Dekeli Science and Technology Innovation Board IPO: Accounts receivable are high, early shareholder ZTE is the largest customer

Recently, according to the website of the Shanghai Stock Exchange, the application for the Science and Technology Innovation Board of Wuxi Dekeli Optoelectronics Technology Co., Ltd. (referred to as “Dekeli”) has been accepted. The company plans to publicly issue no more than 24.32 million shares, accounting for no less than 25% of the company’s total share capital after the issuance.

The prospectus shows that from 2018 to 2020 and the first half of 2021 (reporting period), Dekeli’s revenue was 265 million yuan, 387 million yuan, 665 million yuan and 383 million yuan, respectively. After deducting non-deductibles, the net profits attributable to the parent were RMB 5.7838 million, RMB 44.7646 million, RMB 135 million and RMB 64.5959 million respectively. Both revenue and net profit have experienced rapid growth. Among them, optical transceiver modules and optical amplifiers are the most important products of Dekeli during the reporting period. The revenue of optical transmission subsystems has increased significantly in 2020.

Dekeli belongs to the optoelectronic device industry. Its main business covers the R&D, production and sales of optical transceiver modules, optical amplifiers, and optical transmission subsystems. The downstream products are mainly used in communication trunk transmission, 5G fronthaul, 5G mid-backhaul, and data links. Acquisition, data center interconnection, UHV communication protection and other fields.

Behind the rapid growth of performance, it is worth noting that most of Dekeli’s business comes from large customers, with a high degree of customer concentration. Among them, the major customer ZTE is the company’s largest customer, and contributed about 55% of the total revenue to Dekeli in 2019 and 2020 respectively.

ZTE is not only Dekeli’s largest customer, but also one of the early shareholders of the company. However, during the reporting period, the identity of its major customers has not changed. For Decoli, in addition to high customer concentration, high accounts receivable is also one of the potential risks.

High concentration of customers

The prospectus shows that at present, the company’s core products are mainly used in the field of optical communication, the downstream application industry is relatively concentrated, and the major customers are also relatively concentrated. During the reporting period, the company’s sales to the top five customers were 185 million yuan, 272 million yuan, 474 million yuan and 244 million yuan, accounting for 69.77% of the company’s operating income in the same period. , 70.17%, 71.34% and 63.65%, with high customer concentration.

De Keli said that if the company’s future cooperation with these customers changes adversely and the company cannot effectively develop other customers, or the existing customer demand is greatly reduced due to the impact of relevant national industry policy changes, the higher customer concentration will affect the company. adversely affect operations.

Among the top five customers, ZTE is the largest customer, and the proportion is quite high. In 2019 and 2020, the sales amount from ZTE will account for more than 50%, 55.59% and 54.94% respectively. In the first half of 2021, although the proportion of sales from ZTE declined to 43.22%, it was still the largest customer, far exceeding the second largest customer, Tongding Internet, which accounted for 6.59% of sales. Compare.

It is worth mentioning that ZTE is not only the company’s largest customer, but also one of the company’s early shareholders. According to the data, in November 1999, ZTE, Wu Peichun and Wei Yu jointly funded the establishment of ZTE Optoelectronics, the predecessor of Dekeli, with a registered capital of 8 million yuan, of which ZTE invested 5.2 million yuan (cash 3.92 million yuan, technology 1.28 million yuan), Wu Peichun contributed 1.76 million yuan (480,000 yuan in cash and 1.28 million yuan in technology), and Wei Yu contributed 1.04 million yuan in cash. The first phase of the registered capital was 5.44 million yuan, and the technology was converted into shares of 2.56 million yuan.

Since then, the company has undergone dozens of equity changes, and early shareholders have basically withdrawn from the ranks of shareholders. As of the date of signing the prospectus, Techlink holds 33.91% of the company’s shares and is the company’s controlling shareholder. The actual controllers of the company are Guisang, Qu Jianping and Zhang Shao. The three are colleagues for many years. Among them, who has an intersection with ZTE Corporation is Qu Jianping. From March 2001 to December 2011, he served as the management cadre of ZTE Kangxun Development Department, Quality Department and Purchasing Department. From January 2012 to October 2014, he served as the deputy general manager of Dekeli, and since November 2014, he has served as the director and general manager of Dekeli.

It is worth noting that during the reporting period, Dekeli has carried out several capital increases and equity transfers. Especially in the year before the IPO application was submitted, in November and December 2020 to be precise, Shenzhen Venture Capital, Hongtu Zhanlu and Unicom Zhongjin successively increased their capital and invested in shares, respectively holding 0.58% and 4% of Dekeli before the issuance. .26% and 1.13% of the shares.

Behind this, ZTE once again appears. ZTE holds 0.23% of Shenzhen Venture Capital and 40% of Hongtu Zhanlu, and indirectly holds 1.71% of Dekeli through these two companies. shares. In addition, Shenzhen Venture Capital also holds an 18% stake in Hongtu Zhanlu.

Accounts receivable and bills receivable account for a high proportion

In addition to the high concentration of customers, Dekeli also has the risk of uncollectible accounts receivable and notes receivable. De Keli said that the company will give customers a certain payment settlement cycle based on their historical transaction records and sales scale. However, its accounts receivable and bills receivable accounted for a relatively high proportion.

The data shows that from 2018 to 2020 and the first half of 2021, the book value of the company’s accounts receivable was 82.7724 million yuan, 74.4652 million yuan, 134 million yuan and 225 million yuan respectively. The book values ​​of the notes were 64.4713 million yuan, 140 million yuan, 189 million yuan and 144 million yuan respectively, and the total accounts receivable and notes receivable accounted for 50.3% of the current assets in each period. %, 54.41%, 46.21% and 51.87%.

De Keli also said that since accounts receivable and notes receivable account for a large proportion of the company’s current assets, with the expansion of the company’s operating scale in the future, the balance of accounts receivable and notes receivable will increase accordingly. If the financial situation of major customers suddenly deteriorates, it will bring the risk that accounts receivable and notes receivable cannot be recovered in time for the company.

The former early shareholder of the company, now the largest customer ZTE, is also the company’s “largest debtor”. As of June 30 this year, the book balance of the company’s accounts receivable from ZTE was 53.862 million yuan, accounting for 23.37% of the book balance of accounts receivable at the end of the current period.

However, Dekeli stated in the prospectus that during the reporting period, there were no directors, supervisors, senior managers, shareholders holding more than 5% of the company’s equity or other major related parties who had interests in the company’s top 5 customers situation.

In addition, Dekeli also has the risk of large inventory. From 2018 to 2020 and the first half of 2021, the book value of the company’s inventories was 88.2475 million yuan, 143 million yuan, 303 million yuan and 295 million yuan respectively, accounting for 30% of current assets. 14%, 36.12%, 43.32% and 41.51%, the proportion of the company’s inventory book value to current assets remained at a relatively high level.

The company maintains a certain scale of inventory to ensure the stability of production and operation. However, if the prices of raw materials and inventory commodities fall sharply or the product sales are not smooth, and the company fails to respond effectively and make corresponding adjustments in a timely manner, the company will face inventory declines. risk.

Note to readers: This article is written based on public information or relevant content provided by interviewees. Insights into IPO and the author of the article do not guarantee the completeness and accuracy of relevant information. The content of this article does not constitute investment advice under any circumstances. There are risks in the market, investment must be cautious!

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