more than 40% of the sales amount came from BYD, and Shenzhen ZTE new material technology co., ltd. (hereinafter referred to as "ZTE new material"), which is a brother company with ZTE (000063.SZ) and panneng technology (688063.SH), failed to go public.

in less than seven months, ZTE's IPO application for listing on the board was terminated. The company's IPO application was accepted on March 30 this year, entered the inquiry link on April 21, was suspended in September because the financial information exceeded the validity period, and was terminated on October 10 because of the withdrawal of the order.

ZTE's new material customers are highly concentrated. During the period from 2019 to 2021 and January to September 2022, the sales amount of the top five customers accounted for about 80% of the current main business income, of which the largest customer BYD accounted for more than 40%. In response, the exchange asked ZTE to assess whether there is a risk of dependence on BYD's single major customer.

In addition, CRE attributes and related transactions have also attracted market attention. ZTE New Material mainly uses a dry process for the production of lithium-ion diaphragm. The growth rate and proportion of dry diaphragm shipments are significantly lower than that of wet diaphragm, and the gap is increasing year by year. In this regard, the exchange asked whether the future dry diaphragm has a strong growth, whether there is a risk of being eliminated.

BYD is the largest customer, contributing more than 40% of sales

According to the prospectus, ZTE New Material is engaged in the research and development, production and sales of polymer special membrane materials such as lithium-ion battery separators, and its main products include dry-process lithium-ion base membranes and coating membranes. Among them, the lithium battery separator is one of the four main materials of lithium-ion batteries, which will directly affect the energy density, safety, cycle life and other key indicators of the battery.

ZTE's customers include BYD, Ningde Times, Haichen Energy Storage, Dispatch Energy Technology, Penghui Energy, etc. Among them, in 2019-2021 and January-September 2022, BYD is ZTE's largest customer, sales amount accounted for ZTE's main revenue of 41.30 percent, 45.12 percent, 60.26 percent and 43.82 percent, respectively.

ZTE New Materials has been cooperating with BYD since 2013. BYD contributed 0.186 billion yuan of sales to the company's operating income of 0.326 billion yuan in 2021.

in this regard, in the audit inquiry, the exchange asked ZTE to assess whether there is a risk of dependence on BYD as a single major customer, and objectively demonstrate the stability and sustainability of the cooperation between ZTE and BYD.

ZTE New Materials replied that the company was affected by the industry's prosperity and the decline in product market prices. In the first two years of the reporting period, there was a relatively high proportion of gross profit from BYD. During the reporting period, the company's sales of dry diaphragms to BYD accounted for about 40% to 50% of the company's total sales of dry diaphragms. The number and amount of diaphragms sold to BYD are expected to increase steadily in the next three years. With the continuous optimization of the company's customer structure, the company's gross profit from BYD will further decrease, accounting for about 40%, and the company will not form a situation of heavy dependence on BYD.

However, ZTE New Material has the risk of customer concentration. During the reporting period, the company's top five customers accounted for 86.01 percent, 79.53 percent, 83.07 percent and 81.77 percent of the company's main business revenue, respectively.

"During the reporting period, the company cooperated well with major customers and continued to develop new customers and introduce new products. However, if the company's customer development is blocked in the future and the cooperation with major customers in the downstream market has adverse changes, it may affect the company's The sales scale, payment speed, gross profit margin, etc. have an impact, which will adversely affect the company's operations." ZTE new material said.

With a high concentration of customers, ZTE's new material accounts receivable also account for a large proportion. At the end of each reporting period, the company's accounts receivable balance as a percentage of operating income was 90.15, 58.61, 75.74 and 78.64, respectively. Among them, accounts receivable from BYD accounted for 17.35, 26.29, 64.06 and 58.56 of the balance of accounts receivable, respectively.

In this regard, ZTE New Materials stated that there is a risk of bad debt loss of accounts receivable. If the company cannot continue to maintain effective management of accounts receivable, or the customer's operating conditions, financial conditions, and market competition have adverse changes, As a result, the company's accounts receivable cannot be fully recovered on time, it will have an adverse impact on the company's continued operations.

The geometry of the prospect of the dry diaphragm? Cotron properties are inquired

ZTE's new material's science and technology properties, related transactions and other issues were also concerned in the inquiry.

At present, the mainstream processes used in the domestic lithium-electric diaphragm industry include dry process and wet process two categories, ZTE new material mainly uses dry process for lithium-electric diaphragm production. At present, the domestic dry diaphragm market presents a trend of head concentration, the main participants in the industry for ZTE new material, star source material, Huiqiang new material, 2022 industry top three concentration of 71%.

According to public information, the growth rate and proportion of dry diaphragm shipments is significantly lower than that of wet diaphragm, and the gap is increasing year by year. In 2021, wet diaphragm shipments accounted for 74%, up 3% from 2020, while dry single-pull/double-pull accounted for 24%/2%, respectively. In the first half of 2022, the proportion of wet diaphragm will further increase by 5 percentage points to 79%.

In the inquiry, the exchange asked whether the dry diaphragm has strong growth in the future, whether it cannot become the mainstream technology and development direction of the diaphragm in the future, and whether there is a risk of being eliminated.

in response, ZTE new materials said that driven by the deepening emphasis on cost control in the new energy vehicle industry chain and the continuous expansion of energy storage application scenarios, dry separator has increasingly prominent advantages in thermal stability, oxidation resistance, cost and other aspects of lithium ion battery raw material selection, and has higher design flexibility in coating, width and other aspects. in the future, dry separator will have more incremental customers and incremental applications, with strong growth, will at the same time with the wet diaphragm to become the mainstream technology and development direction of the future diaphragm, there is no risk of being eliminated.

at the same time, ZTE new materials also suggested that there is a risk of changes in the technical route of the industry. if the dry diaphragm enterprises represented by the company cannot meet the needs of customers to develop new products and improve product performance in the future, they may face the risk of declining market demand in the dry lithium battery diaphragm industry, thus adversely affecting the company's operating performance.

Related transactions are also of interest to exchanges. ZTE New Communications Co., Ltd. (hereinafter referred to as "ZTE New") is the controlling shareholder of ZTE New Materials, and also controls ZTE, Paneng Technology and other companies.

During the reporting period, ZTE New Materials sold 3.8665 million yuan, 7.064 million yuan, 13.4243 million yuan and 30.443 million yuan respectively, accounting for 6.64 percent, 8.27 percent, 4.34 percent and 7.62 percent of the main business income respectively. Paneng Battery is a wholly-owned subsidiary of Paneng Technology.

in this regard, the exchange in the inquiry asked ZTE new material to explain the necessity of the transaction, the relevant pricing basis and fairness, to measure the impact of the related transaction with the power battery on the company's gross profit and net profit.

In terms of performance, ZTE's operating performance and profitability have fluctuated greatly in recent years. During the period from 2019 to 2021 and January to September 2022, the company's revenue was 63.0646 million yuan, 91.2799 million yuan, 0.326 billion yuan and 0.4299 billion yuan respectively; the net profit was -75.4608 million yuan, -84.9392 million yuan, 35.759 million yuan and 25.5087 million yuan respectively. As of September 30, 2022, the company's accumulated unrecovered loss was 0.112 billion yuan.