East material science and technology lack of growth market share decline competitiveness doubt

Today, the SFC will review the Sichuan East Wood Technology Group Co., Ltd. 's first application (hereinafter said: East material technology) IPO application. East Material Technology prospectus shows that the East Wood technology is located in Sichuan Province Mianyang economic and technological Development Zone, the company's main business for insulating materials, functional polymer materials and related fine chemical products research and development, manufacturing and sales. The company intends to issue no more than 80 million shares in the SSE, after the issuance of the total share capital of not more than 307.88 million shares.　　The proposed fund-raising 558.76 million yuan, for 3500 tons of capacitors with polypropylene film technology, such as 5 projects.　　Financial data show that the company achieved operating income of 1.019 billion yuan last year, net profit of 183 million yuan, net assets per share of 2.26 yuan, earnings per share of 0.8 yuan. East Wood Technology is currently the most complete variety of insulation materials manufacturers.　　The prospectus said that there are no listed companies in the current a-share company and the East Wood technology product structure and business focus is identical. After consulting the East material technology prospectus, we found that the company's raw material procurement has significant risks in view of the recent earthquake and nuclear crisis in Japan.　　In view of the expiration of tax concessions, the impact of raw materials procurement, as well as equipment imports may also be affected so that the production lag, the company's 11 performance has a face risk, investors need to remain vigilant.　　1, the main product market share has been declining, capacity expansion enthusiasm is insufficient, the company's competitiveness is doubtful. In the prospectus, the company claims that it has been committed to the development, production and sales of high-performance new insulating materials, with strong research and development, manufacturing strength and strong market development capabilities, has become China's comprehensive insulating materials research and development manufacturing enterprises in the vanguard.　　However, the company's market share details show that the market share of its leading products has been declining in the past three years, as follows: Data map. Visible from the top left figure, the company's main products electrical polyester film (income accounted for nearly 50%), its market share 07-09 years of continuous decline, from 21.9% to 17.8%, income accounted for 11% of the soft composite insulating materials (including mica and film two types), its market share from 9.3% to 6.8% , falling from 26.1% to 18.7%.　　In the same period, the company's competitors Changzhou yuxing Insulation Materials Co., Ltd. 's market share has been continuously promoted (on the right), beyond the company to become the first major manufacturers of electrical polyester film, its 07-09-year composite growth rate reached 46%. For 60% of the total income ratio of products in the past three years, the market share has been declining, the company's explanation in the prospectus is that capacity bottlenecks limit the increase in market share: 2007-2010, the company's own production line of electrical polyester film capacity utilization rate is 114.57%, 108.94%, 105.63% And 103.8%, has exceeded the capacity of existing equipment capacity design. So since the capacity of 4 consecutive years can not meet the order needs, sales exuberant, in short supply, the company should actively expand production capacity. But the company's capital expenditure is not positive, such asThe following table shows: The above table shows that the new capital expenditure is net worth, minus the depreciation of fixed assets and the amortization of intangible assets. In 09, the company only invested 16.99 million yuan in capital expenditure, which accounted for less than 30% of the total cash in hand and net profit of the previous year, in the case of a continuous shortfall in the company's The company's cash dividend reached 16.88 million yuan. The company is more willing to use its money to pay dividends in the unfavorable circumstances of a rapidly expanding competitor's market share. 10, the company's capital expenditure has been upgraded, but the proportion of net profit in the previous year is only 50%, even taking into account the need for operating capital, there are still some funds idle, and the company also dividends 16.88 million yuan. In 09-10 years, the company's new capital expenditure accounted for only 5% and 12% of the original productive capital.　　The figures show that companies ' willingness to spend on capital is clearly inadequate and investment is slow. As for capital expenditure, the company explains in its prospectus that the capital structure is constraining the ability to expand further. On the one hand, the company's cash and net profits are fully capable of supporting more capital expenditures, and, on the other hand, does the company's existing capital structure have financing capacity? We analyze both financial ratios and borrowing capacity.　　First, the financial ratios are shown in the table below: a data map. The company's most recent liquidity and debt ratios are at a very normal level and, from a trend perspective, the company's debt rate has fallen sharply from 68.7% in 07 to 46.2% in 10, to 22% per cent, and to increased liquidity. This is often the financial performance of companies that have slowed demand growth and production operations into a stable period, but the company is in an industry where demand is growing rapidly (see the analysis of competitor growth above).　　The company's current level of indebtedness can fully support further expansion. Secondly, from the analysis of the ability to borrow, please refer to the following table: 2010 data, in which the mortgaged assets include fixed assets and intangible assets, can be pledged assets including accounts receivable, notes receivable and inventory the existing mortgage and pledged borrowings of the company account for only 20%-30% of the company's mortgaged/pledged assets, even taking into account the discount on asset price when borrowing The company still has considerable scope and capacity to continue borrowing. The company itself claims, "bank credit records are good, with a high credit rating." "The above analysis shows that the essence of the problem is the company's own lack of willingness to expand, and debt financing will not be sufficient, rather than lack of expansion and financing capacity." So why would the company rather wait years or more for the city to raise money, at the expense of competitors ' share, rather than cut dividends and appropriately raise the debt rate to invest in expansion as early as possible?　　This cannot help but raise doubts about the company's competitive power and the real intentions of financing. In addition, the company in the case of insufficient capacity, the choice of Jiangsu Reihua Materials Co., Ltd. for outsourcing processing, processing costs from 07 to 2100 yuan/ton gradually up to 10 2300 yuan/ton, and the latest contract has been postponed to 2014 years. 08-10 years, the CommitteeThe yield of the processing production accounted for 46%, 44% and 37%, respectively, while the gross profit margin of commissioned processing was lower than that of the gross production rate by 2.4%. If the commissioning process is to solve the short-term capacity shortage problem, then it can be understood. But the company has commissioned processing for more than 4 years (and will continue at least 4 years), and according to the company's plan for the project, the new total of 33,000 tons of insulating material capacity of the time required for only 18-24 months.　　The company has long relied on commissioned processing but is unwilling to expand its capacity, which is contrary to the purpose of listing financing.　　2, tax concessions lead the selection of production base, the company will be facing adverse situation after the expiration of the offer.　　Nearly three years of financial data disclosed by the company reveal that the tax burden of the company is very light, as shown in the following table: Data map. From the consolidated statement, the company almost does not pay income tax, the reason is that the company enjoys the northwest development, Wenchuan earthquake-stricken areas such as the numerous tax incentives, including the main subsidiary of Sichuan Oriental Insulating Materials Co., Ltd. (contribute more than 80% income and profit) 08-10-year income tax exemption. However, according to the prospectus, most of the tax benefits enjoyed by the company expired on December 31, 2010.　　This means that from 11 onwards, the company's earnings growth will be affected by the new tax. The company enjoys tax preferences and the main subsidiaries are located in Sichuan. However, the company's raw materials and product sales market are mainly concentrated in east China, South China and other regions, the company's competitors are mainly located in east and South China, in the procurement, sales and transport costs occupy a clear advantage.　　After the tax concession expires, the company will face a very unfavorable situation.　　3, the core equipment and raw materials are all dependent on imports, the recent supply shocks may result in the market after the performance. The company's core production equipment are imported from abroad, leading products electrical polypropylene film main raw materials-polypropylene resin, but also all from Europe, Japan and other regions and countries import.　　In the last three years, the company's main raw materials for the procurement of polypropylene resin and the proportion of the situation as shown in the table below: Data map. At present, 62% of the core raw material supply relies on a day of the manufacturer, taking into account the recent earthquake and nuclear crisis in Japan, the company's raw materials procurement there are significant risks.　　In view of the expiration of tax concessions, the impact of raw materials procurement, as well as equipment imports may also be affected so that the production lag, the company's 11 performance has a face risk, investors need to remain vigilant. 4, the actual control person shareholding structure hidden trouble the biggest shareholder of the company is Guangzhou Genistein, shareholding 51%, while Guangzhou Genistein is by the four people (unrelated relations), respectively, the average shareholding 24-25%. Although the four men signed a unanimous agreement on action, they did not specify how to deal with disagreements between the four. To exercise the actual control by the opinion of the person (other listed companies with similar circumstances will generally make it clear that the opinions of one of them shall prevail when the consensus cannot be formed, such as Shandong Shengyang Power Supply Co., Ltd.). There is a risk of instability in such a shareholding structureMay affect the company's long-term development.