A detailed account of domestic water meter listed companies' profits and market

Foreword: In recent days, Henan Xintian GEM has successfully applied for the initial application, but the reporter has many doubts about certain information in its listing prospectus, which will be elaborated below.

Xintian Technology, which has been established more than 10 years ago, was favored by a number of PE investment institutions before its listing. In addition to the investment from Tellhow, Daewoo and Zhengye Venture Capital, it was also the fourth direct investment of Haitong Securities. The project, Haitong Tianyuan holds 1.56 million shares, accounting for 2.75% of the total share capital before the issue.

PE institutions are eager to join shares, no doubt optimistic about the high growth of Xintian Technology. The pre-disclosure shows that in the three years from 2008 to 2010, the company's net profit achieved a leap from 6.7963 million yuan to 3938.68 million yuan, a growth rate of 4.79 times, and the comprehensive gross profit ratio increased significantly from 24.69% to 39.45%.

The reporter noted that under the influence of persistent inflation, the prices of raw materials such as brass and iron cases rose in 2010. Affected by this, Xintian Technology's peer competitor Sanchuan Co., Ltd. (300066. SZ) and other companies have a lot of gross profit margins. A sharp decline. However, in the same period, Xintian Technology's comprehensive gross profit margin rose from 32.19% to 39.45% in one fell swoop, and realized a doubling of net profit.

What are the hidden reasons behind the sharp increase in gross profit margin and profits?

The confusion of gross profit margins soaring

In 2010, Xintian Technology's operating revenue increased by 63.67% and net profit increased by 118.71%. Behind the increase in net profit exceeding operating income, the company's gross profit margin increased significantly by 7% to 39.45%.

However, it is strange that the gross profit margin of other companies listed on smart water meters has dropped sharply over the same period.

Taking its rival Sanchuan as an example, its gross profit margin in 2010 was reduced from 33.13% to 25.82%. The company said that due to the increase in prices of various materials, especially the brass price, which accounts for nearly 50% of production costs, rose by 35.64% over the same period of 2009, resulting in a 7.31% decrease in sales gross profit margin.

The sales revenue of the Hong Kong stock company Wasion Group (3393.HK) for smart water, gas and heat meters for 2010 was only 3% higher than that of the same period of last year, and the overall gross profit rate was 13% lower than that of 2009.

With the sharp drop in gross profit in the same industry, why does Xintian Technology stand out?

Xintian Technology stated that the main reason for the increase in gross profit margin was the gradual reduction in unit costs. The prospectus shows that compared to the same period of 2009, the average unit of the company's 2010 smart water meter, electricity meter, heat meter and gas meter series has changed as follows: -5.52%, -18.69%, -0.13% and -25.02%.

The company believes that reducing the cost of killer is an advantage in technological innovation. Since the material cost accounted for more than 95%, the company managed to reduce the amount of raw material consumed by improving the design.

In addition, in terms of smart meters and smart gas meters with the fastest cost reductions, Xintian Technology explained that because customers have more personal needs, smart meters need to implement more functions through embedded software, so they gradually increase the price. The average unit price rose by 28.9 yuan, while the cost for the same period decreased by 28.88 yuan, so the gross profit rate increased from 31.43% to 40.84%.

At the same time, in 2010, the higher-priced new product ultrasonic heat meter was put on the market, because the product uses ultrasonic measurement technology, does not require the base meter, so the production cost is low, so in 2010 only the gross margin of the heat meter and the system It reached 50.83%.

Compared with Sanchuan and Xinkai Technology prospectus, the reporter found that the different production methods of smart water meters are one of the major reasons for the difference in gross profit margin.

Among them, Sanchuan Co., Ltd. produces both base tables and a full set of smart water meters. The independent processing method makes the company more sensitive to the prices of raw materials such as copper. Newly-developed technology, due to its small scale, mainly adopts external processing methods. The company provides drawings and entrusts external associations to process and produce base tables, electronically controlled valves, housings, circuit diagrams, and other materials. In addition, it also imports certain components and materials. The direct impact of raw materials is smaller.

Market share confusion

In addition, the reporter noticed that, with the company that is mainly engaged in smart water meters, Xintian Technology and Sanchuan Co., Ltd. have shown great differences in their industry status description in the prospectus.

Haitong Securities, according to the information of the China Municipal Water Supply and Drainage Association's Equipment Materials Working Committee, believes that Xintian Technology's sales of intelligent water meters in 2008 and 2009 were 222,400 and 277,900, and realized sales revenue of 61,075,500 yuan and 76,454,400 yuan. According to calculations, the company’s market share in domestic water meter products ranks in the top three.

However, according to the statistics of the China Metering Association's Water Metering Committee, Guosen Securities stated that from 2007 to mid-2009, the Sanchuan Stock Co., Ltd. had a sales volume of 3,277,400, 3,866,500, and 4,625,600 and achieved 253 million. Yuan, 276 million yuan and 311 million yuan in sales revenue, ranked the second place in the water meter product industry.

Guoxin Securities believes that according to the ranking of sales volume and sales revenue, the top five companies in the domestic water meter industry are Ningbo Water Meter Co., Ltd., Sanchuan Co., Ltd., Ningbo Donghai Instrument Waterway Co., Ltd., Chongqing Smart Water Meter Co., Ltd. and Lianyungang Lianli Water Meter Co., Ltd. .

Among them, the fifth Lianyungang Lianli water meter sales in 2009 was 1.52 million, sales income was 110 million yuan, much higher than the 279,900 new sales and 76,424,400 yuan of sales of Xintian Technology in 2009.

If they are arranged in this order, Xintian Technology, which claims to be ranked in the top three sales rankings, has not been on the list.

In the prospectus, Xintian Technology, apart from affirming its top three rankings in the industry, only vaguely mentions that the industry’s largest enterprise in the industry occupied 5.8% of the market in 2009. It did not specify the industry rankings and related company names in detail. .

In addition, Sanchuan did not list Xintian Technology as a competitor. Xintian Technology, on the other hand, listed Sanchuan as a competitor in the smart water meter, and selected a number of financial data as a reference to analyze the performance of the company.