On January 14, 2011, Tongda Cable IPO application was approved. However, the financial risks disclosed in the prospectus of its prospectus cannot be ignored. The most important of these is the risk of a decline in gross margins. Some media reported that in the second half of 2010, the increase in the prices of major raw materials required by the company's products may cause the company's gross profit margin to decline. However, the report period in the company's prospectus submission was only as of June 30, 2010. In addition, the prospectus report also reveals financial risks such as a single source of profit, low asset turnover, and unreasonable liability structure.
Tongda Cable: The fluctuation of gross profit margin during the reporting period
At the end of the year and the beginning of the year, the submissions for the prospectuses of a number of companies intending to attend the association had announced the results as of the end of September 2010. However, Henan Tongda Cable Co., Ltd. (hereinafter referred to as “Tongda Cableâ€) only announced the results as of June 30th. Performance.
From the published information, it can be seen that the gross profit margin of Tongda Cable has fluctuated greatly in recent years: in 2007, the gross profit rate of the main business was 11.46%; in 2008 it was decreased to 10.85%; in 2009, it was 13.98%; in the first half of 2010; It dropped again to 11.85%. As the gross profit of the company is mainly contributed by ACSR, the change in the company's gross profit margin is mainly affected by the change in the gross profit margin of ACSR.
The company explained this: In 2008, affected by the financial crisis, the average selling price and unit cost of the company's steel-cored aluminum stranded products fell in 2008. Its average selling price decreased by 5.29% from the previous year, and the unit cost decreased. 4.62%, due to the decline in the average price of product sales is greater than the rate of decline in unit costs, resulting in the product gross profit rate fell by 0.62%; 2009 unit cost of ACSR decreased by 21.84% over the previous year, and sales The average price only decreased by 18.86%, because the decline in the average price of product sales was less than the rate of decline in unit costs, resulting in a 3.28% increase in the gross profit rate of the product; the unit price of ACSR in the first half of 2010 was lower than that in 2009. 3.95%, while the unit cost decreased by only 1.49%. The decrease in the average price of product sales was greater than the decrease in unit cost, which caused the gross profit margin of the product to drop by 2.2%.
In the production cost of ACSR, aluminum (including aluminum rods and aluminum ingots) accounts for the largest proportion. During the reporting period, the ratio of aluminum cost to production cost was 91.71%, 88.38%, 87.35% and 87.69%, respectively. The analysis of the sensitivity of aluminum price changes to the company's comprehensive gross profit margin shows that the comprehensive gross profit rate is more sensitive to fluctuations in aluminum prices. Taking 2009 as an example, with Other conditions remaining unchanged, the average unit price of aluminum will vary by 1%. The rate of change in gross margin was 6.15%, and the gross value of gross margin changed 0.86%.
Tongda Cable: Gross Profit Margin May Decline in the Second Half of 2010
From the above analysis, we can see that the price of aluminum has a great influence on the company's gross profit margin. Although most of the cost increase caused by aluminum price increases can be compensated by the rise in sales prices, the short-term gross profit margin will decline if the sharply rising costs cannot be completely absorbed by subsequent high price orders in the short term.
In the second half of 2010, aluminum prices continued to rise with the remaining bulk commodity prices, and the main contract of Shanghai Aluminum 1104 rose from 14,490 yuan/tonne on June 7, 2010 to 16,860 yuan/tonne on January 17, 2011, and On November 10, it hit a stage high of 17,615 yuan per ton.
Many institutions are optimistic about the trend of aluminum prices in 2011. According to Sun Lei, an analyst from Galaxy Futures, in the Daily News, liquidity was still abundant in the first half of 2011, and domestic aluminum plants have not been put into production. It is expected that the Shanghai aluminum price fluctuation range will be 16250 to 19500 yuan/ton in 2011. The average annual price is About 18,000 yuan / ton; LME aluminum price volatility range of 2250 ~ 2900 US dollars / ton, the average price of 2500 US dollars / ton.
Insiders told the "Daily" that the gross profit margin of Tongda Cable in 2010 is likely to continue to decline. In the past six months, the price of bulk commodities, aluminum prices are not outstanding, but it has also risen substantially. In the future, aluminum prices will continue to rise, which may put pressure on the operating costs of the company and the entire industry, erode gross margins.
Because the company’s prospectus does not disclose the figures for the three quarterly reports and the expected figures for the whole year, the company’s gross margin in the second half of 2010 will not be announced until the publication of the annual report.
Tongda Cable: The Manuscript Release Reveals Three Financial Risks
In addition to the risk that the above gross profit margin may decline, the following three aspects of financial risks are disclosed in the prospectus submission.
Profit is strongly dependent on a single product
The prospectus application note particularly reminds investors of the risk of a single company product structure: Since the establishment of the company, the company has been specialized in the production and sale of ACSR, and the sales revenue of ACSR in the reporting period accounted for the proportion of main business income. Above 95%. If the market demand for ACSR products is adversely changed, it will bring certain operating pressure to the company.
The company's operating income, the proportion of main business income during the reporting period are all above 97%, while the sales of main products of ACSR accounted for the proportion of main business income during the reporting period are above 96%. The company’s revenue and profits are highly dependent on ACSR's single product. In 2009, the company's newly-built aluminum-clad steel strand pilot line was put into operation. The product range was increased to three types.
Compared with Tongda cables, most of the companies in the same industry have a much richer product range. For example, Wanma Cable's product categories include cross-linked cables, plastic cables, overhead lines and other cables, a total of more than 180 varieties, more than 14,000 specifications; solar cable main products are power cables, special cables, construction lines , data cables, equipment lines, overhead lines and a series of varieties; the main products of Super Super cables are 35kV and below wire and cable, including three categories of power cables, wires and cables for electrical equipment and bare wires, involving more than 500 models, More than 10,000 specifications.
Asset turnover rate shows a downward trend
From the data provided in the prospectus report, it can be seen that the company's asset turnover rate showed a downward trend during the reporting period. In particular, the inventory turnover rate in 2008 and 2009 is quite different from the average value of listed companies in the same industry. In 2008, the average turnover rate of listed companies in the same industry was 8.04, and Tongda cable was 5.98. In 2009, the average turnover rate of listed companies in the same industry was 6.13, and Tongda cable was 4.11.
The company's explanation for this is that the decrease in the inventory turnover rate during the reporting period was mainly due to the increase in the scale of the company's business and the increase in the purchase of raw materials and the increase in raw material reserves during the period when raw material prices were low. Compared with listed companies in the same industry, the company's inventory turnover rate is low. This aspect is determined by the operating characteristics of the steel-cored aluminum stranding industry, which are "heavy material and light". On the other hand, it reflects that the company still has some deficiencies in the precise management and control of inventory, and the company is seriously studying this issue. We will promptly formulate improvement measures and will strive to improve the level of inventory management and speed up the company's inventory turnover efficiency.
The company's accounts receivable turnover rate and total asset turnover rate have declined in 2009 to varying degrees compared to 2008. The reason explained by the company is: In 2009, the company's accounts receivable turnover rate was lower than the level of 2008, mainly due to the company's sales growth in 2009, but the sales unit price decreased, the operating income decreased, and accounts receivable maintained growth; 2009 The decrease in the total asset turnover rate was mainly due to the decrease in the main business revenue of the company due to the drop in raw materials. However, these two indicators are basically at the industry average.
Unfair debt structure
The company's financial data show that the company's liabilities are almost all current liabilities, and the ratio of current liabilities as of June 30, 2010 was as high as 99.06%. The only non-current liabilities of RMB 3 million were deferred income from government subsidies.
The company's borrowings from banks are all short-term loans, and there are no long-term loans. Because the interest rate of short-term borrowings is generally higher than that of long-term borrowings, it also needs to be repaid within one year or within one operating cycle. If the repayment period of current liabilities is relatively concentrated, it may cause the company’s monetary funds to be in short supply and face greater flow. Sexual risk.
The company's management believes that the company's debt structure is in line with the company's production and operation characteristics and industry characteristics, and it matches the asset structure. The current liabilities of the company are almost all current liabilities. The main reason is that the company is limited by the level of gross margin of the industry in which the company is located. The company prioritizes cost factors in fundraising and the use of current liabilities in large amounts can save capital costs.
As can be seen from the above explanation, the low level of gross profit margin is the main reason for forcing the company to make heavy use of current liabilities.
Tongda Cable: The fluctuation of gross profit margin during the reporting period
At the end of the year and the beginning of the year, the submissions for the prospectuses of a number of companies intending to attend the association had announced the results as of the end of September 2010. However, Henan Tongda Cable Co., Ltd. (hereinafter referred to as “Tongda Cableâ€) only announced the results as of June 30th. Performance.
From the published information, it can be seen that the gross profit margin of Tongda Cable has fluctuated greatly in recent years: in 2007, the gross profit rate of the main business was 11.46%; in 2008 it was decreased to 10.85%; in 2009, it was 13.98%; in the first half of 2010; It dropped again to 11.85%. As the gross profit of the company is mainly contributed by ACSR, the change in the company's gross profit margin is mainly affected by the change in the gross profit margin of ACSR.
The company explained this: In 2008, affected by the financial crisis, the average selling price and unit cost of the company's steel-cored aluminum stranded products fell in 2008. Its average selling price decreased by 5.29% from the previous year, and the unit cost decreased. 4.62%, due to the decline in the average price of product sales is greater than the rate of decline in unit costs, resulting in the product gross profit rate fell by 0.62%; 2009 unit cost of ACSR decreased by 21.84% over the previous year, and sales The average price only decreased by 18.86%, because the decline in the average price of product sales was less than the rate of decline in unit costs, resulting in a 3.28% increase in the gross profit rate of the product; the unit price of ACSR in the first half of 2010 was lower than that in 2009. 3.95%, while the unit cost decreased by only 1.49%. The decrease in the average price of product sales was greater than the decrease in unit cost, which caused the gross profit margin of the product to drop by 2.2%.
In the production cost of ACSR, aluminum (including aluminum rods and aluminum ingots) accounts for the largest proportion. During the reporting period, the ratio of aluminum cost to production cost was 91.71%, 88.38%, 87.35% and 87.69%, respectively. The analysis of the sensitivity of aluminum price changes to the company's comprehensive gross profit margin shows that the comprehensive gross profit rate is more sensitive to fluctuations in aluminum prices. Taking 2009 as an example, with Other conditions remaining unchanged, the average unit price of aluminum will vary by 1%. The rate of change in gross margin was 6.15%, and the gross value of gross margin changed 0.86%.
Tongda Cable: Gross Profit Margin May Decline in the Second Half of 2010
From the above analysis, we can see that the price of aluminum has a great influence on the company's gross profit margin. Although most of the cost increase caused by aluminum price increases can be compensated by the rise in sales prices, the short-term gross profit margin will decline if the sharply rising costs cannot be completely absorbed by subsequent high price orders in the short term.
In the second half of 2010, aluminum prices continued to rise with the remaining bulk commodity prices, and the main contract of Shanghai Aluminum 1104 rose from 14,490 yuan/tonne on June 7, 2010 to 16,860 yuan/tonne on January 17, 2011, and On November 10, it hit a stage high of 17,615 yuan per ton.
Many institutions are optimistic about the trend of aluminum prices in 2011. According to Sun Lei, an analyst from Galaxy Futures, in the Daily News, liquidity was still abundant in the first half of 2011, and domestic aluminum plants have not been put into production. It is expected that the Shanghai aluminum price fluctuation range will be 16250 to 19500 yuan/ton in 2011. The average annual price is About 18,000 yuan / ton; LME aluminum price volatility range of 2250 ~ 2900 US dollars / ton, the average price of 2500 US dollars / ton.
Insiders told the "Daily" that the gross profit margin of Tongda Cable in 2010 is likely to continue to decline. In the past six months, the price of bulk commodities, aluminum prices are not outstanding, but it has also risen substantially. In the future, aluminum prices will continue to rise, which may put pressure on the operating costs of the company and the entire industry, erode gross margins.
Because the company’s prospectus does not disclose the figures for the three quarterly reports and the expected figures for the whole year, the company’s gross margin in the second half of 2010 will not be announced until the publication of the annual report.
Tongda Cable: The Manuscript Release Reveals Three Financial Risks
In addition to the risk that the above gross profit margin may decline, the following three aspects of financial risks are disclosed in the prospectus submission.
Profit is strongly dependent on a single product
The prospectus application note particularly reminds investors of the risk of a single company product structure: Since the establishment of the company, the company has been specialized in the production and sale of ACSR, and the sales revenue of ACSR in the reporting period accounted for the proportion of main business income. Above 95%. If the market demand for ACSR products is adversely changed, it will bring certain operating pressure to the company.
The company's operating income, the proportion of main business income during the reporting period are all above 97%, while the sales of main products of ACSR accounted for the proportion of main business income during the reporting period are above 96%. The company’s revenue and profits are highly dependent on ACSR's single product. In 2009, the company's newly-built aluminum-clad steel strand pilot line was put into operation. The product range was increased to three types.
Compared with Tongda cables, most of the companies in the same industry have a much richer product range. For example, Wanma Cable's product categories include cross-linked cables, plastic cables, overhead lines and other cables, a total of more than 180 varieties, more than 14,000 specifications; solar cable main products are power cables, special cables, construction lines , data cables, equipment lines, overhead lines and a series of varieties; the main products of Super Super cables are 35kV and below wire and cable, including three categories of power cables, wires and cables for electrical equipment and bare wires, involving more than 500 models, More than 10,000 specifications.
Asset turnover rate shows a downward trend
From the data provided in the prospectus report, it can be seen that the company's asset turnover rate showed a downward trend during the reporting period. In particular, the inventory turnover rate in 2008 and 2009 is quite different from the average value of listed companies in the same industry. In 2008, the average turnover rate of listed companies in the same industry was 8.04, and Tongda cable was 5.98. In 2009, the average turnover rate of listed companies in the same industry was 6.13, and Tongda cable was 4.11.
The company's explanation for this is that the decrease in the inventory turnover rate during the reporting period was mainly due to the increase in the scale of the company's business and the increase in the purchase of raw materials and the increase in raw material reserves during the period when raw material prices were low. Compared with listed companies in the same industry, the company's inventory turnover rate is low. This aspect is determined by the operating characteristics of the steel-cored aluminum stranding industry, which are "heavy material and light". On the other hand, it reflects that the company still has some deficiencies in the precise management and control of inventory, and the company is seriously studying this issue. We will promptly formulate improvement measures and will strive to improve the level of inventory management and speed up the company's inventory turnover efficiency.
The company's accounts receivable turnover rate and total asset turnover rate have declined in 2009 to varying degrees compared to 2008. The reason explained by the company is: In 2009, the company's accounts receivable turnover rate was lower than the level of 2008, mainly due to the company's sales growth in 2009, but the sales unit price decreased, the operating income decreased, and accounts receivable maintained growth; 2009 The decrease in the total asset turnover rate was mainly due to the decrease in the main business revenue of the company due to the drop in raw materials. However, these two indicators are basically at the industry average.
Unfair debt structure
The company's financial data show that the company's liabilities are almost all current liabilities, and the ratio of current liabilities as of June 30, 2010 was as high as 99.06%. The only non-current liabilities of RMB 3 million were deferred income from government subsidies.
The company's borrowings from banks are all short-term loans, and there are no long-term loans. Because the interest rate of short-term borrowings is generally higher than that of long-term borrowings, it also needs to be repaid within one year or within one operating cycle. If the repayment period of current liabilities is relatively concentrated, it may cause the company’s monetary funds to be in short supply and face greater flow. Sexual risk.
The company's management believes that the company's debt structure is in line with the company's production and operation characteristics and industry characteristics, and it matches the asset structure. The current liabilities of the company are almost all current liabilities. The main reason is that the company is limited by the level of gross margin of the industry in which the company is located. The company prioritizes cost factors in fundraising and the use of current liabilities in large amounts can save capital costs.
As can be seen from the above explanation, the low level of gross profit margin is the main reason for forcing the company to make heavy use of current liabilities.
Telephone Est Co., Limited , http://www.gd-charger.com