H1 net profit fell 239.89% year-on-year, this industrial Internet company plans to raise 1 billion yuan

On September 14, Dongtu Technology disclosed a plan to issue A-shares to specific objects. The total amount of funds raised in this issuance shall not exceed RMB 100,000.00 million. After deducting the issuance expenses, the net amount of funds raised will be invested in digital factory intelligent control solution projects, digital construction and intelligent engineering equipment control solution projects, R&D and training demonstration center projects, repayment of bank loans and replenishment of working capital projects.

Dongtu Technology stated that with the completion and promotion of the fundraising and investment projects, the company will further deepen its presence in the industrial Internet field, quickly introduce the industrial intelligent control market, and gain huge market space.

From a macro perspective, the development of China's industrial Internet industry has entered the fast lane. Relevant data show that in 2021, the scale of China's industrial Internet industry has exceeded the trillion yuan mark, reaching 1076 billion yuan, a year-on-year increase of 18.23%. It is expected that in 2022, the scale of China's industrial Internet industry will reach 1241.9 billion yuan.

For Dongtu Technology itself, in the first half of 2022, Dongtu Technology signed new orders of 770.9963 million yuan (tax included), an increase of 35.93% over the same period last year ; among them, the industrial-grade network communication business continued to maintain its growth trend in traditional advantageous areas, with new orders of 479.4993 million yuan, a year-on-year increase of 16.68%; based on the breakthrough progress made in commercial applications of industrial-grade edge control server business and operating system and industrial software business last year, new orders totaled 124.9071 million yuan in the reporting period, an increase of 85.9486 million yuan year-on-year, achieving rapid growth; the big data network service and industrial Internet + solution business had new orders of 166.5899 million yuan in the reporting period, a year-on-year increase of 33.75%.

However, it is worth noting that even in the favorable industry environment, Dongtu Technology has won orders in various business segments, but it is still in a loss-making state.

According to Dongtu Technology's 2022 semi-annual report, the company's operating income was 323 million yuan, a year-on-year decrease of 11.11%; the net profit loss was 86 million yuan, a year-on-year decrease of 239.89%.

Dongtu Technology explained that there are three main reasons for the decline in performance:

① In the first quarter of 2022, the company's business expansion was hindered by the repeated impact of the epidemic at home and abroad, and order delivery did not meet expectations. The company achieved operating income of RMB 100.8126 million in the first quarter, a decrease of RMB 71.7563 million from the same period last year, and the gross profit was reduced by RMB 41.7574 million from the same period last year;

② In the first half of this year, the company continued to increase its R&D investment in core products such as domestically produced industrial Internet network products and industrial Internet edge control computing products. During the reporting period, the company invested RMB 92.3956 million in R&D, an increase of RMB 16.2902 million over the same period last year, a year-on-year increase of 21.40%;

③ The company implemented the "2021 Restricted Stock Incentive Plan" in the second half of 2021. During the reporting period, the company's equity incentive expenses increased by RMB 13.9119 million compared with the same period last year.

It can be found that the reason why Dongtu Technology mentioned that it plans to use 300 million yuan of the funds raised in this issuance to repay bank loans and supplement working capital may be related to the sharp decline in its performance.

In fact, the industrial Internet industry in which Dongtu Technology operates has high technical barriers and large R&D investment. The need to maintain high-cost R&D investment has become a norm in the industrial Internet. Take Foxconn Industrial Internet as an example. According to its 2021 annual report data, in the past year, Foxconn Industrial Internet's R&D investment was 10.835 billion yuan, a year-on-year increase of 7.94%.

Shugen Internet, which is striving to enter the Science and Technology Innovation Board, is also investing heavily in research and development. In the past three years, Shugen Internet's cumulative R&D investment totaled 533.6091 million yuan, accounting for 56.30% of its cumulative operating income in the past three years.

It can be said that at the current stage, the industrial Internet is still a relatively money-burning track. Under this circumstance, Dongtu Technology has a basis for using the raised funds to maintain continuous investment in research and development, maintain the company's operating model and business development, and alleviate the liquidity pressure faced by the company's future development and expansion.