Source: Titanium Media

(AI-generated)

On February 28, the satellite navigation concept stock Mengsheng Electronics (688311. SH) released a performance report, with revenue halving and a loss of 268 million yuan, announcing that its performance hit the worst year since data began. And in 2024 alone, the company will lose profits for three consecutive years after listing.

For the sharp decline in performance, Mengsheng Electronics attributed it to the impact of the industry, huge goodwill impairment provisions and bad debt provisions.

Titanium media APP noticed that under the multiple "water reversal" shadows of the postponement of procurement in the military industry, the layout of new products is less than expected, and the "backlash" of high-premium mergers and acquisitions, the speed of Mengsheng Electronics's "revenue scale is expected to recover and achieve growth" may not be as optimistic as the company's previous reply to investors.

Lose 3 years of money earned in one year

According to the performance report, in 2024, Mengsheng Electronics will achieve revenue of 151 million yuan, a decrease of 54.34% from the same period last year; Net profit attributable to shareholders of listed companies was -268 million yuan, deducting non-net profit of -262 million yuan, continuing the loss of the previous year.

Mengsheng Electronics is mainly engaged in the R&D and manufacturing of related products in the field of satellite application technology, including satellite navigation, satellite communication, electronic countermeasures and other products, which was listed in 2020 and is one of the earliest enterprises on the Science and Technology Innovation Board in Sichuan. The peak of performance in the first and second year of listing will begin to decline in 2022, with a loss of 56.3108 million yuan in 2023.

(Mengsheng Electronics performance, source: wind).

It should be noted that in 2023 and 2024, the company will have a cumulative loss of 324 million yuan, and the three years of profit after listing will only achieve a net profit of 267 million yuan.

The decline in performance is first of all affected by industry factors. The company said that the customers are mainly subordinate units of large military industrial groups, and the products are mainly used in special fields, affected by the industry environment, some project acceptance delays, project procurement plans are delayed, new orders are slowed down, etc., the company's output has declined sharply, and revenue has dropped sharply, which has led to a significant increase in fixed costs such as manufacturing costs and labor costs per unit of products, and a large decline in gross profit margin.

Of course, the performance of Mengsheng Electronics is not the only one affected by the industry 688053. SH), Guoguang Electric (688776. SH), China UAV (688297. SH) and so on are all "difficult brothers" in Sichuan. In 2024, Ciscorui's revenue will be 143 million yuan, down 26.60%, and the net profit attributable to the parent company will be -21.2535 million yuan, down 149.31%; Guoguang Electric's revenue was 543 million yuan, down 27.17%, and the net profit attributable to the parent company was 48.138 million yuan, down 46.72%; The revenue of China UAV was 685 million yuan, down 74.28%, and the net profit attributable to the parent company was -53.9161 million yuan, down 117.82%.

In addition, the voice of military supporting enterprises is low, and the problem of bad debts of accounts receivable has also been reflected in reality. Wind data shows that from 2021 to 2024, the company's accounts receivable will be 532 million yuan, 547 million yuan, 589 million yuan and 510 million yuan respectively, accounting for 111.76%, 114.20%, 177.95% and 337.75% of the revenue in each period. The company said, "During the reporting period, the collection of accounts receivable was poor, and the provision for bad debts increased significantly year-on-year. ”

After the performance commitment period, it was "counterattacked" by high-premium mergers and acquisitions

The house leak coincided with overnight rain, and the target of Mengsheng Electronics' high-premium merger and acquisition in order to "broaden its business area" became a "drag" for the company after the performance commitment period.

In April 2021, the company increased its capital by 122.4 million yuan and acquired the equity of Nanjing Yinghuo Taixun Information Technology Co., Ltd. (hereinafter referred to as "Nanjing Yinghuo") held by Wu Tuanfeng and Yang Fuhua, and won a total of 51% of the equity of Nanjing Yinghuo. The funds used were over-raised funds at the time of IPO, with a valuation premium rate of 833.75% and a goodwill of 79.1149 million yuan.

Nanjing Yinghuo's main business is oriented to the needs of communication and information systems, and is committed to the R&D and innovation of satellite communication systems and wireless ad hoc network systems, mainly engaged in system design, signal processing and equipment R&D, and provides modules, terminals, complete machines and related technology development services and system solutions based on the application needs of different industries.

According to the company's vision at that time, after the acquisition, through the technical exchanges between the two parties, it will help accelerate the construction of Mengsheng electronic information and signal processing related technologies, promote the formation of a systematic technology system for satellite communication, and realize the rapid evolution of products from antennas to terminals and systems. At the same time, the use of systematic satellite communication technology, the company can accelerate the development of wireless ad hoc network communication system in the future, which will help the company to lay out and develop the satellite Internet and wireless ad hoc network market, broaden the company's business areas, and further enhance the market competitiveness and profitability of Mengsheng Electronics. In 2020, Nanjing Firefly's net profit was only 7.3696 million yuan.

However, the high premium also matches the high performance commitment, Wu Tuanfeng and Yang Fuhua promised that the net profit of Nanjing Firefly from 2021 to 2023 will not be less than 13 million yuan, 14 million yuan, 18 million yuan, and not less than 45 million yuan in three years.

From 2021 to 2023, Nanjing Firefly will achieve net profits of 14.0989 million yuan, 16.962 million yuan, and 18.9187 million yuan respectively, fulfilling its commitments.

However, once the commitment period passes, Nanjing Firefly's performance in 2024 will quickly "change face". According to the company's preliminary impairment test, it is planned to make a goodwill impairment provision of 14.5713 million yuan in the fourth quarter of 2024, and a cumulative goodwill impairment provision of 79.1149 million yuan in 2024. As a result, it will also deal a "heavy blow" to the performance of Mengsheng Electronics in 2024.

By the way, in addition to the acquisition of Nanjing Firefly, Mengsheng Electronics also issued convertible bonds of 300 million yuan in September 2023 to invest in the construction of the electronic countermeasure equipment research and production center construction project and replenishment. The original completion time of the project was June 30, 2025, but due to industry changes, slowing down the pace of end users, product development and mass production progress is not as expected, the company postponed the project to June 30, 2026. (This article was first published in Titanium Media APP, author: Su Qitao).

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