Embedded computer technology company Zhimingda's IPO on the Science and Technology Innovation Board has been accepted

On June 2, the Shanghai Stock Exchange officially accepted the application of Chengdu Zhimingda Electronics Co., Ltd. for listing on the Science and Technology Innovation Board.

It is understood that Zhimingda mainly provides military embedded computer-related products and solutions for customers in the military field. Through years of accumulation, the company has built five major product series classified by terminal product application scenarios, namely airborne embedded computers, missile-borne embedded computers, ship-borne embedded computers, vehicle-borne embedded computers and other embedded computers, mainly involving data acquisition, signal processing, data processing, communication exchange, interface control, high-reliability power supply, large-capacity storage, and graphics and image processing and other functions, serving military customers in the fields of aviation, aerospace, ships and ground. As the company's early technical accumulation is gradually transformed into products, the variety and quantity of products that the company supports for customers' finalized projects continue to increase.

High customer concentration

According to the prospectus, from 2017 to 2019, Chengdu Zhimingda achieved operating income of RMB 170,811,200, RMB 234,732,300, and RMB 260,659,500, respectively; and achieved net profits of RMB 23,799,900, RMB 62,467,900, and RMB 59,460,100, respectively. In terms of product segments, the sales revenue of airborne embedded computer products accounted for the highest proportion of the company's main business revenue, at 77.70%, 67.62%, and 69.66%, respectively.

Zhimingda said that the company's continued growth in operating income was due on the one hand to the continuous increase in national defense spending, the increased demand for weapons and equipment in the national defense and military situation, and the gradual advancement of national policies, and on the other hand directly stemmed from the results of the company's continuous investment over the years.

In terms of customers, the revenues of Zhimingda’s top five customers were RMB 158,315,200, RMB 221,528,300 and RMB 247,029,000, respectively, accounting for 92.72%, 94.46% and 94.77% of the main business revenues in the current period, respectively, and the customer concentration was relatively high. Zhimingda believes that although the company has formed a close cooperative relationship with its major customers, according to the military supply system, suppliers of standard products are usually not easily replaced, and the company actively develops new products that meet the needs of existing customers, actively expands new customers, and opens up new markets to reduce the potential adverse effects of high customer concentration. However, if the company makes unfavorable progress in the development of new business areas, new product research and development, or if the demand of existing customers drops significantly, the high customer concentration will have an impact on the company's operations.

In terms of procurement, Zhimingda mainly purchases integrated circuits, capacitors and connectors, resistors, structural parts, PCBs, crystal oscillators and other electronic components from suppliers. Among them, the two raw materials of integrated circuits and capacitors accounted for more than 50% and 10% of the total raw material purchases during the reporting period, respectively; connectors, resistors, structural parts, PCBs, crystal oscillators and other raw materials did not exceed 10%. In 2017, 2018 and 2019, the purchase amount of integrated circuits accounted for 54.94%, 57.56% and 55.62% respectively, which was the company's largest purchase amount of raw materials. From the overall procurement structure, it remained stable during the reporting period.

In addition, in the military products industry, sales proceeds are relatively slow due to factors such as long settlement time and annual concentrated payments. At the same time, with the expansion of Zhimingda's business scale, the absolute amount of the company's accounts receivable has increased rapidly. From the end of 2017 to the end of 2019, the book value of Zhimingda's accounts receivable was RMB 112.9044 million, RMB 159.0273 million and RMB 194.9763 million, respectively, accounting for 37.42%, 40.50% and 42.58% of total assets, respectively.

In addition, at the end of each reporting period, the book value of Zhimingda's inventory was RMB 66,282,800,719, and RMB 74,712,300, accounting for 21.97%, 20.39%, and 16.32% of total assets, respectively. The inventory turnover rates were 0.93, 0.94, and 1.25, respectively. It can be seen that the company has a large inventory balance and a low inventory turnover rate.

Raised 436 million yuan! Invested in embedded computer expansion and other projects

According to the prospectus, Zhimingda Electronics plans to raise 436 million yuan to invest in embedded computer capacity expansion projects, R&D center technology transformation projects, and to supplement working capital.

Zhimingda believes that with the rapid development of the company's business scale and the implementation of early R&D reserve projects, the company's product line will continue to be enriched, and the development of downstream business areas will continue to deepen. The company's existing business premises will not be able to meet the needs of the company's future business development, which will affect the further improvement of the company's production capacity to a certain extent. Therefore, in order to meet the company's future business development needs, the company plans to purchase a mature property with an area of ​​approximately 12,000m2 in an industrial park in Chengdu, expand the company's own business site area, solve the risk of instability of the business site caused by site leasing, and simultaneously introduce a number of advanced embedded computer development, production assembly and testing software and hardware facilities and equipment to improve the company's production capacity and response efficiency to customers.

In addition, as the number of projects involved increases, the complexity and challenges of the projects continue to increase. Zhimingda needs to continuously increase its investment in technology research and development, continue to follow up on industry and customer needs, and consolidate its market position and advantages to support the development of long-term business in the future. To this end, the company plans to invest 106.4026 million yuan on the basis of integrating existing R&D resources for the overall upgrade and construction of the R&D center.

In addition, since private military electronic enterprises are generally small in scale, with fewer assets such as houses and land in their asset structure, the company's external financing channels are relatively single, and the model of relying solely on internal business accumulation further restricts the development of the company and the industry. Obtaining working capital and making effective use of it is an important basis for private military electronic enterprises, including the company, to break through bottlenecks and break through the competitive landscape.

智明达表示，本次募集资金项目建成后，公司经营规模、原材料保障能力、研发能力和资金实力将显著提高。尤其是军用嵌入式计算机生产能力显著提升，生产流程和工艺进一步完善，产业布局更趋完善。本次募投项目建成后，将有利于巩固和加强公司在军用嵌入式计算机行业中的竞争地位，增强公司盈利能力和市场竞争力。

In terms of development planning, Zhimingda's overall plan is to further enhance the company's core technology in military embedded computers, based on the existing product line, seize the opportunity of localization of military products, increase R&D and innovation efforts, optimize efficiency, strengthen marketing and service system construction, and strive to achieve faster development after listing.