On January 4, 2013, Nanda Optoelectronics issued the “Announcement on the China Securities Regulatory Commission to issue a warning letter to the companyâ€. Due to the sharp decline in performance after the listing, the CSRC adopted the supervision and management measures issued by the company.
At the same time, Pacific Securities (601099.SH), which sponsored the listing of Nanda Optoelectronics, was also issued a warning letter, and the signing sponsors Cheng Zhengmao and Tang Weihua took the regulatory measures of “not accepting documents issued within 3 monthsâ€.
What is worth asking is, why can such IPO projects be carried out on the GEM Board of Directors?
Continuous "changing face" performance
Nanda Optoelectronics announced that the company received the "Decision on Administrative Supervision Measures" issued by the CSRC on January 2, 2013.
After investigation, the company disclosed that its net profit decreased by about 20% year-on-year in the “Initial Public Offering and Issuance of the GEM Listing†on July 26 last year. It was disclosed in the first-day risk warning announcement on August 7 last year. The net profit attributable to the issuer's shareholders decreased by 27.71% compared with the same period of last year." According to preliminary estimates, the company's net profit fell by about 40% from January to September 2012 (the actual decline was 52.42%).
Nanda Optoelectronics and related intermediaries did not truthfully explain the above matters in the “Commitment Letter on Major Events after the Nanda Optoelectronics Conference†submitted to the Securities Regulatory Commission on July 18 last year, and did not make a supplementary announcement in time during the IPO process. The CSRC therefore took the supervision and management measures for issuing warning letters.
Regarding the punishment, Nanda Optoelectronics Secretary Zhang Jianfu refused to accept the interview on the grounds of the meeting.
On July 26, 2012, Nanda Optoelectronics IPO issued an announcement. According to preliminary estimates, the company's product sales in the first half of the year increased by about 40% year-on-year. Due to the price decline, revenue fell by about 10% year-on-year, and net profit was about 55 million. Yuan, down about 20% year-on-year.
On August 7, Nanda Optoelectronics officially landed on the GEM. On the same day, the “First-day Risk Warning Announcement†disclosed that Nanda Optoelectronics’ net profit for the first half of the year was 54.924 million yuan, down 27.71% from the same period last year of 7571.19 million yuan. Nanda Optoelectronics explained that “the unit price of MO source products has returned to rationality, and the decrease in unit price has resulted in a decrease in gross profit marginâ€.
The company further estimated that the company's net profit for the period from January to September 2012 was about 82 million yuan to 96 million yuan, down about 40% year-on-year.
In fact, in the 2012 third quarterly report disclosed by Nanda Optoelectronics, its net profit was only 75.770 million yuan, down 52.42% year-on-year; its revenue decreased by 124.414 million yuan compared with the same period of last year, down 44.99% year-on-year.
Such a big performance "changed face", Nanda Optoelectronics and its sponsor, Pacific Securities, did not explain this before. Although the company was punished accordingly, in the view of a fund manager in Shanghai, the LED industry's business climate has been seriously declining. “The continued profitability of the company is worrying, and such a large performance has changed. Can you let it go public?"
The future is worrying
The performance of Nanda Optoelectronics' “changing face†is surprisingly fast. According to its prospectus, from 2009 to 2011, the company's net profit after deducting non-recurring gains and losses was 6,709,100 yuan, 55,744,900 yuan and 179,916,400 yuan, 2010. The company's net profit growth rate for the year and 2011 was 730.89% and 215.57%, respectively.
Such high growth has undoubtedly played a crucial role in investigating the company's performance after the listing, and its “reporting not to worry†approach has led investors to be unable to judge their true business conditions.
The reporter sorted out his prospectus and financial report and found that Nanda Optoelectronics had many doubts at the beginning of its listing.
According to the prospectus, the MO source products operated by Nanda Optoelectronics include trimethylgallium, trimethylindium, triethylgallium, trimethylaluminum, ferrocene, triethylsulfonium, carbon tetrachloride, carbon tetrabromide, etc. Among them, trimethylgallium and trimethylindium are the two most important and most abundant sources of MO. In the past three years, the sales revenue of the above two businesses accounted for more than 87% of the company's main business income.
As of the end of 2011, the balance of Nanda's photoelectric inventory reached 101.4645 million yuan, while the total operating cost for 2011 was only 67.357 million yuan, which means that the company has reserved about a year and a half of goods for sale. The price of trimethylgallium continued to decline from the fourth quarter of 2011, which is the main reason for its decline.
“Although LED products are the key products in the current energy conservation and environmental protection field, they are currently overcapacity and demand is shrinking.†The above fund managers bluntly stated that the demand for MO source products of Nanda Optoelectronics mainly depends on the downstream LED market demand, thus enabling the company to operate. The growth in performance faces certain risks. "It should be traced whether the data disclosed in the prospectus of Nanda Optoelectronics is true."
Nanda Optoelectronics reported in the third quarter of 2012 that the net cash flow from its operating activities was -24.709 million yuan, a decrease of 139,140,900 yuan over the same period of the previous year; accounts receivable of 37,386,600 yuan, an increase of 288,179,000 yuan from the opening balance, an increase of 336.32 %, mainly due to the slow return of the company in 2012.
At the end of the period, the inventory balance was 92,724,400 yuan, and the total operating cost of Nanda Optoelectronics in the first three quarters was only 66,167,700 yuan. At this rate, it took more than one year for Nanda Optoelectronics to sell so much inventory.
The performance is changing like a child, the accounts receivable is increasing, the payment is weak, and the destocking process is difficult. For Nanda Optoelectronics, in order to realize the three quarterly reports, the company will maintain a good profitability in the future development. "The difficulty is as big as you can imagine."
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