Yuanfeng Technology terminates its IPO on the Science and Technology Innovation Board. Is the research and development project of the intelligent connected cockpit system stranded?

According to Jiwei.com, on July 12, the Shanghai Stock Exchange issued the "Decision on Terminating the Review of Yuanfeng Technology Co., Ltd.'s Initial Public Offering and Listing on the Science and Technology Innovation Board", deciding to terminate the review of its initial public offering and listing on the Science and Technology Innovation Board.

According to the announcement, on July 9, 2021, Yuanfeng Technology and its sponsor Dongxing Securities Co., Ltd. submitted to the Exchange the "Application of Yuanfeng Technology Co., Ltd. to Withdraw the Application Documents for the Initial Public Offering and Listing on the Science and Technology Innovation Board" and the "Application of Dongxing Securities Co., Ltd. to Withdraw the Application Documents for the Initial Public Offering and Listing on the Science and Technology Innovation Board of Yuanfeng Technology Co., Ltd." respectively, applying to withdraw the application documents. Yuanfeng Technology did not disclose the reason for the termination of the IPO.

According to Jiwei.com's previous analysis of the company's prospectus, Yuanfeng Technology is mainly engaged in the research and development, design, manufacturing and sales of smart automotive electronic products, and also provides technical development services related to the Internet of Vehicles; its main products and services cover smart driving assistance products, smart cockpit products, smart interconnection products and Internet of Vehicles technology development services, etc. Specific products include streaming media rearview mirrors, in-vehicle multimedia host, in-vehicle multimedia display screens, T-BOX and smart bracelet keys, etc.

During the reporting period, Yuanfeng Technology's profits mainly came from providing customers with professional smart automotive electronic products and vehicle networking-related technical development services. Among them, smart driving assistance products accounted for more than half, and the sales volume of this product increased from 187,000 sets in 2018 to 356,500 sets in 2020, and is in a state of sustained growth.

Calculated based on the main business income composition, the unit prices of intelligent driving assistance products from 2018 to 2020 were RMB 26,717.17 per unit, RMB 2,371.21 per unit, and RMB 2,116.72 per unit, respectively, declining at a rate of about 10% per year.

During the reporting period, the gross profit margins of Yuanfeng Technology's main businesses were 27.42%, 22.85% and 23.64% respectively, showing an overall downward trend. Among them, the gross profit margin of intelligent driving assistance products, which accounted for more than half of the revenue, fell even more. In 2018, the gross profit margin of such products was still 28.54%, but in 2020 it dropped to 22.19%.

It is worth noting that during the reporting period, the sales revenue of the top five customers of Yuanfeng Technology accounted for 94.02%, 89.78% and 93.13% of its operating revenue respectively, among which the sales revenue to Anyue Pioneer accounted for 79.46%, 64.27% and 61.46% of its operating revenue respectively. This is rarely seen among comparable listed companies in the same industry.

Behind its extremely high dependence on its largest customer, Yuanfeng Technology can be said to have no bargaining power, which may be the reason why its intelligent driving assistance products meet customers' 10% "annual reduction requirement".

From the perspective of accounts receivable, during the reporting period, the balance of accounts receivable of Yuanfeng Technology increased with the growth of operating income. As Yuanfeng Technology's largest customer, Anyue Pioneer's accounts receivable also ranked first. As of the end of 2020, the book value of Yuanfeng Technology's accounts receivable was 315 million yuan, accounting for 38.75% of total assets. Among them, the accounts receivable from Anyue Pioneer alone reached 163 million yuan, accounting for about 50% of the total accounts receivable.

In addition, the prospectus shows that the product costs of Yuanfeng Technology are mainly direct materials. During the reporting period, the company's direct material costs accounted for approximately 90.24%, 90.72% and 92.97% of its operating costs. From the disclosed information, Yuanfeng Technology's main raw materials are electromechanical components, standard electronic components, software and structural components. Among them, the localization rate of core electromechanical components and electronic components is not high, and most of them are imported from abroad.

As the global COVID-19 pandemic continues in 2020, there is a shortage of core electronic components such as automotive chips. The main raw materials of Yuanfeng Technology account for more than 90% of its production costs. If the supply shortage of core electronic components such as automotive chips in the future leads to price increases, its unit production costs will increase, and gross profit margins will decline when other factors remain unchanged, which will have an adverse impact on the company's operating performance and profitability.

In order to adapt to the development trend of intelligent and networked automotive electronics, Yuanfeng Technology raised 680 million yuan to invest in the research and development and industrialization of intelligent networked cockpit systems and the construction of intelligent driving research and development centers. The termination of this IPO means that this production plan will also be "shelved".