary, accrued large goodwill impairment and long-term asset impairment losses of about 700 million yuan.
In 2017, Red Phase Inc(300427) acquired 100% equity of Wolong Electric Yinchuan Transformer Co., Ltd. (hereinafter referred to as “Yinchuan Wolong”) and 67.54% equity of Hefei Xingbo Communication Technology Co., Ltd. in order to extend the industrial chain. However, due to the slowdown of national railway investment and the decline of investment scale, the industry competition in the subdivided field of transformer business intensifies. In 2021 Red Phase Inc(300427) , it is estimated that the impairment provision for the goodwill formed by Yinchuan Wolong will be about 670 million yuan, and the asset impairment loss of about 35-40 million yuan will be accrued for its long-term assets.
According to the financial report and enterprise public information, Yinchuan Wolong is one of the earliest enterprises to undertake the localization project of railway traction transformer in China. It is also one of the important cooperation units of traction transformer scientific and technological innovation of the former Ministry of railways. It has a high and stable market share in China’s railway traction transformer market. Its main customers include the Railway Corporation and its subordinate railway bureaus China Railway Construction Corporation Limited(601186) , China Railway Group Limited(601390) , Alstom and other railway construction units.
According to the Ministry of transport and China Railway Group, since 2015, the growth of national railway fixed asset investment has been slow or even negative. in 2019, the national railway fixed asset investment was 802.9 billion yuan and 781.9 billion yuan in 2020, a year-on-year decrease of 2.6%.
The decline in the growth rate of the whole industry affected the performance of Red Phase Inc(300427) company. According to the semi annual report of Red Phase Inc(300427) 2021, the operating revenue from railway and rail transit traction power supply equipment decreased by 46.5964 million yuan or 42.14% compared with the same period of the previous year, mainly due to the decline in the newly signed contract in Wolong, Yinchuan.
It is worth mentioning that in the first half of 2021, Red Phase Inc(300427) realized a net profit of 70.34 million yuan, and the net profit of Yinchuan Wolong alone was 50.69 million yuan, accounting for 72%. It can be said to be an important source of profit for the parent company.
The second largest loss is due to the poor operation of Red Phase Inc(300427) in 2021.
In 2021, Red Phase Inc(300427) the newly signed contract amount on power equipment condition detection and monitoring products decreased compared with the same period last year, resulting in a decrease in the sales revenue of the company’s power sector in the reporting period compared with the same period last year. Moreover, affected by market competition and the slowdown of railway investment, the sales revenue of the company’s railway and rail transit sector in the reporting period decreased compared with the same period of last year. In addition, the comprehensive gross profit margin of Red Phase Inc(300427) in 2021 decreased compared with the same period of last year, mainly due to the rise of raw material prices, labor costs, market competition and project differences.
Due to the pre loss of performance, received a letter of concern on January 24. the attention letter requires Red Phase Inc(300427) to explain the reason and rationality of withdrawing large goodwill impairment provision for Yinchuan Wolong; Whether the provision for goodwill impairment of the company in the previous period and this year is reasonable and sufficient; Details of impairment of long-term assets in Yinchuan Wolong; The company’s directors, supervisors, senior managers and shareholders holding more than 5% of the shares have bought and sold the company’s shares in recent one month.
With this attention letter, Red Phase Inc(300427) share price fell. On January 24, Red Phase Inc(300427) closed at 12.00 yuan / share, down 3.23%, and it was as low as 10.65 yuan / share, a new low in recent two years.
