Shengjing Micro's IPO on the Science and Technology Innovation Board was accepted and raised 852 million yuan to invest in the construction of an electronic extension module project

On June 30, the Shanghai Stock Exchange officially accepted the application for listing on the Science and Technology Innovation Board of Wuxi Shengjing Microelectronics Co., Ltd. (hereinafter referred to as Shengjing Micro).

According to information, Shengjingwei relies on its independently designed integrated circuits and is mainly engaged in the research and development, production and sales of core control components of electronic detonators and their initiation control systems. Its current main products include electronic delay modules and initiators.

High customer concentration

From 2018 to 2020, Shengjingwei achieved operating income of RMB 3.3943 million, RMB 75.1026 million, and RMB 210.8120 million, respectively, and the corresponding net profits were RMB -1.2896 million, RMB 15.8085 million, and RMB 63.0276 million, respectively.

From the perspective of product classification, Shengjingwei's main products include electronic delay modules and initiators, and their sales revenue accounts for 100.00%, 98.83% and 99.17% of the main business revenue respectively.

Among them, the sales revenue of electronic delay modules was RMB 3.3394 million, RMB 67.8404 million and RMB 201.2660 million, accounting for 98.38%, 90.40% and 95.59% of the main business revenue respectively. It can be seen that the application fields of its core technology and the corresponding product types are relatively single.

In the future, if the process of electronic detonators replacing traditional detonators slows down, or the market demand declines, Shengjingwei's performance and growth rate may slow down or even decline, which will have a significant adverse impact on the company's operating performance.

In terms of customers, during the reporting period, the sales of Shengjingwei's top five customers accounted for 100.00%, 99.85% and 93.68% respectively. Among them, the company's sales to its largest customer, Yahua Group, were RMB 2.6439 million, RMB 33.1735 million and RMB 106.4382 million, accounting for 77.89%, 44.17% and 50.49% respectively, with a high single customer ratio and customer concentration.

Shengjingwei said that if there are major adverse changes in the operating conditions of major customers, a sharp drop in purchasing demand, adjustments to purchasing strategies, or purchases from other similar suppliers, the company's orders may drop significantly, which will have an adverse impact on the company's operating performance.

In addition, at the end of each period of the reporting period, the book value of Shengjing Micro's inventory was RMB 5.4473 million, RMB 14.6887 million, and RMB 31.3044 million, respectively, showing an increasing trend year by year. It said that with the rapid growth of demand in the downstream industry, the rise in prices of some raw materials, and the tightening of upstream chip foundry capacity, the company increased its inventory based on market forecasts and its own operating conditions, resulting in an increase in the amount of inventory. In the future, if market demand changes, or differs greatly from the company's forecast, or if the company's own inventory management is improper, it may lead to unsalable products and inventory backlogs, which will require an increase in the provision for inventory impairment, which will have an adverse impact on the company's operating performance.

Raised 852 million yuan to invest in the extension module project

The prospectus shows that Shengjingwei plans to raise 852 million yuan in this IPO, which will be invested in the research and development and industrialization projects of delayed modules, R&D center construction projects, and development and technology reserve funds.

It is understood that the Ministry of Industry and Information Technology and the Ministry of Public Security proposed in 2018 to fully promote the application of electronic detonators. The annual increase in the use rate of electronic detonators in provinces, autonomous regions, and municipalities shall not be less than 20%, and the full use of electronic detonators will be basically realized by 2022. Driven by policies and markets, my country's electronic detonator market has developed rapidly. In 2019, my country's electronic detonator output was 58 million, accounting for only 5.29% of the total industrial detonator output; in 2020, my country's electronic detonator output was 117 million, achieving a year-on-year growth of 100%, but the proportion of total output is still at a low level. There is a large market space for electronic detonators to replace traditional industrial detonators. It is expected that the next few years will be a key market opportunity period for the development of the electronic detonator industry. As the core component of electronic detonators, electronic delay modules will also be in a strategic opportunity period.

Shengjingwei believes that the smooth implementation of the delay module research and development and industrialization project will help the company seize the development opportunities of the electronic detonator market and meet the rapidly growing market demand, thereby further consolidating the company's industry position and enhancing the company's competitiveness.

The R&D center construction project will be able to create a high-end technology R&D platform for the company, and establish a professional research and testing center with complete functions covering chip technology, key electronic components, product process and quality reliability, downstream blasting scheme design and engineering testing, etc., to provide reliable guarantees for product R&D, mass production and downstream applications.

In addition, Shengjingwei plans to raise funds from the issuance of stocks based on actual business needs, combined with industry development trends, market demand, future strategic development goals and technology reserves, to supplement development and technology reserve funds of 450 million yuan. The funds will be used for fire bomb delay systems, online temperature monitoring of cable joints, oil perforating bullet applications of electronic delay modules, geological exploration detonation systems, operational amplifier analog chips, SiC discrete devices and other future reserve projects as well as to supplement working capital.

Regarding the company's strategic planning, Shengjingwei said that the company's strategic planning can be divided into two dimensions: horizontal and vertical. Horizontally, the company responds to the country's call to vigorously develop the semiconductor industry, guided by the ever-evolving market demand and driven by technological innovation, plans to deepen its roots in the field of analog chips, and strive to build the company into a well-known digital-analog hybrid chip design and development company at home and abroad; vertically, the company plans to continue to increase the research and development of electronic delay modules, develop more market-competitive product series, continuously expand market share, and connect the upstream and downstream links of products, so as to establish the company's leading position in the field of electronic detonators in the civil explosives industry.