The profitability of Eaton's electronic investment project remains to be tested
On April 30, Eaton Technology successfully impacted the IPO for the second time, but its sustainable operation ability has attracted much attention from investors, especially whether its IPO projects can contribute profits as scheduled remains to be tested.
Since its establishment, the company has been focusing on the manufacturing and sales of high-precision, high-density double-layer and multi-layer printed circuit boards, and is one of the leaders in the domestic printed circuit board industry.
Profitability of fund-raising projects
According to the prospectus of Eaton Technology, the operating income of the Company in 2012 decreased by 2.96% compared with 2011, and in 2013, the operating income fell by 6.65% again on a year-on-year basis. The net profit attributable to the owners of the parent company after deducting non profits in 2013 was 320.9092 million yuan, a decrease of 0.34% compared with 2012. The company believes that the main reason for the continuous decline of operating income is the impact of the overall environment of the global and PCB (printed circuit board) industry and the adjustment of the company's sales strategy.
In fact, from the current situation of PCB markets at home and abroad, the reason for the decline of Eaton's performance is the overcapacity of the domestic PCB industry.
According to the statistics of China Printed Circuit Industry Association, there are nearly 1500 PCB manufacturers in China. The industry presents a highly decentralized competition pattern, and the scale of enterprises is generally small. In 2012, the sales revenue of China's top ten printed circuit board enterprises totaled 29.8 billion yuan.
Analysts pointed out that although the domestic PCB industry ranks first in the world in terms of capacity scale, most of the enterprises lack core technology, and most of them are foreign co processing enterprises. The production equipment is imported, the design is foreign, and the R&D and innovation capabilities are lacking.
In 2012, most of the top ten domestic PCB sales revenue enterprises were agent manufacturers of foreign customers. Zhuhai Zixiang Electronics, which ranked first, was a wholly-owned subsidiary of Japan MEKTRON, the world's largest softboard enterprise; Schindler Technology, the second largest supplier of printed circuit boards in North America; The third ranked Huiya Group is a subsidiary of the American Huiya Group. Although Eaton Technology ranked in the top ten, its market share was only 1.79%. At present, most of its products are low-end PCB products.
This time, Eaton Technology is regarded as a multi-layer printed circuit board project with an annual output of 1.1 million square meters and a HDI (high efficiency density inverter) printed circuit board project with an annual output of 450000 square meters to meet the market development trend and customer needs, improve the company's competitiveness, and have a good profit prospect. Whether it can really improve the profitability of Eaton Technology is unknown.
According to the idea of Eaton Technology, when the project of producing 1.1 million square meters of multilayer printed circuit boards annually reaches its capacity, it will focus on the production of high-end multilayer printed circuit boards such as communication products and automobile electronic circuit boards. It is estimated that the product structure after reaching its capacity will be 4 layers of boards accounting for 20%, 6-8 layers of boards accounting for 50%, and more than 10 layers of boards accounting for 30%. When the HDI printed circuit board project with an annual output of 450,000 square meters is put into operation, it is estimated that the product structure will be 65% of the first level HDI boards and 35% of the second level HDI boards.
However, the reality faced by Eaton Technology is that in 2013, the sales of its multi-layer circuit board products, especially the sales of six and more layers of boards, accounted for only 26.56% of the company's sales, and the sales price continues to decline. In 2013, the sales price of six layers of boards per square meter fell 2.92% year on year, in 2012, 2.89% year on year, in 2013, the price of eight layers of boards and more fell 5.16%, and in 2012, 5.10%.
At present, most of the domestic PCB listed companies, such as Tianjin Plin, Ultrasonic Electronics, Chaohua Technology, Xingsen Technology, Zhongjing Electronics, and Shanghai Electric Co., Ltd., have already embarked on multi-layer PCB projects, and the market competition is fierce. In 2013, the capacity utilization rate of Eaton Technology was only 85.48%. After the project is put into production, how to ensure the digestion of capacity and achieve high profitability remains to be tested by the market.
For the high-end HDI printed circuit board project with an annual output of 450000 square meters, Eaton Technology currently does not have a systematic HDI production capacity. At present, the company has only carried out corresponding research and development and technical reserves in the field of HDI board products, and actively prepared for the trial production of HDI products. In addition, it is still preparing to produce the first and second level HDI board products at the low-end of HDI boards. It is unknown that the company will have a real capacity, How to make profits also remains to be tested.
The company's future performance remains to be tested
For fund-raising projects, Eaton Technology seems confident.
For the project with an annual output of 1.1 million square meters of multi-layer printed circuit boards, the company expects a total investment of 650019300 yuan, including 593.3466 million yuan of construction investment and 56.6727 million yuan of initial working capital. The construction period of the project is one year, and normal production will begin in the third year. The company expects an annual sales revenue of 1552.1 million yuan after normal production, and the investment can be recovered in four or five years. The HDI printed circuit board project with an annual output of 450000 square meters is planned to have a total investment of 658.002 million yuan. The construction period is one year, and the normal production will begin in the third year. The annual sales revenue is 1014.75 million yuan.
However, judging from the current market demand, Eaton Technology may take a longer time to achieve the above business objectives.
However, the company believes that the raised investment projects will greatly strengthen the company's financial strength, enable the company to increase its chain expansion efforts, rebuild and expand the base projects, establish a more efficient operating system, lay a solid foundation for the company's future market development, and enhance the company's competitive advantage.
However, some analysts said that the fund-raising projects would probably worsen the operation of Eaton Technology. As of December 31, 2013, the monetary capital of Eaton Technology was up to 1.075 billion yuan, while the company's total assets were only 3.09 billion yuan, which means that the company will hold 1.075 billion yuan in cash, which is sufficient to cope with the company's operation and business development. After the trial production of the raised investment project totaling 1.3 billion yuan, the capacity cannot be digested in time, which may occupy most of the company's working capital, affecting the development of the company's future performance.
At the same time, fund-raising projects are all invested in infrastructure and equipment introduction, and the insufficient R&D investment of the company will also directly affect the development of the company's products and drag down the company's R&D capability.
As the company said, the full production period of the raised investment project is the third year after it is put into production. If the market changes significantly due to various factors such as the adjustment of national industrial policies and changes in market demand during this period, the company has the risk that the business performance cannot continue to grow or even cannot grow due to the increase in the depreciation costs of fixed assets.
The Prospectus of Eaton Technology Prompts Fourteen Risk Factors
In the prospectus, Eaton Technology reminded investors that, in addition to other materials provided in this prospectus, they should carefully consider the following risk factors when evaluating the company's shares issued this time.
1、 Risk of improper control by the actual controller. Prior to this offering, Eaton Investment held 98% of the shares of Eaton Technology, which is in an absolute controlling position. Eaton Investment is a wholly-owned subsidiary of Gaoshu Co., Ltd. Li Yongqiang, Li Yongsheng and Li Mingjun indirectly hold 98% of the Company's shares through Gaoshu Co., Ltd. Li Yongqiang, Li Yongsheng and Li Mingjun are the three brothers who act in concert to jointly control Eaton Technology and act as the actual controllers of the company.
After this issuance, Li Yongqiang, Li Yongsheng and Li Mingjun will still achieve absolute control over the Company indirectly through Eaton Investment. If the actual controller uses its controlling position to control the appointment and removal of personnel and business decisions of the company by exercising voting rights, it may damage the interests of Eaton Technology and the small and medium-sized shareholders of the company.
2、 Risk of price fluctuation of raw materials. Copper clad plate, copper foil, copper ball and resin sheet are the main raw materials required for the production of Eaton Technology. The price fluctuation of the above raw materials has a certain impact on the company's operating performance.
In 2010, with the recovery of the global economy, the copper price entered an upward channel. The international copper price reached its highest value in the middle of February 2011. After February 2011, the international copper price showed a high shock, showing a downward trend compared with the previous period. In 2011, the gross profit margin of the company remained stable at about 21%. In 2012, the international copper price declined slightly compared with 2011, resulting in a slight increase in the gross profit margin of the company in 2012. In 2013, the international copper price continued to decline, and the gross profit margin of the company increased by 3.84% compared with 2012. To sum up, the price fluctuation of main raw materials such as copper clad plate, copper foil, copper ball and resin sheet has a significant impact on the company's performance.
3、 Exchange rate risk. The export of products, import of raw materials, foreign exchange loans and equipment import in the normal operation of Eaton Technology will involve foreign exchange revenue and expenditure, mainly in US dollars. During the reporting period, the sales revenue settled in US dollars in the Company's export sales accounted for 89.32%, 90.23% and 83.60% of the main business revenue in the reporting period, respectively. The gross profit margin of the Company was relatively sensitive to the exchange rate between US dollars and RMB.
On the one hand, the change of RMB exchange rate will affect the profitability of the company: the company's products are priced in US dollars in the international market, and the appreciation of RMB will narrow the company's profit margin when the sales price remains unchanged; Raising the price will affect the market competitiveness of the company's products and reduce the sales volume. On the other hand, the foreign currency held by the Company will also cause certain exchange losses. During the reporting period, the exchange gains and losses of the Company were 22.356 million yuan, 5.5533 million yuan and 36.8902 million yuan, respectively, accounting for 7.69%, 1.69% and 11.47% of the Company's current net profits.
4、 The company's performance fluctuation risk. The operating income of Eaton Technology in 2012 decreased by 2.96% compared with 2011; The operating revenue in 2013 decreased by 6.65% compared with that in 2012. The main reason for the continuous decline of the company's operating revenue is the impact of the overall environment of the global and PCB industry and the adjustment of the company's sales strategy.
5、 The risk of global economic fluctuations. The prosperity of the PCB industry is closely related to the overall development of the macro-economy and electronic information industry.
Eaton's technology products are mainly exported. In 2011, 2012 and 2013, the export proportion of the company's products was 89.43%, 90.27% and 83.75% respectively. In the future, if the global economy fluctuates significantly, it will have a negative impact on PCB manufacturers including the Company.
6、 Risk of changes in tax rates and tax policies. 1。 The risk that the parent company's income tax rate changes and the company's current and future net profit level decreases due to the failure to apply for high-tech enterprise qualification. 2。 Risk of changes in export tax rebate policies
7、 Environmental risks. 1。 Risk of environmental pollution or violation of relevant environmental protection laws and regulations during production. 2。 The increasingly strict environmental protection policy brings risks to the company's operating costs.
Other risks also include: the risk that accounts receivable cannot be recovered in time, the risk of large inventory scale, technical risk, the risk of land being recovered, the risk of declining return on net assets, the risk of investment projects with raised funds, and the risk of stock market fluctuation.