The rationality is doubtful. Rongtai shares’ fixed increase of more than 1 billion yuan was questioned.

The rationality is doubtful. Rongtai shares’ fixed increase of more than 1 billion yuan was questioned.

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Recently, Rongtai Shares received an audit inquiry letter from the Shanghai Stock Exchange. Regarding the company’s 1.05 billion yuan private placement project, the exchange raised more than 20 questions, focusing on the rationality of this refinancing. The company’s announcement shows that Rongtai Co., Ltd. has initiated two refinancing applications in the more than three years since its listing. However, the expected economic benefits of previously raised investment projects are quite different from the actual economic benefits. In addition, the company’s previous fundraising projects have been frequently postponed.

Launched two refinancings more than three years after listing

The announcement shows that the private placement project of Rongtai Shares started in August last year, and then the amount of funds to be raised was reduced.

On August 10, 2023, Rongtai Shares disclosed its private placement plan, stating that the company plans to raise no more than 1.1 billion yuan in additional funds, and will use the investment for “new energy automobile parts intelligent manufacturing projects” and “supplementary working capital.” The project plans to The amounts of raised funds used were 880 million yuan and 220 million yuan respectively. On December 1, 2023, Rongtai Shares released a revised draft of the private placement plan. The amount of funds to be raised was reduced from 1.1 billion yuan to 1.05 billion yuan, of which the “supplementary working capital” project was reduced from 220 million yuan to 170 million yuan. .

Public information shows that Rongtai Co., Ltd. was listed on the Shanghai Main Board in February 2021. The company raised 813.6 million yuan in its initial offering, with a net fundraising amount of 748.4337 million yuan. In 2021, the company released a convertible bond issuance plan and raised 650.67 million yuan through the issuance of convertible bonds in August 2022. Coupled with this private placement application, the company has launched two refinancing applications in more than three years since its listing.

The reporter noticed that although Rongtai Co., Ltd. frequently initiated refinancing applications, the expected economic benefits of the company’s previous investment projects were significantly different from the actual realized economic benefits.

According to the economic benefit calculations of the project disclosed in the prospectus, Rongtai’s IPO investment project includes “the expansion project of adding 390,000 new automotive powertrain casings and 380,000 new energy motor casings for automotive precision die-casting processing parts.” The annual average total profits of the “Production and Construction Project of Key Automotive Steering System Parts” and “Mexico Automobile Lightweight Aluminum Alloy Parts Expansion Project” were 40.4816 million yuan, 38.4897 million yuan, and 60.5093 million yuan respectively. However, the application materials show that as of September 2023 On the 30th, the cumulative benefits realized by these three projects were 15.169 million yuan, 355.1 million yuan and -11.6787 million yuan respectively.

IPO and convertible bond fundraising projects are frequently postponed

The reporter noticed that part of the funds raised in Rongtai’s IPO was used to supplement the company’s liquidity.

On March 5, 2021, not long after the company went public, Rongtai Shares issued an announcement about using raised funds to supplement working capital, saying that based on business development needs and working capital needs, the company plans to use the funds raised from the IPO for the “supplementary working capital” project. All 160 million yuan was transferred to the company’s general settlement account to supplement working capital to meet the actual needs of the company’s subsequent development. On January 6, 2023, Rongtai Shares disclosed that the company will complete the IPO fundraising project and the balance of the special account for the fundraising project as of December 31, 2022 (including financial management income and interest income) of 27.7216 million yuan, and The savings generated from the difference between the interest income and handling fees generated before the subsequent cancellation of the special account for raised funds will permanently supplement the working capital and be used for the company’s daily production and operations.

The announcement shows that both Rongtai’s IPO fundraising projects and convertible bond fundraising projects have been delayed. On March 24, 2022, Rongtai Co., Ltd. issued an announcement on the extension of some investment projects with raised funds, saying that it planned to adjust the “R&D center construction project” in the IPO raised investment project to reach the scheduled usable state and postpone it from March 2022. Extended to December 2022. On August 30, 2022, Rongtai Co., Ltd. once again announced that it plans to expand the IPO fundraising project by “adding 390,000 new automotive powertrain casings and 380,000 new energy motor casings to automotive precision die-casting parts.” The date for the project to reach its intended usable status has been extended from August 2022 to December 2022. On December 22, 2023, Rongtai Co., Ltd. issued another relevant announcement stating that the promotion plan of the “annual output of 1.1 million new energy vehicle aluminum alloy parts project” in the convertible bond investment project has been postponed, and the company plans to postpone the project. The date for the project to reach its intended usable status has been extended from December 2023 to June 2024.

It is worth noting that there are still variables in the implementation of this private placement investment project. Rongtai Co., Ltd. stated that as of the date of this prospectus, the company has not yet obtained the property rights certificate for the land used for the new energy automobile parts intelligent manufacturing project.

Rongtai Shares also reminded the implementation risks of this private placement investment project, saying that during the implementation of the investment project, if there are adverse changes in the project progress, investment costs, national industrial policies, etc., it may lead to the extension of the project construction cycle and the project implementation. The effect is lower than expected, which brings certain risks to the company’s profitability. There is a possibility that its actual profit level will not meet expectations, which will have a negative impact on the improvement of the company’s operating performance.

Regulatory inquiries focus on rationality of refinancing

After Rongtai Co., Ltd. submitted its application for private placement this time, it attracted inquiries from regulators, and the focus was mainly on the rationality of this refinancing.

On March 21, 2024, Rongtai Co., Ltd. received the “Inquiry Letter Regarding the Review of Application Documents for Jiangsu Rongtai Industrial Co., Ltd.’s Issuance of Stocks to Specific Targets” issued by the Shanghai Stock Exchange (referred to as the “Inquiry Letter”). The Shanghai Stock Exchange raised more than 20 questions in the inquiry letter regarding this private placement investment project, previous investment projects, financing scale, company business and operating conditions, etc.

In response to this private placement investment project, the Shanghai Stock Exchange requested Rongtai Shares in its inquiry letter to explain whether this investment project involves new products, the differences and connections with existing business and previous investment projects, and whether there are synergistic effects. Whether the funds raised this time meet the requirements for investment in the main business, and whether there are production capacity digestion risks in the investment projects raised this time.

In response to the frequent delays in previous fundraising projects and poor economic returns, the Shanghai Stock Exchange required Rongtai Shares to explain: the latest progress in the implementation of convertible bond fundraising projects, the reasons and rationality for the postponement of some previously raised projects; combined with the initial fundraising The project product output ramp, sales, market supply and demand changes, etc., explain the reasons and rationality for the differences between the initial investment projects and the expected benefits, and whether relevant factors will have an impact on this fundraising project.

In view of the scale of this financing, the Shanghai Stock Exchange requires Rongtai Shares to explain the specific content and calculation process of construction engineering fees, equipment purchase and installation fees, etc., as well as the determination basis and rationality of the cooperative equipment manufacturers; combined with the non-capital expenditures of this fundraising project situation and purpose of replenishment, explain the actual scale and rationality of the replenishment, and whether there is any replacement of investment before the board of directors; combined with the company’s existing fund balance, net cash inflow, purpose and funding gap, explain this financing The rationality of the scale, etc.

The prospectus shows that in recent years, Rongtai’s gross profit margin has continued to decline, and there are differences in some financial data. During the reporting period (referring to 2020, 2021, 2022 and January to September 2023), the company’s net profits attributable to the parent were 127.7851 million yuan, 100.6174 million yuan, 133.6401 million yuan and 115.0722 million yuan respectively. During the same period, the company’s main business gross profit margins were 32.47%, 25.75%, 24.27% and 24.35% respectively, and the net cash flows generated from operating activities were 277.5174 million yuan, 124.2999 million yuan, -24.7379 million yuan and 58.8448 million yuan respectively. . As a result, the Shanghai Stock Exchange required Rongtai Co., Ltd. to analyze the reasons and rationality for the company’s continued decline in gross profit margin, and explain the reasons and rationality for the differences between the company’s net cash flow generated from operating activities and net profit during the reporting period.

As of press time on March 31, Rongtai Shares had not yet disclosed its response to the review inquiry letter.

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