Investment and financing

Wen/Hua Yong (Xiaocai Mi'er observer)

(Data map)

Two years after being listed on the New Third Board, Huayi Ecological Garden Co., Ltd. (hereinafter referred to as Huayi Ecology), which felt helpless, began to seek for listing on the board, and embarked on the path of listing for eight years after several twists and turns. Recently, it submitted to the main board of Shenzhen Stock Exchange for listing and registration, and planned to raise 500 million yuan.

Xiaocai Mier found that Huayi Ecology was founded by Hu Youhua, the president of Anhui Landscape Industry Association, which is known as the "first share of Hui style gardens" in the future, and is also a typical family enterprise.

According to the prospectus, Huayi Ecology was established in May 1997 by Hu Youhua and Hangzhou Huaxin Railway Engineering Consulting Co., Ltd. with a monetary investment of 300000 yuan, focusing on ecological restoration, landscape construction and maintenance services. After more than ten years of development, Huayi Ecology was listed on the NEEQ in January 2014 and has now withdrawn.

During the reporting period, the main business income of Huayi Ecology is classified as follows:

According to the prospectus, relying on the general contracting customers such as the government, state-owned enterprises and central enterprises, Huayi Ecology will achieve an operating revenue of 628 million yuan, 732 million yuan and 784 million yuan respectively from 2020 to 2022, and the net profits attributable to the shareholders of the parent company will be 34.8275 million yuan, 56.3819 million yuan and 82.443 million yuan respectively in the same period. From the perspective of performance, Huayi Ecology has been operating steadily in the past three years, even growing against the trend. Therefore, the founder Hu Youhua seems determined to win the IPO.

However, Xiaocai Mier found that the balance of its accounts receivable was 1.2 times the proportion of its revenue in the same period, which seemed to pave the way for a sudden listing. At the same time, it had trampled on the problems of real estate development enterprises, bad debt provision of more than 200 million yuan, sudden dividend distribution, etc., casting a shadow on the prospect of Huayi Eco IPO.

The accounts receivable are high, and the bad debt losses are up to 200 million yuan

Xiaocai Mier found that Huayi's ecological accounts receivable remained high throughout the reporting period. According to the prospectus, at the end of each period from 2020 to 2022, the book values of accounts receivable of Huayi Ecology were 593.3591 million yuan, 699.8198 million yuan and 525.0399 million yuan, accounting for 53.31%, 57.12% and 41.45% of the total assets respectively; The balance of accounts receivable was RMB 797 million, RMB 930 million and RMB 754 million, accounting for 126.91%, 127.05% and 96.17% of the revenue in the same period.

Some experts said that the formation of large amount accounts receivable and the low recovery rate of accounts receivable should have its historical reasons or special circumstances, such as the company's loose credit policy, weak control over accounts receivable or other problems that are not standardized. At the same time, we cannot rule out an extreme possibility, that is, the large amount of accounts receivable formed by falsely increasing the operating income for some purpose can only be on account for a long time. The report shows that from 2020 to 2022, the turnover rate of accounts receivable of Huayi Ecological Group will be 0.96, 1.13 and 1.28, which is far lower than the general standard value of 3, and the turnover rate will be slow.

Main financial indicators of Huayi Ecology during the reporting period:

Correspondingly, Huayi Ecology has a high proportion of bad debt provision for accounts receivable. From 2020 to 2022, the proportion of bad debt provision for accounts receivable will be 15%, 50% and 80%, 1.25 percentage points, 20 percentage points and 30 percentage points higher than the industry average, respectively, and the bad debt in the same period will reach more than 200 million yuan. Under the condition that the net profit is less than 100 million yuan, the bad debt provision of accounts receivable is more than 200 million yuan every year, which is incredible. By the end of 2022, the accounts receivable of Huayi Ecology for Huaxia Happiness will be 73.7114 million yuan (including the returned notes receivable). The provision for bad debts will be 58.9691 million yuan based on 80% of the provision ratio. At the same time, for the accounts receivable of Zhuoda Holding Group Co., Ltd., the provision for bad debts will be 19.5518 million yuan based on 100% of the provision ratio. In the future, the real estate industry will continue to be depressed, and Huayi Ecology still has the risk that the receivables related to Huaxia Happiness cannot be fully cashed when they are due.

At the end of each reporting period, accounts receivable and bad debts of Huayi Ecology are as follows:

At the same time, at the end of each period from 2020 to 2022, the book values of Huayi Ecological contract assets are respectively 142.847 million yuan, 94.6445 million yuan and 210.7512 million yuan, accounting for 12.83%, 7.73% and 16.64% of the total assets at each end of the year.

In addition, the gross profit rate of current Huayi ecological garden landscape construction is far lower than the industry average. During the reporting period, the average comprehensive gross profit margin of listed companies in the same industry was 31.01%, 32.17% and 21.51% respectively, while the comprehensive gross profit margin of Huayi Ecology was 19.84%, 22.04% and 22.57% respectively, which was only slightly higher than the industry average 21.51% in 2022.

The business has obvious geographical limitations, the number of employees continues to decline, and the gross profit rate is lower than that of peers

Huayi Ecology is an enterprise founded by Hu Youhua, the president of Anhui Landscape Industry Association, in 1997. After years of development, it has formed two main lines of business: ecological restoration and garden landscape. Nearly 90% of its business income is concentrated in Anhui Province, which also reflects the difficulties of cross regional management of the garden landscape industry.

From 2020 to 2022, the business income of ecological restoration and landscape construction of Huayi Ecology mainly comes from Anhui Province, which is 503.2534 million yuan, 604.7615 million yuan and 677.155 million yuan respectively in each phase, accounting for 80.12%, 82.60% and 86.33% of the main business income, which is relatively high, and the business area is relatively concentrated.

At the end of the reporting period from 2020 to 2022, the number of employees of Huayi Ecology was 438, 383 and 370 respectively, with a decrease of 15.5% at the end of 2022 compared with the same period in 2020. According to the announcement data on the New Third Board, at the end of 2017 – 2019, the number of employees of Huayi Ecology was 433, 498 and 503 respectively, which shows that the number of employees of Huayi Ecology has declined significantly in recent years. So, why does the number of employees decline in the case of income growth? It's more or less "strange".

It is worth noting that Huayi Garden has distributed dividends for many times from 2016 to 2021, and the total amount of dividends is 73.8 million yuan, of which Huayi Ecology also carried out cash dividends of 24 million yuan and 30 million yuan in 2020 and 2021. It is really incomprehensible that Huayi Ecology still forcibly distributed dividends under high accounts receivable and tight cash flow.

In the historical evolution of multiple capital increases, the founders of Huayi Ecology, Hu Youhua, Hu Wenhua, Fan Lixia, etc., have made contributions in kind, that is, in the form of seedlings, and are unable to provide payment records for the purchase of seedlings; At the same time, Huayi Ecology's inventory collection and external sales voucher documents cannot correspond to the seedlings used for capital contribution one by one, and there are certain procedural flaws in the physical capital contribution. This will become a focus of the regulatory review.

Macroeconomic growth slows down and competitive disadvantages are highlighted

The clients of Huayi Ecology are mainly relevant government departments, investment entities authorized by the government or state-owned enterprises and public institutions. Macro regulation, especially financial policy regulation, and local government financial conditions have a significant impact on its business expansion and project fund recovery, thus affecting its business performance. From 2015 to 2019, the average annual growth rate of national fiscal revenue and expenditure was 5.54% and 8.78% respectively, and the overall fiscal revenue and expenditure maintained a high growth rate; From 2020 to 2022, the average annual growth rate of national fiscal revenue and expenditure will decline to 2.47% and 3.00%, respectively, slowing down. In the future, if governments at all levels reduce or delay non rigid financial expenditure projects, which will reduce the investment scale of ecological restoration and landscape construction projects, delay the construction period, reduce the rate of return of projects and other adverse circumstances, it will have an adverse impact on the business performance of Huayi Ecology.

In addition, as an unlisted enterprise, Huayi Ecology has disadvantages in brand building, customer expansion, market share, scale expansion and financing. Since the mandatory qualification requirements were cancelled in 2017, the historical performance, professional composition, unit size, financial strength and other factors of enterprises have become the main competitive assessment criteria. In this context, listed enterprises have more competitive advantages than non listed enterprises such as Huayi Ecology.

Xiao Caimier observed the words:

On August 27, the CSRC said that it would fully consider the current market situation, comprehensively improve the counter cyclical adjustment mechanism of the primary and secondary markets, tighten the pace of IPO in stages, and promote the dynamic balance between investment and financing.

This "negative policy" may be somewhat detrimental to the future IPO of Huayi Ecology. Can Huayi Ecology successfully break through the A-share market? There are many unknowns.