Why is the gross profit margin low when the sales proportion of former staff dealers is high? Yada e-replied to the inquiry of the Science and Technology Innovation Board

On September 6, Zhonghuanet Finance learned that on September 6, Guangdong Yada Electronics Co., Ltd. (hereinafter referred to as "Yada Electronics") replied to the inquiry on the review of the Science and Technology Innovation Board.

The Reply to the Inquiry Letter on the Review of Application Documents for Initial Public Offering of Shares and Listing on the Science and Technology Innovation Board of Guangdong Yada Electronics Co., Ltd. published on the website of the CSRC on September 6 disclosed the main questions. In the inquiry of the Science and Technology Innovation Board, Shanghai Stock Exchange mainly focused on 13 questions, including technological advancement, dealers, revenue, expenses, patents, inventory, accounting adjustment, risk tips and information disclosure.

As for dealers, according to the declaration documents, the sales revenue realized by the company through former employee dealers accounted for 77.94%, 79.50% and 76.45% of the total distribution revenue, respectively, accounting for 23.83%, 24.58% and 22.32% of the operating revenue; Some customers developed by former staff dealers are unwilling to sign contracts with dealers and require to sign contracts directly with Yada Electronics; Such former employees require to retain their identity so that they can expand their business abroad, so the company retains the identity of such employees. Shanghai Stock Exchange requires to explain the gross profit margin of products sold to dealers of different former employees, and whether there is any difference between the gross profit margin of other dealers and direct customers, and the reasons ； During the reporting period, the transaction amount of the distribution company established between the issuer and some former employees during the service period, and the sales revenue of customers developed by Yada Electronics and former employees' dealers are accounted as distribution revenue or direct sales revenue.

Yada Electronics replied that during the reporting period, there were seven former employee dealers in Yada Electronics, of which Shenzhen Yunfan, Nanjing Yaada and Emendas were the main former employee dealers. The total sales amount of Yada Electronics to the three dealers was 40.4663 million yuan, 54.8584 million yuan and 61.0998 million yuan, respectively, accounting for 95.64%, 94.11% and 93.72% of the income of the former employee dealers.

The main reason why the gross profit margin of direct sales customers of Yada Electronics is higher than that of former employee dealers is that the company faces customers directly under the direct sales mode, and the gross profit margin is relatively high; Under the distribution mode, the company sells its products to dealers, who then sell them to final customers. The dealers themselves need to retain a certain profit margin, and the gross margin is lower than that of the direct sales mode.

The main reasons for the difference between the gross profit rate of sales of Yada Electronics to major former employee dealers and that of other dealers are as follows: First, the power monitoring products produced by Yada Electronics are customized products, and there are differences in technical parameters, function realization paths and other aspects of the same type of products, leading to price differences. The dealers purchase different models of products according to their customers' needs, and the difference in product structure leads to the difference in the average price of their products. Second, Shenzhen Yunfan, Nanjing Yaaida and Emendas have cooperated with the company for more than 8 years, and their purchase amount from Yada Electronics is high and the purchase volume is large. Moreover, these three dealers need to undertake the functions of product installation guidance, after-sales service and other functions for end customers within their sales regions. Therefore, the sales price has certain advantages, and the gross margin is slightly lower.

With regard to the acquisition of Zhongpeng New, according to the prospectus, Zhongpeng New is mainly engaged in the research, development, production and sales of distribution cabinet products, which belongs to the downstream of the company's business. In August 2019, the company acquired 55% of the equity of Shenzhen Zhongpeng New Electrical Technology Co., Ltd. This acquisition is based on the paid in capital, in which 20% of the equity of Zhongpeng New held by Bao Jianwei was purchased at the price of 165000 yuan, 5% of the equity held by Bao Haoyu and 30% of the equity held by Shenzhen Wande Intelligent Technology Co., Ltd. were purchased at the price of 1.00 yuan. At the end of 2018, Zhongpeng New had total assets of 5.8234 million yuan and operating revenue of 15.7104 million yuan. Bao Jianwei made a performance commitment to the company to ensure that the total net profit of Zhongpeng New in 2020, 2021 and 2022 would not be less than 21 million yuan. Shanghai Stock Exchange asked to explain the reason why Bao Jianwei made a large performance commitment at a low purchase price, and whether there were other interest arrangements;

Yada replied that from January to July 2019, Pengxin's operating income was 8.0453 million yuan, and its net profit was 360400 yuan. On July 31, 2019, the asset liability ratio of Pengxin was 88.42%. Before the company acquired Zhongpeng New, its performance scale was small, its working capital was tight, and its operation was difficult. The original shareholders could not continue to maintain Zhongpeng New's operation. At the same time, Zhongpengxin has operated in the field of communication and data center power distribution for many years, has a certain technological accumulation, and some technologies have been converted into invention patents, and Zhongpengxin is a high-tech enterprise, with a certain R&D innovation ability and development prospects. Considering the subsequent support of Arda Electronics to the new business of Zhongpeng and its optimistic prospect, Bao Jianwei agreed to make a commitment to large performance.

After negotiation, Bao Jianwei, Bao Haoyu and Shenzhen Wande Intelligent Technology Co., Ltd. transferred 55% equity of Zhongpeng New to Yada Electronics based on paid in capital; According to the Supplementary Agreement to the Equity Transfer Agreement signed by and between Yada Electronics and Zhongpeng New on July 22, 2019, after the acquisition, Yada Electronics contributed 5.335 million yuan to Zhongpeng New; After the acquisition, Yada Electronics provided financial support to Zhongpeng New with a total amount of no more than 10 million yuan. To sum up, Bao Jianwei's performance commitment to Yada Electronics is based on the premise that Yada Electronics invests in Zhongpeng New and provides follow-up development funds, which is also the need to ensure the investment and capital security of Yada Electronics. It is reasonable and there is no other interest arrangement.

Yada Electronics is mainly engaged in the R&D, production and sales of intelligent power monitoring products as well as power monitoring system integration services. The main products are power monitoring products and power monitoring system integration projects. Power monitoring products are the main source of income, mainly including power monitoring instruments, power monitoring devices and sensors.

key word: staff distributor sale Ratio high