Source: Raddo

Text/Cheng Mengyao

Combined with YOFC (601869. SH) terminated the framework cooperation agreement just half a month ago, Changyingtong (688143. SH) then announced its intention to acquire 100% of the shares of Wuhan Shengyisheng Optoelectronics Technology Co., Ltd. (hereinafter referred to as Shengyisheng Optoelectronics).

YT plans to facilitate the acquisition by issuing shares and paying cash, and at the same time raise matching funds. Due to the uncertainty of trading, trading in Changyingtong shares will be suspended from the market open on November 1, 2024 (Friday), and the suspension is expected to last no more than 5 trading days.

This acquisition will help Changyingtong introduce optical devices and micro-connection assembly products to further extend the layout of the industrial chain.

On the eve of the acquisition announcement on the evening of October 31, Changyingtong's share price rushed, closing up 19.39% at 27.58 yuan per share, with a total market value of 3.375 billion yuan, triggering market speculation that it may be involved in insider information leakage.

The day before the resumption of trading, Changyingtong issued an announcement on the postponement of the resumption of trading, saying that trading will continue to be suspended from the market open on the morning of November 8, 2024 (Friday), and it is expected that the suspension will continue to last no more than 5 trading days.

　　01

Performance "change face".

Founded in 2010, Changyingtong is mainly engaged in the research, production and sales of fiber optic gyro core device fiber optic ring and special optical fiber related products, including fiber optic ring devices, special optical fibers, new materials, high-end equipment, special cables, etc., mainly used in inertial navigation systems, customers are well-known military enterprises or scientific research institutes with leading technical strength in the fiber optic gyro industry, and the final customers are the military.

After the first 3 years of "burning money" and 5 years of financial pressure, in 2018, the special optical fiber produced by Changyingtong was fully verified by customers and gradually lived a "good life".

In 2022, YT was selected as a national-level specialized and new "little giant" enterprise, and landed on the Science and Technology Innovation Board in December of the same year, with an issue price of 35.67 yuan per share and a net amount of 755 million yuan of raised funds, which will be used for special optical fiber and cable, optical device production capacity construction projects, R&D center construction projects and supplementary working capital. As of June 30, 2024, the balance of its fund-raising account was 224 million yuan.

On the top of the domestic "first share of optical fiber ring", Changyingtong's share price rose by more than 40% on the first day of listing. However, in the second year of listing, the performance of Yingtong "changed face", and this acquisition was also regarded by the outside world as a move to reverse the decline in performance.

In 2022, Changyingtong achieved operating income of 314 million yuan, a year-on-year increase of 19.79%; In 2023, Changyingtong will achieve revenue of 220 million yuan, a significant decrease of 29.82% year-on-year; net profit was 15.6324 million yuan, a year-on-year decrease of 80.73%; net profit attributable to the parent company fell by 80.72%; The net profit after deduction turned from profit to -4.1216 million yuan, a decrease of 105.84%.

It is worth noting that a lot of Changyingtong's operating income is "white". In 2023, its balance of accounts receivable has exceeded its current operating income. As of the end of September 2024, the balance of its accounts receivable and notes receivable was 340 million yuan, an increase of 52.3561 million yuan from the beginning of the period, which was 1.44 times of its operating income (annualized). In 2022 and 2023, the accounts receivable turnover ratio of YT will be 1.53 times and 0.9 times, respectively. From January to September this year, Changyingtong has provided for credit impairment losses of 13.3715 million yuan, exceeding the whole year of 2023.

A large number of accounts receivable not only increases the risk of bad debts, but also affects the cash flow of Changyingtong. From 2021 to 2023, Changyingtong's operating cash flow will be 58.7759 million yuan, 32.9665 million yuan, and 20.6237 million yuan respectively, with a continuous sharp decline, with a net outflow of 62.792 million yuan from January to September this year, and the hematopoietic capacity has declined seriously.

In this context, YT is trying to expand to the upstream of the value chain and explore new business growth points. In November 2023, Changyingtong New Material Industrial Park settled in Wuhan Optics Valley. The total investment of the project is 500 million yuan, and the specific construction content is: relying on Changyingxin to build a research and development production line of optical fiber coating resin, optical fiber parallel belt resin, optical fiber coloring resin, optical fiber gyroscope supporting adhesive, Haiphong potting glue, etc., with a production capacity of 1,200 tons/year after completion; Relying on Changyingtong Thermal Control, the R&D production line of thermal control materials, thermal control components and thermal management system will be built, with a production capacity of 30 million pieces per year after completion.

In addition, the investment amount of funds raised by Changyingtong's IPO fundraising project is 440 million yuan, and the investment progress of the investment rate as of June 2024 has reached 23.88%, and it is expected to be completed and put into operation by the end of December 2025. This also means that before it is completed and put into production, Changyingtong's profitability will continue to be under pressure.

　　02

Mysterious man Cheng Lin

The target of this acquisition, Shengyisheng Optoelectronics, was established in May 2016 with a registered capital of 18.1818 million yuan. Focusing on the technical research, product development, manufacturing and service of optical communication devices, it has reached strategic partnerships with Accelink, Fiberhome, Hisense Broadband, Yongding Optoelectronics, Shijia Photonics and other enterprises. With the acquisition of Shengyisheng Optoelectronics, Changyingtong can directly undertake its customer resources.

Shengyisheng Optoelectronics currently has three shareholders, Wuhan Chuanglian Zhiguang Technology Co., Ltd. (hereinafter referred to as Chuanglian Zhiguang) holds 45% of the shares; Li Longqin holds 27.5% of the shares and is the actual controller; Ningbo Chengfenghao Enterprise Management Co., Ltd. (hereinafter referred to as Ningbo Chengfenghao) holds 27.5% of the shares.

After penetration, its equity belongs to 10 natural persons, and people are quite concerned about natural persons Cheng Lin and Li Pengqing. The two will take over 75% of the shares of Chuanglian Zhiguang in May 2024 and become indirect shareholders of Shengyisheng Optoelectronics. Li Pengqing will step down as the general manager of Shengyisheng Optoelectronics in April 2024, and currently has no position, indirectly holding 18% of the shares; Cheng Lin took the position of manager, and at the same time, as a legal person, the ultimate beneficial shares of Shengsheng Optoelectronics are 15.75%.

Cheng Lin and Li Pengqing are old partners, and they are bound together by Wei Liangyi and Li Guojiao, both of whom are the earliest founders of Chuanglian Zhiguang, and are currently directors of Shengyisheng Optoelectronics.

In March 2016, Wei Liangyi and Li Guojiao jointly established Chuanglian Zhiguang with a registered capital of 200,000 yuan, and then Wang Han joined. But in May 2024, Wei Liangyi and Li Guojiao withdrew at the same time, and Cheng Lin and Li Pengqing took over the registered capital of the two respectively. At present, Chuanglian Zhiguang is jointly controlled by Cheng Lin, Li Pengqing, and Wang Han, and the three hold 30%, 40%, and 25% of the shares respectively. Wei Liangyi does not hold shares, but concurrently serves as a legal person, executive director, manager, and financial director.

The four of them also invested in Wuhan Hongzhuo Technology Co., Ltd. (hereinafter referred to as: Wuhan Hongzhuo), but unlike the equity change of Chuanglian Zhiguang, Wuhan Hongzhuo was jointly established by Cheng Lin, Li Pengqing and Wei Zhongyi in February 2014, and Wei Liangyi and Li Guojiao joined in October of the same year, and Cheng Lin and Li Pengqing withdrew. In February 2024, Wei Liangyi, Li Guojiao, and Wei Zhongyi will withdraw at the same time, and the shareholding ratios at the time of withdrawal will be 50%, 49%, and 1% respectively. Wuhan Hongzhuo is currently 59% owned by Gong Zhi and 41% by Faye Wong.

Tianyancha information shows that in addition to Shengyisheng Optoelectronics and Chuanglian Zhiguang, Cheng Lin is currently associated with 1 company: Wuhan Qichen Optoelectronics Technology Co., Ltd. (hereinafter referred to as: Qichen Optoelectronics). Cheng Lin holds 55% of the shares of Venucia Optoelectronics, and is also a legal person, controlling shareholder, actual controller, and concurrently serves as executive director, manager, and financial director.

In November 2021 and January 2022, Kuang Chizen Technology received the angel round of Fenghe Fund, Optics Valley Growth Venture Capital, and Pre-A round of financing from Sycamore Capital, with a registered capital of 5.16 million yuan. Compared with Shengyili Optoelectronics, the prospect of independent walking of Kuangqiyuan Technology is more optimistic.

However, in July 2024, that is, 2 months after Cheng Lin became a shareholder of Yisheng Optoelectronics, and 3 months before the merger and acquisition news was issued, Cheng Lin withdrew from all positions in Guangqiyuan Technology, along with Wen Xiaohuan and Wei Liangyi, who were directors at the time, and among the new directors, Gao Shen is the managing partner of Sycamore Tree Capital. Wen Xiaohuan currently holds another 45% stake in Venucia Optoelectronics.

Founded in June 2021 with an initial registered capital of RMB 3 million, CZEI was initially held by Wuhan Qiyuan Optoelectronics Partnership (Limited Partnership) and Wuhan Venucia Optoelectronics Partnership (Limited Partnership) with 75% and 25% of the shares respectively. The executive partner of both is Venucia Optoelectronics, which currently holds 2% of the shares. Kaizen Optoelectronics (Limited Partnership) was initiated and established by Cheng Lin, and before its exit in August 2022, he personally held 78% of the shares.

From the perspective of the timeline, Chuanglian Zhiguang was established in March 2016, Shengyisheng Optoelectronics was established in May 2016, Venucia Optoelectronics was established in May 2021, and Guangqiyuan Technology was established in June 2021. The registered address of these enterprises is located in Wuhan Optics Valley, and they have a close relationship with Cheng Lin.

Through Chuanglian Zhiguang, he indirectly held shares in Shengyisheng Optoelectronics, withdrew from all positions in Guangqiyuan Technology, and only indirectly retained 2% of the equity through Venucia Optoelectronics, and then sold Shengyisheng Optoelectronics, and the appearance of Cheng Lin also added some imagination to this merger.

　　03

Tens of millions of profits were lost by canceling the contract

It has to be mentioned that due to the termination of the framework cooperation agreement with YOFC in advance and the liability for breach of contract of 15 million yuan, the non-recurring profit and loss increased, and the profit pressure of YOFC further increased.

In March 2022, YOFC and YOFC signed a 4-year business cooperation framework agreement, stipulating that from 2022 to 2025, the amount of polarization-maintaining fiber for ring winding purchased by YOFC from YOFC from 2022 to 2025 shall not be less than 5.33A km (A refers to the purchase volume of the total length of the cumulative procurement in the framework agreement signed between the company and YOFC in 2020 to reach the first preferential price, and other data are listed using its relative value to A), and the tentative execution price of annual procurement is 0.93A yuan/km(a refers to the company's 2018 sales price excluding tax for the specific contract of G1 units, and the price data in this article is presented by its relative value of a), Changyingtong paid a deposit of 15 million yuan for this, and agreed that if the minimum annual delivery volume is not reached, YOFC will deduct 5 million yuan from the deposit as liquidated damages.

On October

15, 2024, the company announced that it would no longer perform the responsibility of polarization maintenance optical fiber delivery from 2023 to 2025, and bear the liability of 15 million yuan for breach of contract, and the liability amount would be deducted from the deposit of 15 million yuan.

In addition to the unfinished purchase volume in 2023, which has been deducted from 5 million yuan as agreed, and the remaining 10 million yuan of performance bond, Changyingtong has made a provision for bad debts of 1 million yuan in 2023. Based on this calculation, the signing of the termination agreement will lead to a reduction of 9 million yuan in the total profit of Changyingtong in 2024. Affected by this, in the third quarter of this year, Changyingtong's net profit decreased by 1959.2% year-on-year and 326.23% quarter-on-quarter.

YOFC is also located in Wuhan Optics Valley, is the first A+H listed company in Hubei Province, and is also Pi Yabin's old employer, before founding YOFC, Pi Yabin has been in YOFC and joint-stock companies for more than 10 years, successively serving as technical manager, marketing director and other positions.

On the eve of the disclosure of the acquisition plan, Changyingtong disclosed the third quarter report of 2024. According to the data, from January to September this year, Changyingtong achieved revenue of 183 million yuan, a year-on-year increase of 36.8%, but the net profit turned from profit to loss to -4.5628 million yuan, a sharp decrease of 270.13% year-on-year; The net profit attributable to the parent company was -3.6948 million yuan, a year-on-year decrease of 230.34%.

Changyingtong said that the operating income in the first three quarters of 2024 increased year-on-year, mainly due to the increase in orders from important military customers and the increase in the number of polarization-maintaining optical fibers and fiber ring devices. The year-on-year decrease in net profit attributable to the parent company was mainly due to the increase in non-recurring gains and losses due to the recognition of margin losses.