Source丨Times Investment Research

Author丨Lu Hai

Editor丨Li Qiantao

[Introduction].

After 5 years of establishment, Jiangsu MiG New Materials Co., Ltd. (hereinafter referred to as "MiG New Materials") is an enviable "lucky one".

However, according to the official website of the Shenzhen Stock Exchange, on September 30, due to the expiration of financial information, the IPO of MiG New Materials pressed the "pause button", and it has been 9 months since the meeting, and MiG New Materials has not yet submitted for registration.

From 2020 to 2022 (hereinafter referred to as the "reporting period"), MiG New Materials' revenue soared, with a compound growth rate of 80%, but its performance showed signs of slowing down in 2023. Times Investment Research noticed that during the reporting period, MiG New Materials' operating cash flow was also abnormal, and there was a net outflow of operating cash flow from 2021 to 2022, and the quality of earnings was doubtful.

On October 22nd and 30th, on the company's profitability, the surge in accounts receivable, the net outflow of operating cash flow and other issues, Times Investment Research sent a letter to MiG New Materials and called to inquire. However, as of press time, the other party has not responded.

[Summary].

1. Competition in the industry has intensified, and performance growth has slowed down. Due to the photovoltaic industry, the performance of MiG New Materials will grow rapidly from 2020 to 2022, but with the intensification of industry competition, MiG New Materials is expected to slow down its revenue and net profit growth in 2023.

2. The operating cash flow and net profit deviate, and the quality of earnings is doubtful. From the perspective of profit margin, MiG New Materials has strong profitability, but its operating cash flow frequently has a net outflow, and the net present ratio, an indicator reflecting the quality of profitability, has also continuously issued "alarm" signals, and the quality of earnings is doubtful.

3. Accounts receivable surged, and the Shenzhen Stock Exchange questioned its relaxation of credit account period. At the end of each period from 2020 to 2022, the proportion of accounts receivable in revenue of MiG New Materials showed an overall upward trend, and the proportion of accounts receivable aged within 6 months decreased. MiG said that it is commercially reasonable to appropriately adjust the credit policy with some customers, and there is no situation where income is adjusted by relaxing the credit policy.

[Text].

Concerns about performance growth

Just 4 years after its establishment, with only 3 full fiscal years of financial data, MiG New Materials dared to sprint to IPO, how bright is the performance?

According to the prospectus, in each period of the reporting period, MiG New Material's revenue increased from 136 million yuan to 439 million yuan, with a compound growth rate of 79.58%; The net profit attributable to the parent company increased from 31 million yuan to 107 million yuan, with a compound growth rate of 84.27%.

The rapid growth of MiG New Materials' performance is mainly due to the "tuyere" of the photovoltaic industry. During the reporting period, more than ninety percent of MiG New Material's revenue came from photovoltaic high-temperature thermal field thermal insulation carbon materials. Driven by the rapid development of the photovoltaic industry, the performance of MiG New Materials has doubled.

However, with the overcapacity of the photovoltaic industry, the performance growth of MiG New Materials has also slowed down.

MiG New Materials expects that its revenue in 2023 will be 550 million ~ 570 million yuan, with a year-on-year growth rate of 25.40% ~ 29.95%; the net profit attributable to the parent company was 110 million ~ 120 million yuan, with a year-on-year growth rate of 3.23% ~ 12.62%; The net profit after deducting non-attributable to the parent company was 102 million ~ 106 million yuan, with a year-on-year growth rate of 1.21% ~ 5.18%.

The performance of comparable companies is also not encouraging.

MiG New Materials will be in the Jianjian Technology (300777. SZ), Guangwei Composites (300699. SZ), Zhongfu Shenying (688295. SH), Zhongtian Rocket (003009. SZ), Jinbo shares (688598. SH) as a comparable company. According to Wind data, the average year-on-year growth rate of revenue and net profit of comparable companies in 2023 will be -9.4% and -40.51% respectively. In the first half of 2024, the revenue and net profit of comparable companies will all show negative growth without exception.

MiG said that during the reporting period, due to the intensification of competition in the industry, the overall market price of products showed a downward trend, compressing its profit margins.

From 2020 to the first half of 2023, the average price of viscose-based graphite soft felt, the main product of MiG New Materials, dropped from 437,400 yuan/ton to 219,600 yuan/ton, close to "halving"; The average price of PAN-based graphite soft felt decreased from 180,800 yuan/ton to 141,300 yuan/ton, and showed a downward trend year by year.

Despite this, the gross profit margin of MiG New Materials is still high. From 2020 to the first half of 2023, the gross profit margin of MiG New Material's main business was higher than 40%, although it decreased by about 3 percentage points, it was still at a high level.

The quality of earnings is questionable

Times Investment Research has noticed that from the perspective of profit margin, MiG New Materials does have strong profitability, but there is no cash inflow behind it.

From the perspective of financial common sense, behind the growth of net profit, there must be an inflow of real money, and the closer the net profit and the net inflow of operating cash flow, the higher the quality of earnings.

However, in 2020, the net profit attributable to the parent company of MiG New Materials will reach 31.3812 million yuan, while the net inflow of operating cash flow will only be 3.1543 million yuan, accounting for only 10%; What's even more puzzling is that in 2021, the net profit attributable to the parent company of MiG New Materials will reach 64.8828 million yuan, but the net outflow of operating cash flow will be 785,300 yuan, and in 2022, its net profit attributable to the parent will reach 107 million yuan, while the net outflow of operating cash flow will be 104 million yuan, and the gap will be further widened.

In the first half of 2023, its operating cash flow once had a net inflow of 56 million yuan, which was close to the net profit attributable to the parent company, but in the third quarter of 2023, it had a net outflow of 26 million yuan, and the net profit attributable to the parent company also reached 80 million yuan.

In contrast, as shown in Figure 5, from 2020 to 2023, the operating cash flow of comparable companies was a net inflow, and there was no net profit outflow but a positive net profit outflow.

Taking Jinbo shares, where the deviation between net operating cash flow and net profit is more serious, as shown in Figure 6, its net profit in 2020 will be 169 million yuan, and the net inflow of operating cash flow will be 41 million yuan, accounting for 24.26%; In 2021, the net profit was 501 million yuan, and the net inflow of operating cash flow was 67 million yuan, accounting for 13.37%; From 2022 to 2023, its net operating cash flow inflow and net profit are relatively close, accounting for 89.84% and 101.96% respectively.

As one of the indicators to measure the quality of corporate earnings, the net present ratio of MiG New Materials has also continuously issued "alarms". According to Wind data, in each period of the reporting period, the net present ratio of MiG New Materials was 0.1, -0.01 and -0.99 respectively. In the same period, the net present ratios of comparable companies were all positive, and the average net present ratios were 1.28, 1.01 and 0.67, respectively, which were much higher than those of MiG New Materials.

In general, high-quality profits should be supported by cash inflows, because only in this way can the company's operating activities generate enough cash to support its operations and expansion, while the cash inflows generated by MiG New Materials' operating activities are difficult to cover cash outflows, and the quality of earnings is questionable.

The Shenzhen Stock Exchange questioned the relaxation of the account period of MiG New Materials

For the situation that the net operating cash flow is lower than the net profit, MiG New Materials said that it is mainly affected by the increase in operating receivables and inventory.

Specifically, at the end of the reporting period, the accounts receivable of MiG New Materials were 63 million yuan, 129 million yuan and 242 million yuan respectively, and the inventory was 07 million yuan, 50 million yuan and 87 million yuan respectively, all of which showed a significant increase. From the perspective of added value, accounts receivable obviously occupy more funds.

According to Wind data, at the end of the reporting period, the accounts receivable of MiG New Materials accounted for 46.16%, 42.60% and 55.07% of revenue respectively, showing an overall upward trend, which shows that the growth rate of its accounts receivable is higher than the growth rate of revenue.

From the perspective of the aging structure of accounts receivable, at the end of each period from 2020 to the first half of 2023, the accounts receivable aged within 6 months accounted for 93.58%, 95.48%, 90.18% and 86.14% respectively, showing an overall downward trend.

At the end of the reporting period, the accounts receivable turnover rate of MiG New Materials was 3.41 times, 3.15 times and 2.36 times respectively, and the average accounts receivable turnover rate of comparable companies in the same period (excluding Zhongfu Shenying with a higher turnover rate) was 5.04 times, 4.60 times and 3.58 times respectively, although they all showed a downward trend, the average turnover rate of comparable companies was still significantly higher than that of MiG New Materials.

Does MiG New Material relax the credit period to stimulate sales? In the first round of inquiry, the Shenzhen Stock Exchange asked it to explain its credit policy for major customers and the agreed settlement method.

In response, MiG New Materials said that the company's credit policy for production customers and trader customers remained relatively stable as a whole, and there were no significant abnormal changes during the reporting period. The appropriate adjustment of the credit policy with some customers is the adjustment of the two parties through negotiation after good cooperation, which is commercially reasonable, and there is no situation of adjusting income through the relaxation of credit policy.

(Full text 2450 words).

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