after spending 1.862 billion yuan raised in the first round, core original shares (stock code "688521") will accelerate the 1.808 billion yuan fixed increase financing plan in the near future. the company plans to invest in "research and development project of Chiplet solution platform in AIGC and smart travel field" and "new generation IP research and development and industrialization project for AIGC, graphics processing and other scenarios".

after the implementation of the above projects, it is full of uncertainty whether the core original shares will turn around. Since its listing in 2020, the company has achieved a cumulative net profit of -0.442 billion billion yuan. The profit cycle of the company's fixed-increase fund-raising project is long, and there is a risk that the research and development results of the fund-raising project will not meet expectations.

Regarding the question of whether more investment in the early stage of the fundraising project will affect the company's short-term performance, a staff member of Xinyuan Co., Ltd. recently told the reporter of the Economic Information Daily on the phone that the fixed fundraising project is only the company's business. For a small part, the company's future profitability must be comprehensively judged based on the market and business development.

Longer profit cycle of fundraising projects

core original shares is a company that relies on its own semiconductor IP to provide customers with platform-based, all-round, one-stop chip customization services and semiconductor IP licensing services. The company's main business has a wide range of applications, including consumer electronics, automotive electronics, computers and peripherals, industry, data processing, Internet of Things, etc. Its main customers include chip design companies, IDM, system manufacturers, large Internet companies, cloud service providers, etc.

the prospectus shows that the total amount of funds raised by the company in this issue of shares to specific targets does not exceed 1.808 billion yuan, of which 1.089 billion yuan is to be invested in "AIGC and Chiplet solution platform research and development project in the field of intelligent travel" and 0.719 billion yuan is to be invested in "new generation IP research and development and industrialization project for AIGC, graphics processing and other scenarios".

for this investment project, core original shares will promote the smooth implementation and industrialization of the project by upgrading and optimizing relevant semiconductor IP, upgrading the system-level chip customization platform based on advanced technology (including basic and application software platforms), promoting iterative research and development and industrialization of Chiplet technologies, actively expanding the depth and breadth of the market, and continuously attracting and training key research and development talents.

The reporter noticed that the profit cycle of the fixed increase investment project of Xinyuan shares is relatively long, and the initial investment will exert certain pressure on the company's financial situation in the short term. From the perspective of operating performance, due to the company's continuous R & D investment and other factors, core shares are still in a state of loss.

specifically, according to calculations, "a new generation of IP research and development and industrialization projects for AIGC, graphics processing and other scenarios", during the research and development period of the fund-raising projects, the fund-raising projects have not yet realized income, and the expected net profits of the projects in T +1 and T +2 years are -131.8894 million yuan and -128.5112 million yuan respectively. The T +3-year project began to gradually generate income, the expected net profit of the project for the year is -50.7228 million yuan; starting from T +4, the project is expected to be profitable and the expected net profit is 32.9685 million yuan. In addition, according to the economic benefits of the project, the internal rate of return after income tax of the project is 19.28. Xinyuan shares believe that "the implementation of this project will improve the company's operating performance".

"AIGC and Chiplet solution platform research and development project in the field of smart travel" is a research and development project that does not directly generate income. the project is mainly invested in research and development expenditure. considering the salary of research and development personnel, IP procurement, depreciation of software and hardware, and cost of test streaming, it is estimated that the new research and development expenditure from T1 to T5 will be 285.6984 million yuan, 259.6471 million yuan, 211.8812 million yuan, 182.7326 million yuan and 151.2835 million yuan respectively, the depreciation and amortization amounts included in research and development expenses are 27.857 million yuan, 34.4863 million yuan, 34.974 million yuan, 42.1408 million yuan and 42.1848 million yuan respectively; the depreciation and amortization amount has decreased year by year since T6, and the total depreciation and amortization amount from T6 to T10 is 29.5076 million yuan. Core original shares admitted that these investments will put some pressure on the company's financial situation in the short term.

Pan Yue Drawing

accumulated unrecovered losses exceed 1.8 billion yuan

in terms of performance, in 2023, core original shares realized operating income of 2.338 billion yuan, down 12.73 from the same period last year. Due to the fluctuation of the company's intellectual property licensing business income, the year-on-year increase in research and development labor costs, and the increase in the provision for credit impairment losses, the company realized a net profit of -0.296 billion yuan attributable to the owners of the parent company in 2023, and a net profit of -0.318 billion yuan attributable to the owners of the parent company after deducting non-recurring gains and losses.

according to the inquiry reply report disclosed by xinyuan shares, at the end of the reporting period (referring to December 31, 2023, the same below), the company's accumulated uncompensated loss was 1.815 billion yuan. Among them, the total amount of non-recurring factors is 564.1251 million yuan, which is the cumulative impact of changes in the fair value of financial instruments such as preferred shares in previous years, the discount of net assets, and the merger of enterprises under the same control. The above situations have been eliminated. Among them, the accumulated operating loss is 1251.3326 million yuan, which is related to the daily operation of the company.

core original shares said that from 2016 to 2023, the company's accumulated research and development investment exceeded 4.5 billion yuan, and the main reason for the company's accumulated operating losses was that the company's continuous research and development investment and scale effect had not yet fully appeared. Semiconductor IP technology and chip customization technology are in the upstream of the integrated circuit design industry, and are also intellectual property-intensive areas with high technology content in the integrated circuit design industry, with the characteristics of large R & D investment and long R & D cycle. In particular, semiconductor IP technology, from investment in research and development to the transformation of research and development results, the process is difficult and time-consuming, and requires a large amount of continuous research and development investment.

"At the same time, as market demand increases and advanced processes evolve, these technologies still need to be continuously developed, iterated and updated. Compared to comparable companies in the same industry, the company's revenue scale is relatively low, and the scale effect has not yet been fully manifested, leaving the company still in a loss state." Core original shares said.

It is worth noting that the net cash flow from operating activities of core shares has been negative for two consecutive years.

The net cash flows from the Company's operating activities were $155.2335 million,-$329.4576 million and-$8.5239 million for each of the reporting periods (from 2021 to 2023, the same below).

Xinyuan shares said that the net cash flow of the company's operating activities in 2022 and 2023 was negative, mainly due to the increase in cash payments caused by the expansion of the chip mass production business and the increase in the size of the company's R & D team. it belongs to the company's active investment in technological innovation and meeting market demand, providing a solid foundation for the company's long-term strategic development. At the end of the reporting period, the total amount of the Company's monetary funds and trading financial assets (which are structured deposits) was $1088.9104 million, and the balance of the Company's disposable funds was high. The existence of uncompensated losses at the end of 2023 will not have a material adverse effect on the Company's cash flow.

In the first quarter of 2024, the loss of core shares further expanded. Due to downstream customer demand and other factors, the single-quarter revenue of Core Original shares fluctuated. The company achieved operating income of 0.318 billion billion yuan in the first quarter, a year-on-year decrease of 41.02; the net profit loss attributable to shareholders of listed companies was about 0.207 billion billion yuan.

previously, core original shares said in the record of investor relations activities that the company currently has sufficient orders in hand. as of the end of the first quarter of 2024, the amount of orders in hand was 2.288 billion yuan, up 11.03 percent from the end of 2023. At the end of 2023, the company expects to convert about 1.807 billion yuan in one year. From the second quarter of 2024, the company's orders in hand will be converted into revenue on a large scale.

Business synergies are not obvious

The reporter noticed that Xinyuan shares frequently invested abroad, but it had no cooperation with many investment companies during the reporting period, and the business synergy effect was not obvious.

As of the end of the reporting period, core shares had invested in 14 companies, of which 13 were equity investments and 1 was an associate of the company. This has also attracted regulatory attention. In the inquiry, the Shanghai Stock Exchange asked the company to explain whether the company holds a large amount of financial investment and similar financial business as of the end of the latest period. At the same time, the company is required to explain that the relevant investment is identified as the basis and rationality of industrial investment around the upstream and downstream of the industrial chain for the purpose of obtaining technology, raw materials or channels.

according to the regulation no 18 of the (refinancing) securities and futures law applicable opinions issued by the CSRC, financial investment includes but is not limited to: investment financial business; non-financial enterprises invest in financial business (excluding investment in group financial companies whose shareholding ratio has not increased before and after investment); equity investment unrelated to the company's main business; investment in industrial funds and merger and acquisition funds; borrowing funds; entrusted loans; purchase financial products with high volatility and high risk, etc.

At the same time, according to the Shanghai and Shenzhen Stock Exchanges on the optimization of refinancing supervision to clarify the relevant specific measures, listed companies with a high proportion of financial investment, the amount of funds raised in this refinancing shall be reduced accordingly.

according to the inquiry response report, as of the end of 2023, the balance of trading financial assets of core original shares was 400.1304 million yuan, all of which were structured deposits with good security. The Company's purchase of structured deposits is mainly cash management for the purpose of preserving the value of liquidity, which is not a "financial product with high volatility and high risk" and is not a financial investment. The book balance of the company's other non-current financial assets is 199.6338 million yuan, which is in line with the company's main business and strategic development relationship of non-listed company equity investment.

However, from the perspective of cooperation, Xinyuan shares have little or no cooperation with many investment companies, and more than 40% of investment companies have no cooperation during the reporting period. For example, during the reporting period, Xinyuan shares did not have any transactions with Beijing Weiqi Li (Beijing) Technology Co., Ltd., Shenzhen Yiqing Innovation Technology Co., Ltd., Point by Point Semiconductor (Shanghai) Co., Ltd., Pengan Integrated Circuit (Hangzhou) Co., Ltd., Nanjing Maisike Microelectronics Technology Co., Ltd. and Shanghai Weixiang Time and Space Information Technology Co., Ltd. Core original shares said, the future will be through capital cooperation to strengthen business synergy with the above-mentioned enterprises.

Xinyuan shares said that the 14 companies invested are all related to the company's main business, and around the upstream and downstream of the industrial chain to obtain technology, raw materials or channels for the purpose of industrial investment. The company's foreign investment is not a financial investment, does not involve financial business, there is no large amount of financial investment.