Xinlu precision’s “Apple dependence”

International Finance News

The revenue generated by the final application of the company’s products to Apple accounts for 99.39%, 92.17%, 95.93% and 88.9% of the main business revenue respectively. It is the company’s main source of revenue, and the company has a certain dependence on the apple industrial chain.

Another enterprise behind Apple’s industrial chain has embarked on the path of IPO.

Recently, according to the official website of the CSRC, Suzhou new land Precision Technology Co., Ltd. (hereinafter referred to as “new land precision”) has submitted a draft declaration and plans to apply for listing on the main board of Shanghai Stock Exchange. The sponsor and lead underwriter are Minsheng securities.

The reporter of the international finance news noted that as an enterprise whose product end customers are mainly apple, the company seems to rely more on the apple industrial chain, and the demand of the latter will directly affect its performance; In addition, Xinlu precision introduced an apple supplier on the eve of its IPO. The supplier cooperated with the company in the year of taking shares and quickly became its top five customers.

Apple dependence

The company’s main products are the overall solution of key cap production fixtures, precision tooling fixtures, precision molds and products, and non-standard automation equipment and accessories. The so-called key cap is a small plastic cap shaped part, which is buckled on the top of the keyboard key, and is marked with the function or number and letter symbols of the corresponding key, which is composed of the surface of the key cap, skirt and hook.

According to the declaration draft, from 2018 to 2020 and the first half of 2021 (hereinafter referred to as the “reporting period”), the company achieved operating revenue of 166 million yuan, 121 million yuan, 240 million yuan and 106 million yuan, with corresponding net profits of 40.2846 million yuan, 48.0535 million yuan, 110 million yuan and 41.7142 million yuan respectively.

Among them, key cap production fixtures contributed 60.19%, 78.34%, 69.44% and 43.81% of the company’s main business income during the reporting period. As for the main business of this part, the company mainly sells key cap production tools to its downstream customers - manufacturers in the apple industrial chain.

During the reporting period, the total sales revenue of the company to the top five customers (including enterprises under the same control) accounted for 99.14%, 93.57%, 97.63% and 92.52% of the current main business revenue respectively, and the customer concentration was relatively high. Among them, the revenue generated by the final application of the company’s products to Apple accounts for 99.39%, 92.17%, 95.93% and 88.9% of the main business revenue respectively. It is the company’s main source of revenue, and the company has a certain dependence on the apple industrial chain.

Like other enterprises in the upstream of the apple industry chain, while Xinlu precision expands its scale, its performance will inevitably be affected by changes in the downstream demand of the apple industry chain.

According to the data of 2019, the company’s operating revenue in 2019 declined year-on-year, including a slight decline of 4.34% in key cap production fixture business, and a sharp decline of 73.42% and 62.6% in precision tooling fixtures, precision molds and products respectively year-on-year. Among them, Apple’s smartphone iPhone 11 terminal product released in 2019 has insufficient demand, which led to the decline of the company’s precision tooling business.

The change of the company’s main business income is also reflected in the gross profit margin. During the reporting period, the comprehensive gross profit margin of Xinlu precision’s main business was 63.2%, 61.37%, 65.13% and 57.7% respectively, which was in a fluctuating state. Among them, 61.37% of the gross profit margin in 2019 was slightly lower than the same period due to the impact of current operating income.

Shares of Apple suppliers

After the company was changed into a joint stock limited company in 2020, it carried out foreign capital increase.

In May 2020, Suzhou Huisi, Haining Hairui and Wuxi Yuli subscribed 1032800 shares, 860700 shares and 573800 new shares of the company respectively, with a subscription price of 17.43 yuan / share; In June of the same year, Shenzhen Yuzhan signed the equity investment agreement and supplementary agreement with Xinlu precision and its shareholders, which agreed that Shenzhen Yuzhan would subscribe for 1.5611 million new shares at the price of 27.2083 million yuan, with the same price of 17.43 yuan per share.

It should be pointed out that the identity of Shenzhen Yuzhan (full name “Shenzhen Yuzhan Precision Technology Co., Ltd.) is relatively special. It is understood that Shenzhen Yuzhan is a wholly-owned subsidiary of industrial Fulian and one of the important suppliers of Apple industrial chain. As of the signing date of the prospectus, Shenzhen Yuzhan held 4% of the shares of the company. According to the principle of prudence, the company disclosed the transaction with Shenzhen Yuzhan with reference to the standards of related parties.

During the reporting period, the sales amount of the company to Shenzhen Yuzhan was 0, 0, 2.2927 million yuan and 10.5023 million yuan respectively, accounting for 0%, 0%, 0.95% and 9.93% of the operating revenue respectively. In the year when Shenzhen Yuzhan became a shareholder, the two sides began to cooperate, and the transaction amount increased significantly in a short time. In the first half of 2021, Shenzhen Yuzhan even entered the list of the top five customers of Xinlu precision. The company said that the price of precision tooling and fixtures sold to Shenzhen Yuzhan is not significantly different from that of similar products sold to other customers, and the sales price is reasonable and fair.

“Responsible” actual controller

As of the signing date of the prospectus, Xu Meng directly held 52.01% of the shares of Xinlu precision, indirectly controlled 18.38% of the shares of the company through xinlucheng investment, indirectly controlled 4.48% of the shares through xincontinental investment, and controlled 74.87% of the shares in total. He is the controlling shareholder and actual controller of the company.

According to the public resume, Xu Meng worked in Suzhou Branch of Agricultural Development Bank from 1997 to 2003 as the business manager. From April 2003 to now, he has worked in Xinlu precision and its predecessor. He is currently the chairman and general manager of the company. He is also the executive partner of xinlucheng investment, the executive partner of xincontinental investment, the executive director of Suzhou Mengcheng Wine Co., Ltd. and the supervisor of Suzhou Industrial Park Lujiu Technology Co., Ltd.

According to the declaration draft, in March 2017, Xu Meng and his wife Wang Mingxia signed a maximum guarantee contract numbered Beilun (Development) 2017 renxiaobao No. 011 with Beilun branch of Bank of China, which was signed between Xinlu precision and Beilun branch of Bank of China in February