The actual controller was involved in a bribery case, and the gross profit margin of PCB copper foil manufacturer Yihao New Materials surged. Is it sustainable?

Recently, Ganzhou Yihao New Materials Co., Ltd. ("Yihao New Materials", the company), which is mainly engaged in the research and development, production and sales of electronic circuit copper foil and its downstream aluminum-based copper clad laminates, has entered an inquiry state for its IPO. The institution is Guosen Securities (12.510, 0.26, 2.12%).
Electronic circuit copper foil, also known as PCB copper foil and standard copper foil, is an important material for the manufacture of copper clad laminates and printed circuit boards (PCB). PCB, as the "mother of electronics", has a wide range of downstream applications. According to Prismark data, the growth of my country's PCB output value slowed down in 2019, maintaining a growth rate of 0.7%; in 2020, the PCB output value was approximately US$35.1 billion, a year-on-year increase of approximately 6.4%.
Yihao New Materials, whose electronic circuit copper foil income accounts for about 70% of its main business income, benefited from the growth of the downstream PCB market in 2020, and the company's operating performance has improved. In the first half of 2021, the gross profit margin of the company's electronic circuit copper foil has surged by more than 10 percentage points to 26.81%. However, the cost of raw material procurement has also increased during the same period. It is also worth paying attention to which product or raw material has a faster price increase.
The actual controller was involved in a bribery case
Before the IPO, Yihao Group directly held 69.42% of the company`s shares and was the company`s controlling shareholder. Zhang Jianmeng directly held 5.27% of the company`s shares and indirectly controlled 69.42% of the company`s shares by controlling Yihao Group. Zhang Jianmeng also serves as the chairman and general manager of the company, and Zhang Xinchen indirectly controls 14.20% of the company's shares through Hong Kong Yiyuan, and serves as a director of the company. The two are father-son relationships and control 88.89% of the company's shares in total. They are the joint actual controllers.
It is worth noting that Zhang Jianmeng, one of the actual controllers, was implicated in a bribery case. Zhang Jianmeng once assisted in the investigation of a suspected crime of serious duty violation by Yang Zhijun, the former director of Zhanggong Branch of Ganzhou Environmental Protection Bureau (hereinafter referred to as the "Yang Zhijun Case") at the request of the case handlers of the Zhanggong District Supervisory Committee of Ganzhou City.
The prospectus shows that the Yang Zhijun case has been finalized by the Ganzhou Intermediate People`s Court in Jiangxi Province in March 2019, convicting Yang Zhijun of taking bribes and sentenced him to punishment. According to Yang Zhijun`s second-instance criminal ruling on bribery (2019) Gan 07 Xing Zhong No. 75), in early June 2017, Yang Zhijun demanded RMB 182,000 from Zhang Jianmeng in the name of the money for tobacco and alcohol, in order to avoid difficulties for the company`s environmental protection work. Zhang Jianmeng agreed to his request. In addition, Yang Zhijun accepted Zhang Jianmeng's meal coupons worth RMB 20,000.
On March 17, 2021, the People`s Procuratorate of Zhanggong District, Ganzhou City issued a [Statement Statement" confirming that when handling the Yang Zhijun case, there was no evidence of Zhang Jianmeng`s suspected criminal case filed in the evidence transferred for prosecution, and no criminal case was filed against him. Allegations.
Subsequently, on March 18, the Zhanggong District Supervisory Committee of Ganzhou City issued a "Statement Statement" confirming that the investigation of Yang Zhijun's case had been completed according to law and that the court had also completed the trial according to law. Zhang Jianmeng actively cooperated with the investigation. In this case, Zhanggong District, Ganzhou City The Supervisory Committee has not filed an investigation into Zhang Jianmeng, nor will he be held responsible for the case.
In addition, Yihao New Material itself is also involved in two litigation disputes.
One of them is a sales contract dispute: As of June 30, 2021, Yihao New Materials should be due to Yangzhou Chengyi Optoelectronics Trading Co., Ltd. (hereinafter referred to as "Chengyi Optoelectronics") for the payment of 6,185,400 yuan. The company signed a tripartite guarantee agreement with Chengyi Optoelectronics and Yangzhou Junmao Optoelectronics Co., Ltd. (hereinafter referred to as "Junmao Optoelectronics"). The agreement stipulates that Junmao Optoelectronics will use its own property to guarantee all debts incurred by Chengyi Optoelectronics and the company`s business .
In July 2021, the company filed a lawsuit in the People`s Court with Chengyi Optoelectronics and Junmao Optoelectronics as the defendants. The litigation request is: order the defendant Chengyi Optoelectronics to pay 6,185,400 yuan for the goods and liquidated damages for overdue payments; order the defendant Junmao Optoelectronics to The defendant assumed the joint guarantee liability for payment obligations of Yiguang Optoelectronics. The case is still under trial.
The other was a contract dispute over general transfer of claims and debts: Ganzhou Zhanggong District State-owned Industrial Assets Management Co., Ltd. (hereinafter referred to as "Zhanggong District State-owned Assets Management Company") filed a lawsuit with the company as the defendant in the Zhanggong District People`s Court of Ganzhou City, Jiangxi Province. The court order: (1) The company fulfilled the "Reconciliation Agreement" and paid a penalty of 1,039,221.78 yuan to the state-owned company in Zhanggong District; (2) All the litigation costs in this case were borne by the company. The company filed a counterclaim and added Tianyin Communication Holdings Co., Ltd. as a third party, and appealed for an order: (1) Zhanggong District State-owned Assets Co., Ltd. immediately returned the Yihao New Material payment of 1,039,146.72 yuan and interest (the interest is from the lawsuit) Calculated at an annual interest rate of 6% from the date until the payment is paid off); (2) The counterclaim costs in this case shall be borne by the Zhanggong District State-owned Assets Company.
On December 22, 2020, according to the judgment results, (1) the company paid 852,13399 million yuan of overdue interest to the Zhanggong District State-owned Company within seven days from the effective date of the judgment; (2) the company`s counterclaim was rejected.
Then on January 7, 2021, the company filed an appeal and petitioned for an order, but on July 12, the Ganzhou Intermediate People's Court of Jiangxi Province rejected the appeal and upheld the original judgment. In August, the company has paid overdue interest to the state-owned company in Zhanggong District. At the same time, the company has issued a "retrial application" and plans to submit it to the Jiangxi Higher People's Court.
The strong demand for PCB drives the company's performance
Electrolytic copper foil is made from copper raw materials into copper sulfate solution, and then electrolytic equipment is used to electrolytically deposit the copper sulfate solution under the action of direct current. According to the different application fields, it can be divided into electronic circuit copper foil and lithium battery copper foil. Electronic circuit copper foil is an important material for the manufacture of copper clad laminates and printed circuit boards (PCBs). PCBs are key electronic components in modern electronic equipment. Terminals are widely used in consumer electronics, 5G communications, Internet of Things, big data, Cloud computing, artificial intelligence, new energy vehicles, industrial control medical, aerospace and many other fields.
According to the data of the CCLA Industry Association, in 2020 my country's electronic circuit copper foil demand, PCB electronic circuit copper foil accounted for 28.57%, and copper clad laminate electronic circuit copper foil accounted for 71.43%. Unlike most companies in the industry, which are mainly copper clad laminate customers, the company's electronic circuit copper foil customers are mainly PCB customers. In 2020, the company's sales of electronic circuit copper foil to PCB customers accounted for 58.47% of the company's total sales of electronic circuit copper foil.
The downstream of Yihao New Materials mainly cooperates with Tripod Technology, Jingwang Electronics (25.890, -0.17, -0.65%), Shenghong Technology (25.420, 0.15, 0.59%), Suntak Technology (12.870, 0.12, 0.94%), five plants Well-known companies in the PCB industry such as Science and Technology, Shiyun Circuits (15.970, -0.04, -0.25%) and CCL industries such as Shengyi Technology (23.710, -0.02, -0.08%) and Nanya New Materials (48.260, 1.13, 2.40%) Well-known companies have established long-term and stable cooperative relations.
During the reporting period (2018-June 2021), Yihao New Materials realized operating revenues of 588 million yuan, 756 million yuan, 838 million yuan, and 638 million yuan respectively; the net profits after deducting non-recurring gains and losses in the same period were respectively 18.21 million yuan, 24.4052 million yuan, 55.723 million yuan and 95,246,100 yuan.
Jiemian News reporters checked the prospectus and found that the company`s rapid growth in revenue and non-net profit in the first half of 2021 is mainly related to the rapid growth in the sales revenue of electronic circuit copper foil, which is mainly due to the downstream PCB industry. The market demand is strong.
Specifically, since the second half of 2020, the rapid growth in demand in the downstream PCB industry has led to tight supply and demand in the electronic circuit copper foil industry, and the copper market price has risen, and the sales unit price has increased. At the same time, the company's electronic circuit copper foil production and sales have increased significantly in 2018. Add a new production line with an annual output of 2,600 tons of copper foil for electronic circuits. The company's current production capacity is 10,200 tons/year, but the company's capacity utilization rate and production-sales rate in the first half of 2020 and 2021 are both greater than 100%, and production capacity is severely saturated state.
In this IPO, Yihao New Materials intends to raise 746 million yuan of funds, of which 587 million yuan will be used for the 10,000-ton high-precision electrolytic copper foil project, which is implemented by the company and belongs to "an annual increase of 20,000 tons of high-end electrolytic copper foil. The first phase of the "Production Line Reconstruction and Expansion Project" has a construction period of 24 months.
According to Prismark data, my country's PCB output value in 2020 is about 35.1 billion U.S. dollars, a year-on-year increase of about 6.4%. HSBC Qianhai Securities predicts that my country's PCB output value will grow at a compound annual growth rate of about 8% from 2020 to 2025. It is estimated that by 2025, my country's PCB output value will reach 51.7 billion U.S. dollars, and its share of the global PCB market will reach 60%.
As shown in the figure, the company's electronic circuit copper foil output in 2020 ranks sixth among domestic holding companies in the country. If the company's fundraising projects are successfully put into production in the future, the company's market share will be given the rapid development of the downstream PCB industry market. Will be further improved.
In addition, Jiemian News reporters also noticed that the first phase of the Yihao New Material PCB project is expected to be put into operation in the second half of 2021, further strengthening the advantages of the vertical integration industry chain. After the PCB project is put into production, the company`s aluminum-based copper clad laminates will gradually be converted to self-use Mainly, the company's product structure will also undergo certain changes by then.
Concentration of raw material procurement increases risks
The prospectus disclosed that the company`s main business costs were mainly direct materials, accounting for 78.25%, 79.11%, 79.08%, and 81.63% in each period of the reporting period. Therefore, the raw material procurement cost was significantly linked to gross profit. Among them, the main raw material of electronic circuit copper foil products is copper, auxiliary materials are sulfuric acid, etc., and the main raw materials of aluminum-based copper clad laminate products are copper foil and aluminum plate.
In 2020, especially since 2021, the purchase price of copper and aluminum plates has increased significantly, so what is the company's ability to deal with the risk of rising raw materials?
In fact, in the aforementioned analysis, it can be seen that the company has increased prices on the sales side, and the price increase is as shown in the figure above. It is worth noting that there is an indicator-gross profit margin is more clear and intuitive. During the reporting period, the company`s electronic circuit copper foil gross profit margin was 16.75%, 12.97%, 15.70%, and 26.81%. It is not difficult to see that the gross profit margin from 2018 to 2020 first dropped and then rose, while in the first half of 2021, the gross profit margin increased by more than 10 percentage point.
Judging from the gross profit margin in the first half of 2021, even in the case of rising raw material costs, the company's electronic circuit copper foil sales have good bargaining space, which can effectively bridge the cost pressure. As of September 8, Shanghai copper's main contract price was 68680 yuan/ton, so the gross profit margin in the second half of the year will further reflect the ability to deal with raw material risks.
In terms of the top five suppliers, during the reporting period, the company's largest supplier was Shanghai Hengyue Trading Co., Ltd. (referred to as "Shanghai Hengyue"), and the purchase content was copper cathode. In 2018 and 2019, the company's purchases from this supplier were 159 million yuan and 177 million yuan, accounting for less than 30% of the total purchases. In 2020 and the first half of 2021, they were 348 million yuan and 280 million yuan respectively. , Accounting for 46.27% and 45.88% respectively. The reason is that in 2020, the company and Trafigura Investment (China) Co., Ltd. (referred to as Trafigura Investment), as the two parties could not reach an agreement on payment terms and delivery volume, terminated the cooperation after the contract expires in April 2020, thereby increasing Increased the purchase of copper cathodes from Shanghai Hengyue.
Therefore, Yihao New Material`s reliance on Shanghai Hengyue`s procurement is worthy of attention. On the one hand, Shanghai Hengyue, as an old customer of the company, has certain bargaining power under the condition of rising cathode copper purchase prices. Hengyue`s cooperation such as Trafigura`s investment was temporarily suspended, which will have a greater impact on the company`s procurement costs.
In terms of copper wire customers, during the reporting period, the company mainly purchased Shangrao Haoyu Copper Co., Ltd. ("Haoyu Copper"). In the first half of 2021, the new customer Jiangtong East China (Zhejiang) Copper Co., Ltd. ( (Referred to as "East China Copper"), the purchase amount was 33.9814 million yuan, while the purchase amount of Haoyu Copper was 42.086 million yuan in the same period.