On October 27, Capital State learned that the IPO application of Longxun semiconductor (Hefei) Co., Ltd. (hereinafter referred to as Longxun shares) was accepted by the Shanghai Stock Exchange recently, and the sponsor is Huaan Securities.
(Image source: Shanghai Stock Exchange website)
Longxun is a high-tech enterprise specializing in integrated circuit design. Its main business is the research and development, design and sales of high-definition video signal processing and high-speed signal transmission chips and related IP. After more than ten years of R&D and innovation accumulation, the company has developed a series of core technologies and chip products with independent intellectual property rights.
The company’s products include two categories of high-definition video signal processing and high-speed signal transmission chips, with more than 130 specifications and models, which can support HDMI, DP/eDP, eDPx, USB/Type-C, MIPI, LVDS and other signal protocols or standards, and the product variety is comprehensive , Performance, power consumption, compatibility and other aspects are in an advanced position in the industry. In addition, the company’s chips have entered Qualcomm, Ambarella, Intel, Samsung, Rockchip and other main chip reference design platforms, Apple (Apple), Cisco (Cisco), Polycom (Poly), Facebook (Facebook), Logitech (Logitech) ), Garmin (Garmin), Foxconn, Skyworth, BOE, Oppo and other world-renowned customers began to choose the company’s chip solutions, and some customers have already produced small batches or formal mass production.
Financial data show that from 2017 to the first half of 2020, Longxun shares realized revenues of 77,113,600 yuan, 80,070,700 yuan, 105 million yuan, and 47.758 million yuan respectively; the net profits of the parent company were respectively They were 10.472.9 million yuan, 25.19 million yuan, 33.778 million yuan, and 7.794 million yuan.
(Image source: Longxun shares prospectus)
According to Article 22 of the “Shanghai Stock Exchange Science and Technology Innovation Board Stock Issuance and Listing Review Rules”, the listing criteria for Longxun shares are: The income is not less than RMB 100 million.”
In this application for the Science and Technology Innovation Board, Longxun plans to issue no more than 108,216,697 shares, and plans to raise 315 million yuan of funds, which will be used for the construction and investment of high-definition video signal processing and control chip development and industrialization projects, high-speed signals Transmission chip development and industrialization project, R&D center upgrade project. Details are as follows:
(Image source: Longxun shares prospectus)
It is reported that Longxun Co., Ltd., formerly Longxun Co., Ltd., was established on November 29, 2006. It is a wholly foreign-owned enterprise invested and established by Chen Feng (English name FENG CHEN), a natural person with permanent residency in the United States. On September 18, 2015, Longxun Co., Ltd. completed the share change to a joint-stock company.
The controlling shareholder and actual Controller of Longxun is Chen Feng. As of the signing date of the prospectus, Chen Feng directly held 17,710,822 shares of the company, accounting for 54.5534% of the company’s total share capital before the issuance. At the same time, the core wealth controlled by him holds 1,433,658 shares of the company, accounting for the company’s current issuance. The former total share capital was 4.416%, and the company’s shares directly and indirectly controlled by Chen Feng accounted for 58.9694% of the company’s total share capital before the issuance. The shareholding structure of Longxun shares is as follows:
(Image source: Longxun shares prospectus)
The prospectus shows that Longxun shares have adopted the Fabless business model commonly used in the integrated circuit design industry. The main suppliers are wafer manufacturing plants and packaging and testing plants, and the issuer has established long-term and stable cooperative relations with major suppliers.
In each period of the reporting period, Longxun’s purchases from the top five suppliers totaled 42.745 million yuan, 39.654 million yuan, 39.65 million yuan, 39.965 million yuan and 29.79 million yuan, accounting for 9.849 million of the total purchases during the same period. %, 95.19%, 95.32% and 93.97%, accounting for relatively high proportions.
Among them, the wafers were mainly purchased from SILTERRA MALAYSIA SDN BHD, and the purchase amount of each period during the reporting period was 26,095 million yuan, 22.114 million yuan, 22.813 million yuan and 18.6976 million yuan, accounting for the same period of wafer purchase amount. The proportions were 90.87%, 88.22%, 94.08%, and 96.81%; the packaging and testing procurement was mainly purchased from Chaofeng Electronics Co., Ltd., and the purchase amount in each period during the reporting period was 11,553,800 yuan. , 13.26 million yuan, 11.0334 million yuan and 9.163 million yuan, accounting for 90.46%, 94.68%, 88.79% and 93.81% of the purchase amount of packaging and testing in the same period.
Since the main supplier of Longxun is an overseas company, if adverse changes in the main supplier occur in the future, the issuer’s products cannot be produced and delivered normally, and the operation of Longxun will be adversely affected.
In terms of overseas sales income, in each period of the reporting period, the overseas sales income of Longxun shares was 50,743,600 yuan, 40,910,900 yuan, 52,665,800 yuan, and 14,586,400 yuan, accounting for 65 percent of the current operating income. ．80%, 50.69%, 50.37% and 30.54%.
The company’s overseas sales customers are mainly located in Taiwan, China, Hong Kong, the United States and other countries/regions; in addition, the company’s wafer manufacturing and packaging and testing are all purchased from overseas. In the future, if global trade frictions intensify, overseas customers may reduce orders, require Longxun’s products to reduce prices, or bear relevant tariffs, and overseas suppliers may be restricted or prohibited from supplying to the issuer, which will result in the operation of Longxun. Negative Effects.
In addition to suppliers, Longxun’s customers are also relatively concentrated. In each period of the reporting period, the total sales of the company’s top five customers were 47,465,300 yuan, 46,644,600 yuan, 56.754 million yuan, and 23,520,100 yuan, respectively, accounting for 61% of the current operating income. 55%, 56.56%, 54.29% and 49.25%, the customer concentration is relatively high.
In addition, at the end of each period of the reporting period, the book value of Longxun’s inventories was 23,083,400, 33,049,700, 30,943,600, and 40,996,100. The inventory scale was relatively large and accounted for the respective proportions of total assets. They were 27.35%, 30.90%, 15.96%, and 20.22%; the inventory turnover rates during the same period were 1.62 times/year, 0.98 times/year, 1.12 times/year and 0.22% respectively. 50 times/year, which is lower than comparable listed companies in the same industry.
Longxun shares said that if the downstream market demand declines or the prices of raw materials such as wafers fall sharply, the company will face the risk of sharply withdrawing inventory price declines, resulting in a decline in the company’s operating performance, and adversely affecting the company’s production operations and business development.
In this sprint for the IPO of the Science and Technology Innovation Board, Longxun shares frankly said that there are still the following risks:
1. There is a risk of seasonal fluctuations in operating income
Some of the issuer’s main products are used in various consumer Electronic products such as televisions, computers, and mobile phones. The issuer’s sales revenue is closely related to the market sales of terminal products. The fourth quarter of each year and the first quarter of the following year are generally the peak season for consumer electronics sales. Consumer electronics manufacturers will increase production and stocking before the peak sales season. The issuer’s sales in the third and fourth quarters of each year were significantly higher than those of the previous two quarters, and sales revenue showed certain seasonal characteristics. In 2017, 2018, and 2019, the issuer’s main business income in the second half of the year accounted for 64.85%, 64.96% and 67.67% of the annual sales income, respectively. Therefore, there is a risk of seasonal fluctuations in the issuer’s operating performance.
2. Risk of gross profit margin fluctuation
In each period of the reporting period, the issuer’s comprehensive gross profit margin was 59.95%, 62.90%, 61.97%, and 57.50%, respectively. The gross profit margin of the company’s products is mainly affected by various factors such as product prices, raw materials and packaging and testing costs, and the issuer’s design capabilities. If the above factors change adversely, the company’s gross profit margin may decrease, thereby affecting the company’s profitability.
3. Risks that government subsidies cannot be sustained
In each period of the reporting period, the contribution of government subsidies received by the issuer to the total profit was RMB 7,073,600, RMB 12.38 million, RMB 16,618,500, and RMB 6,258,800, respectively, which accounted for the percentages of total profits for the current period, respectively. 55.91%, 45.04%, 45.60% and 87.10% are relatively large. The issuer’s industry belongs to the policy support industry. If the government subsidy project undertaken by the issuer in the future decreases or fails to pass the review and acceptance of the relevant department, there is a risk that the government subsidy will not be sustainable or be required to be refunded, which will affect the issuer’s operating performance Negative Effects.
4. Risk of falling return on net assets
In 2017, 2018 and 2019, the issuer’s weighted average return on net assets was 21.60%, 35.53% and 27.12%, respectively. After the funds raised this time are in place, the issuer’s net assets will increase substantially, but it will take some time for the implementation of the investment projects of the raised funds and the generation of the final economic benefits. Risk of falling asset yield.