Why there are still “three problems” to be solved in Dongpeng holding’s IPO to raise 1.6 billion yuan

Guangdong Dongpeng Holding Co., Ltd. (hereinafter referred to as “Dongpeng holding”, 003012. SZ), which has been delisted from the Hong Kong stock market for four years, finally landed in the A-share market on October 19. < p > < p > according to the public information, Dongpeng holdings is a ceramic enterprise in Guangdong, whose main business is R & D, production and sales of ceramic tiles and sanitary ware. According to the profit forecast report recently disclosed by Dongpeng holdings, it is expected to achieve an operating revenue of 6.796 billion yuan in 2020, an increase of only 0.65% over the same period of last year; it is expected to achieve a net profit of 629 million yuan, a year-on-year decrease of 20.82%. < / P > < p > according to the financial reports in the past three years, the profit of Dongpeng Holdings has been declining. Since the beginning of this year, the gross profit rate and operating profit rate of the company have also been declining. < / P > < p > so, what is the reason for the company’s low profitability? In addition, what impact does the rising inventory and debt risk have on the company’s operation? The Dongpeng holding covid-19 has been a pioneer in the ceramic industry for nearly 50 years. This year,

is hit by the new crown disease and the company is in a predicament of a profit decline. According to the financial report, in the past three years, Dongpeng holding’s revenue has been stable, but its net profit has been slowing down since 2018. From 2017 to 2019, the revenue of Dongpeng holdings was 6.632 billion yuan, 6.619 billion yuan and 6.752 billion yuan respectively; after deducting the non recurring profit and loss, the net profit attributable to the parent company was 932 million yuan, 700 million yuan and 719 million yuan respectively.

entered the covid-19 2020, and the Dongpeng holding company’s performance declined. In the first half of the year, the revenue of Dongpeng holdings was 2.6 billion yuan, a year-on-year decrease of 13.59%, and the net profit attributable to the parent company was 215 million yuan, a year-on-year decrease of 34.6%. In the context of overall economic recovery, this trend has not yet been reversed. As of the first nine months of this year, the revenue of Dongpeng holdings was 4.769 billion yuan, with a slight decrease in growth rate; meanwhile, the net profit fell by 6.9% to 523 million yuan. < p > < p > Dongpeng holdings is expected to achieve a revenue of 6.796 billion yuan in 2020, a year-on-year increase of 0.65%; it is expected to achieve a net profit of 629 million yuan, a year-on-year decrease of 20.82%. < / P > < p > “mainly affected by the epidemic.” In view of the decline in profits, the head of the Investor Relations Department of Dongpeng holdings told investor.com. < / P > < p > according to the data of wind, the gross profit rate of Dongpeng Holdings has dropped from 37.21% in 2017 to 35.69%, and the trend has not been reversed in 2020. Meanwhile, the operating profit margin and return on net assets have also dropped significantly this year, which means that the overall profitability of the company is gradually weakening. < / P > < p > “in recent years, the profit of building materials market is very low. Now, due to the regulation of real estate, the price of ceramic tiles is seriously depressed. With the increasing demand for hardbound houses, most of the ceramic manufacturers in Guangdong Province seek cooperation with real estate developers. For example, country garden and Evergrande usually contact the manufacturers for supply at a lower price for the first time. As a result, the profits of the manufacturers are low. ” A senior ceramic industry personage from Foshan, Guangdong Province disclosed to “investor net”. < / P > < p > he believes that the profit of the ceramic industry is different from the golden age of the past decades. Many wholesalers in other provinces do not take ceramic tiles from Guangdong. Some customers and dealers even bargain with manufacturers for a few cents. “Affected by the epidemic this year, the manufacturers are in a difficult situation to survive. Generally speaking, the industry is not booming as before.” < / P > < p > the impact of the epidemic on enterprises is obvious, but with the domestic economic recovery, how to improve the profitability of Dongpeng holding, which has a leading position in the industry, is still a difficult problem for enterprises. < / P > < p > looking through the prospectus of Dongpeng holdings, investor.com found that the company’s inventory scale has been high. Obviously, a large number of inventory backlog problem has become the second problem to be solved. < / P > < p > according to the prospectus, the book value of Dongpeng holding’s inventory from 2017 to 2019 and from January to June 2020 were 1.025 billion yuan, 1.331 billion yuan, 1.340 billion yuan and 1.42 billion yuan respectively, accounting for 27.59%, 32.4%, 25.46% and 27.15% of the current assets at the end of each period. The turnover rate of inventory decreased from 3.87 times in 2017 to 1.15 times in the first half of this year. < p > < p > for the high inventory, Dongpeng holdings explained: “it is related to the company’s business model and industry characteristics. In order to ensure the full supply of sales channels and the corresponding speed, all kinds of products need to maintain a certain scale of inventory goods.” < / P > < p > as for the impact of high inventory on operation, the person in charge of the above investor relations department told investor.com: “the overall impact is not big. Every year, the company will send a special person to clear the inventory regularly. When the inventory has reached a certain level or some products are unsalable, the company will clear the inventory of the products. The de inventory is continuous. This year, due to the particularity of the epidemic situation, the inventory of the company has become higher. In previous years, the inventory of the company is not too high. ” < p > < p > as of the first three quarters of this year, the inventory of Dongpeng holding reached a new high of 1.45 billion yuan, exceeding 111 million yuan compared with the whole year of 2019. < / P > < p > “not only this year, but in fact, a few years before the outbreak of the epidemic, de inventory is also a problem for ceramic enterprises. Although an important advantage of ceramic tile is that the product will not be expired, in order to speed up the de inventory, the industry will carry out special price treatment for some products, that is, the special price brick often used in the industry now. For example, if a brick color is not easy to sell and the overstock is too much, it will be processed at a lower price. Generally, it will be processed to big customers. When the big customers can’t digest it, it will be processed to those who specially purchase special price bricks outside The company. ” The above ceramic industry senior personage expresses to “investor net”. < / P > < p > generally speaking, on the one hand, excessive inventory will solidify the enterprise’s capital and aggravate the loss, on the other hand, it is also the performance of the decline of the company’s operating efficiency or the weakening of the overall bargaining power. < / P > < p > at present, the inventory of Dongpeng Holdings has not been effectively improved, and the stock is still in a rising state. In the future, once the company’s inventory is not good, it will not only bring the risk of asset depreciation, but also bring adverse effects on the enterprise operation. < p > < p > on the evening of November 23, Dongpeng holdings announced that it agreed to use the raised funds to replace the self raised funds of 936 million yuan that had been invested in the raised investment projects in advance, with the total replacement funds of 936 million yuan. < p > < p > Dongpeng holdings, which was just listed on October 19, raised 1.623 billion yuan at the issue price of 11.35 yuan per share. After deducting the issuance expenses, the amount of funds to be raised is 1.48 billion yuan. Now, Dongpeng Holdings has decided to replace nearly 63% of the funds just raised with the self raised funds previously invested, causing investors’ concern. < / P > < p > “since 2017, our investment in projects with our own funds has reached more than 900 million, which shows that our own funds have a strong overall strength. At present, the raised funds have been in place. The company hopes to replace the raised funds with the self invested funds as our circulating funds for the company’s operation or financial management, so as to further improve the company’s performance.” The person in charge of the Investor Relations Department of Dongpeng Holdings said. < / P > < p > as of the first half of this year, the company’s total liabilities were 4.525 billion yuan, of which current liabilities were 3.936 billion yuan, accounting for 86.98% of the company’s total liabilities; the current ratio was 1.33, and the quick ratio was 0.97. Nearly 80% of the company’s current liabilities and low current and quick ratio reflect the company’s short-term debt repayment pressure. According to wind data, as of the first three quarters of this year, the company’s asset liability ratio has further increased to 46.38%, while the proportion of current liabilities in total debt has further increased to 89.51%. < / P > < p > although the high current liabilities are closely related to the industry, the current liabilities ratio of nearly 90% of Dongpeng holdings will not only increase the debt repayment pressure of the enterprise, bring debt risk, but also face refinancing pressure due to the risk of financial structure. < / P > < p > at present, Dongpeng holdings successfully listed in a shares, with the investment of fund-raising, it can relieve the capital pressure of the company to a certain extent, but due to the problems of low profit, high overstock inventory, increased debt risk and so on, it may bring many hidden worries to the company’s operation. In the future, investors.com will continue to pay attention to whether the “three problems” of Dongpeng holdings can be solved. (produced by thinking Finance) < / P > < p > Disclaimer: the purpose of reprinting this article is to convey more information, and it does not represent the opinions and positions of our website. The content of this article is for reference only, and does not constitute an investment proposal. Investors operate on this basis at their own risk. < p > < p > Chinanet is a state key news website under the leadership of the Information Office of the State Council and the management of China foreign language publishing and Distribution Bureau. Through 11 versions in 10 languages, the website publishes information 24 hours a day. It is an important window for China to carry out international communication and information exchange.