Niche business is not easy to do.
In the impression of many people, it is extremely pleasant to enjoy a comfortable spa in the huge jacuzzi at night. The "old money" in Europe and the United States, from Bezos to Bill Gates, are often loyal fans of jacuzzis.
Taking Bezos, the top wealthy man and the head of Amazon, as an example, according to public information, there are three jacuzzi bathtubs in his newly built superyacht;According to "Elon Musk's Biography", Musk once advised Bezos "not to indulge in the luxury of the jacuzzi".
It seems that jacuzzi is a rich man's business, but it does not mean that jacuzzi will definitely be listed:On the evening of December 1, the IPO of Guangzhou Tenglong Health Industry Co., Ltd. on the main board of the Shenzhen Stock Exchange was announced to terminate the review, the direct reason was that the company and the sponsor Guoxin ** applied to withdraw the application for sponsorship on November 21. And this is a company that makes jacuzzi accessories, and originally planned to raise about 101.3 billion yuan to expand production!
What's even more unusual about this company is that it still chose to withdraw even after completing the exchange's second round of inquiries and responses. The reason for this choice may be inseparable from the impact of the economic situation on the company's performance.
The decline in performance blames the general environment
According to the industry research report data, the global spa massage cylinder accessories industry market capacity in 2020 will be 22$0.9 billion, or an incremental market capacity of $12$2.7 billion, with a stock market capacity of 9$8.2 billion.
As mentioned at the beginning of this article, the jacuzzi belongs to the favorite of the Western "old money", so foreign manufacturers often have a deeper technical background. Tenglong Health is one of the companies that breaks the monopoly of foreign technology and sells products to the world.
According to the latest prospectus of Tenglong Health, the company's main products are divided into massage products, water treatment products, lighting products and accessory products according to their functions. Massage products mainly include massage nozzles and nozzle seats, water treatment products mainly include water filtration accessories, water disinfection accessories and water circulation accessories, lighting products mainly include bathtub lamps and pool lights, and accessories products mainly include bathtub covers, bathtub cover brackets, etc.
It can be seen from here that Tenglong Health produces the "core component" of the jacuzzi - the water circulation system, and the customers are not small: according to the prospectus, the company's main products are exported to overseas, successfully exported to North America, Europe and other regions, and the customer base covers Watkins, Bluefalls, Bullfrog, Sr.A number of international spa massage cylinder manufacturing leading enterprises such as Smith and StrongSpas have formed a pattern of competition with international spa massage cylinder accessories manufacturers such as Waterway and CMP.
As for the issue of competition in the same industry, Tenglong Health is also full of confidence: according to the prospectus, there are not many domestic enterprises engaged in spa massage pool accessories, and the scale is small, and there is no effective competition, the main enterprises in the industry include the issuer, the United States Waterway and the United States CMP, and the issuer's main competitors are located overseas. Dare to love this is a "semi-exclusive" business in China.
Having said all this, what is the company's performance?During the reporting period, the issuer achieved operating income of 24,135120,000 yuan, 38,996650,000 yuan and 44,102460,000 yuan, and the operating income growth in 2021 will be 6158%, and the increase in operating income in 2022 will be 1309%, the issuer's performance growth slowed down. During the reporting period, the company's main business income from export sales was 21,343580,000 yuan, 34,968$790,000 and $42,570750,000 yuan, accounting for respectively. 91% and 9676%。However, the net profit of overseas subsidiaries accounted for the proportion of the company's consolidated net profit respectively. 19%。
Prospectus-related information, the same below.
From January to June 2023, the company achieved an operating income of 17,918210,000 yuan, down 3119%；Net profit and net profit attributable to shareholders of the parent company were 6,089950,000 yuan, down 3153%, according to the company's explanation, this is due to the fact that after the explosive growth of the spa massage cylinder market in 2021, the current market demand has declined, and downstream customers have shifted from "stocking in advance" to "destocking", and the company's operating performance is facing the risk of decline. However, overall, the amount of new orders from January to June 2023 still reached 13.9 billion yuan, the same level as the same period last year, providing a guarantee for the company's performance level.
The reason for the decline in performance,The deeper reason is the fluctuation of the company's performance caused by the change in the macroeconomic situation, especially the impact of the new crown epidemic. As the company said in the second round of responses, "In 2021 and the first half of 2022, the spa massage cylinder industry experienced rapid growth brought about by excessive consumption, which was mainly attributed to two aspects":
During the epidemic, consumer demand for spa jacuzzi was rapid**, and the whole cylinder manufacturers were overly optimistic about the demand of the entire market**
Based on the Sino-US friction and the shortage of shipping capacity during the epidemic, the whole cylinder manufacturer placed more orders with the issuer in order to ensure the safety of the first chain.
The "whole cylinder manufacturer" here refers to the downstream massage spa cylinder assembly manufacturer, which is also the company's main customer. The company's statement is to demonstrate that the issuer's "rapid growth in performance in 2021 and 2022 is higher than the growth of Watkins' own revenue scale, which is reasonable." In summary, it is reasonable for the issuer to expect that the increase in Watkins' revenue exceeds the increase in Watkins' own revenue."
Why is Watkins sacred?It is one of the internationally renowned spa massage cylinder manufacturers and the company's main customersDuring the reporting period, the total sales revenue of the company's top five customers was 16.9 billion yuan, 279.9 billion and 37.5 billion yuan, accounting for the proportion of the current operating income respectively. 76% and 8503%, the customer is stable and the concentration is high.
However, the high degree of concentration does not ensure that future performance will not fluctuate: as a consumer durable, usually people do not replace the spa bathtub often after buying it, and the service life of its components is usually as long as several years, since, as the company said, "the whole cylinder manufacturer has placed more orders with the issuer in order to ensure the safety of the first chain", then there is likely to be an overdraft of future demand, and as the market returns to normal in the first half of 2023, it is reasonable for the company's performance to decline.
In addition, the adjustment of the sales method of Watkins also affected the company's revenue in 2022: according to the prospectusThe company's high production and sales rate in 2022 is mainly due to the change of the company's sales model to its largest customer, Watkins. At the same time, from 2021 to 2022, the company's revenue ratio to Watkins has increased sharply from 25% to 41%, which is also related to the model change!
Specifically, in 2020 and 2021, the company's sales model to its largest customer, Watkins, was a consignment model, so some products produced in that year recognized sales revenue in the second year, and from February 2022, Watkins will be on the The procurement model of the merchant has been changed from the consignment model to the general model, and the products produced in the current year are mainly sold in the current year, and some of the products produced in the previous year are also sold in the current year, so in 2022, the company's product output is lower than the sales volume, and the production and sales rate is at a high level.
It is precisely because of this cyclical factor and model change factor that the Shenzhen Stock Exchange asked the company in the inquiry letter to "explain the reasonableness of the issuer's sales revenue in 2022 to continue to grow when the foreign market demand returns to normal", and asked to explain whether the company's performance growth is sustainable after the concentrated outbreak of demand in the downstream industry.
Overseas subsidiaries distribute dividends to the parent company
The collection of the three parties remains high
Another point worth noting,The cash dividends of the overseas subsidiary to the parent company constitute part of the profit of the parent company**.
According to the prospectus, Tenglong Health has a total of five overseas subsidiaries, of which Yuanhe Yongrong and Taijia Xingping are overseas investment platforms and have not carried out actual operationsEvan Runbo is mainly engaged in production business, which is still in the stage of mechanical equipment commissioningOnly two overseas companies, Fanfeng Runbo and Tenglong International, are engaged in sales business, and the net profit margin of these two major subsidiaries is about 3%-4%.
In 2022, Fanfeng Runbo will achieve revenue of 30.2 billion yuan, net profit 981380,000 yuan;Tenglong International achieved revenue of 12.4 billion yuan, net profit of 543720,000 yuan. The other three companies did not generate revenue and were in a slight loss. The total net profit contributed by the five companies was about 15 million yuan, less than a fraction of the overall net profit of the current period. Once the foreign exchange regulatory policy changes, affecting the subsidiary's ability to pay dividends, then Tenglong Health's performance may fluctuate greatly.
Another point is the high level of third-party collections. According to the prospectus, the amount of third-party payment in each period was 972660,000 yuan, 9,367800,000 yuan and 18.3 billion yuan, accounting for the proportion of the current operating income. 02% and 4153%。In particular, in 2022, the proportion of third-party collections will increase by 16 percentage points.
In the first round of inquiries of the Shenzhen Stock Exchange, Tenglong Health was required to explain the main customers and commercial reasonableness involved in the third-party collection, as well as whether there were fictitious transactions or adjustment of account aging, whether the third-party payment method was clearly stipulated in the contract, whether the payment agreement or payment confirmation letter signed by the third party was obtained, and whether there were payment disputes caused by the third-party payment during the reporting period.
In this regard, Tenglong Health explained that in each period of the reporting period, the amount paid by the parent company of the company's group customers on behalf of the subsidiary or designated by other entities within the group was 733290,000 yuan and 8,997140,000 yuan and 13,234950,000 yuan, accounting for the proportion of operating income respectively. 07% and 3001%。Such third-party payment is an intra-group fund payment arrangement for downstream customers, which is reasonable.
Performance increases, power consumption decreases
Just because of the change in the production process
It is also worth noting that while Tenglong Health's performance in 2022 will grow rapidly, the energy consumption of production will decline significantly!This is somewhat unusual for a traditional manufacturing company.
According to the prospectus, during the reporting period, the energy required for the company's production was mainly electricity, and the company's power consumption was as follows:
It can be clearly seen that the issuer's revenue in 2021 and 2022 has maintained relatively good growth, but its energy consumption in 2022 has fallen sharplyCould it be that in 2022, the company has greatly improved its production process, saved energy and reduced emissions, and achieved a double harvest of economic benefits and green environmental protection?
In the first round of inquiries, the exchange also noticed this anomaly, requiring the company to "analyze the reasons for the changes in the unit consumption of major raw materials and energy during the reporting period".
The company gave the corresponding relationship between energy consumption and the output of major products during the reporting period:
According to the company's statement below, the high unit consumption in 2020 is mainly due to the impact of the production scale of the injection molding workshop: in order to ensure the smoothness of the production processThe injection molding machine remains in standby mode during the mold change process, which consumes electricity. In 2020, due to the small production scale, the production batch of a single product is small, the frequency of mold change is high, and the number of upper and lower mold sets is 15 more than that in 202177%, resulting in higher power consumption.
This explanation sounds very reasonable, but it still does not explain the previous question: why did the performance increase in 2022 but the power consumption decreased?
A plausible explanation is,Some of the products sold by the company in 2022 came from inventory in 2021This is in line with the above "products produced in the current year are mainly sold in the current year, and at the same time, some products produced in the previous year are also sold in the current year", and it can also be confirmed from the inventory quantity in the reporting period:
"Snake swallowing elephant" fundraising
The amount of funds raised exceeds net assets
According to the prospectus, if all goes well, this time Tenglong Health will receive 101.3 billion yuan raised, of which 40.9 billion yuan will be used for the spa jacuzzi accessories production base upgrade project, 12.6 billion yuan will be used for the industrialization project of key components of the hydromassage pool, 1300 million yuan will be used for intelligent warehousing and information construction projects, 6,575910,000 yuan will be used for the R&D center upgrade construction project, 2$800 million will be used to replenish liquidity.
It stands to reason that it is a good thing for enterprises to expand production, but they should also consider whether they have the ability to digest itAs of December 31, 2022, the total assets of Tenglong Health were approximately 38.7 billion yuan, net assets of about 33.2 billion yuan, the IPO fundraising scale has exceeded 3 times the current company's net assets.
In this fund-raising project, the company did not disclose its new production capacity in detail in the prospectus, but only briefly said that "it is expected that the new production capacity can be effectively digested", and did not provide more information about the new production capacity and how to digest the new production capacity method
While raising funds to replenish the flow, the problem of "large dividends before listing" also exists in Tenglong HealthFrom 2020 to 2022, Tenglong Health paid cash dividends of 12 million yuan, 56 million yuan, and 80 million yuan respectively, with a cumulative dividend of 14.8 billion yuan. Among them, the cash dividend in 2022 is far more than half of the net profit for the current period.
Epilogue
From the analysis of this article, it can be seen that Tenglong Health has raised a lot of money with a small body and sufficient monetary funds but has financed 2800 million yuan of replenishment, financing replenishment at the same time, but also a huge dividend 1500 million yuan, as well as a series of problems in the company's internal control, may be the "fuse" of its final collapse after two rounds of inquiries in the current listing environment.
Disclaimer] The content of the article is for research and Xi purposes only and does not constitute any investment advice.