Jiang Bolong’s cash flow has repeatedly suffered from high inventory turnover and slow turnover. The controlling shareholder is a witness to the bribery case.
Editor’s Note of China Economic NetShenzhen Jiangbolong Electronics Co., Ltd. (hereinafter referred to as "Jiangbolong") will hold its initial meeting on December 16, 2021. The company plans to list on the Growth Enterprise Market of Shenzhen Stock Exchange this time, and the number of public offerings will not be less than 10% of the total share capital of the company after the issuance, and it will not exceed 42 million shares. The sponsor and lead underwriter are CITIC Jiantou Securities Co., Ltd. and the joint lead underwriter is HSBC Qianhai Securities Co., Ltd. Jiang Bolong plans to raise 1.50 billion yuan this time, of which 700 million yuan will be used for the second phase construction project of Jiang Bolong Zhongshan Storage Industrial Park, 350 million yuan will be used for enterprise-level and industrial-level storage research and development projects, and 450 million yuan will be used to supplement working capital.
From 2018 to January-June, 2021, Jiangbolong’s operating income was 4.228 billion yuan, 5.721 billion yuan, 7.276 billion yuan and 5.302 billion yuan respectively, of which the main business income was 4.228 billion yuan, 5.721 billion yuan, 7.276 billion yuan and 5.301 billion yuan respectively.
From 2018 to January-June, 2021, Jiang Bolong received cash of 4.135 billion yuan, 5.874 billion yuan, 7.539 billion yuan and 5.338 billion yuan, respectively.
From 2018 to January-June, 2021, Jiangbolong’s net profit was-58,436,900 yuan, 127 million yuan, 276 million yuan and 680 million yuan respectively, of which the net profit attributable to the owners of the parent company was-56,539,700 yuan, 128 million yuan, 276 million yuan and 680 million yuan respectively.
From January to June of 2018 to 2021, the net cash flow generated by Jiangbolong’s operating activities was-212 million yuan,-173 million yuan, 424 million yuan and-971 million yuan respectively.
From January to September 2021, Jiangbolong’s operating income was 7.679 billion yuan, a year-on-year increase of 67.45%; The net profit was 948 million yuan, a year-on-year increase of 3997.91%; The net profit attributable to shareholders of the parent company was 948 million yuan, a year-on-year increase of 3997.91%; The net profit of returning to the mother after deduction was 871 million yuan, a year-on-year increase of 475.74%; The net cash flow from operating activities was-838 million yuan, compared with-2,645,900 yuan in the same period of last year, with a change ratio of-31,562.27%.
Jiang Bolong estimates that the operating income in 2021 will be 9.600 billion yuan to 10.140 billion yuan, an increase of 31.94% to 39.36% compared with 2020; The net profit attributable to shareholders of the parent company is 960 million yuan to 1.035 billion yuan, an increase of 247.53% to 274.68% compared with 2020; After deducting non-recurring gains and losses, the net profit attributable to shareholders of the parent company is 883 million yuan to 958 million yuan, an increase of 186.80% to 21.116% compared with 2020.
From 2018 to January-June 2021, the total assets of Jiangbolong were 2.751 billion yuan, 4.033 billion yuan, 5.055 billion yuan and 5.673 billion yuan respectively; The total liabilities were 706 million yuan, 924 million yuan, 1.592 billion yuan and 1.603 billion yuan respectively.
After review, from January to September 2021, the total assets of Jiangbolong were 6.091 billion yuan, an increase of 20.50% over the end of last year; Total liabilities were 1.751 billion yuan, up 9.98% from the end of last year.
From 2018 to January-June 2021, the current ratio of Jiangbolong was 3.60 times, 3.95 times, 2.76 times and 3.06 times respectively, the quick ratio was 1.54 times, 1.87 times, 1.32 times and 0.86 times respectively, and the asset-liability ratio (parent company) was 5.30%, 9.19% and 0.86 times respectively.
From 2018 to January-June 2021, the average asset-liability ratio of comparable listed companies in the same industry was 56.77%, 54.01%, 51.65% and 54.49% respectively. Among them, Smart Global’s asset-liability ratio is 72.19%, 61.16%, 64.14% and 76.66%, Weigang’s asset-liability ratio is 66.34%, 66.89%, 65.80% and 63.09%, and the pirate ship’s asset-liability ratio is 79.94%, 79.54% and 66.
From January to June of 2018 to 2021, Jiangbolong’s monetary funds were 531 million yuan, 1.198 billion yuan, 1.585 billion yuan and 603 million yuan respectively, accounting for 22.83%, 34.47%, 36.86% and 12.76% of current assets respectively.
From 2018 to January-June, 2021, the deposits in Jiangbolong Bank were 531 million yuan, 1.198 billion yuan, 1.585 billion yuan and 603 million yuan respectively, accounting for 99.98%, 99.99%, 100.00% and 99.99% of the monetary funds respectively.
From 2018 to January-June 2021, the book value of Jiangbolong’s accounts receivable was 407 million yuan, 409 million yuan, 385 million yuan and 610 million yuan respectively, accounting for 17.50%, 11.77%, 8.96% and 12.93% of current assets respectively.
From 2018 to January-June, 2021, the balance of accounts receivable of Jiangbolong was 408 million yuan, 410 million yuan, 386 million yuan and 611 million yuan respectively, of which the balance of accounts receivable within three months was 397 million yuan, 405 million yuan, 353 million yuan and 611 million yuan respectively.
From 2018 to January-June, 2021, the amounts paid back by Jiang Bolong after the accounts receivable period were 408 million yuan, 409 million yuan, 386 million yuan and 537 million yuan, respectively, and the proportions of the paid back after the period were 99.87%, 99.90%, 100.00% and 87.88%.
From 2018 to January-June 2021, the turnover rate of accounts receivable of Jiangbolong was 13.83 times, 14.02 times, 18.33 times and 21.30 times respectively, and the average of comparable companies in the same industry was 7.79 times, 7.11 times, 7.39 times and 7.59 times respectively.
From 2018 to January-June, 2021, the accounts receivable turnover of Smart Global, a comparable company in the same industry, was 6.13 times, 5.33 times, 5.18 times and 5.61 times respectively, the accounts receivable turnover of Weigang was 9.75 times, 8.91 times, 9.66 times and 8.53 times respectively, and the accounts receivable turnover of pirate ships was 7.68 times and 6.76 times respectively.
From 2018 to January-June 2021, the book value of Jiangbolong’s inventory was 1.333 billion yuan, 1.825 billion yuan, 2.246 billion yuan and 3.393 billion yuan respectively, accounting for 57.26%, 52.53%, 52.24% and 71.84% of current assets.
From 2018 to January-June 2021, the inventory balance of Jiangbolong was 1.391 billion yuan, 1.852 billion yuan, 2.267 billion yuan and 3.457 billion yuan respectively, and the inventory depreciation reserve was 58.156 million yuan, 27.0826 million yuan, 21.3206 million yuan and 64.1743 million yuan respectively.
Jiang Bolong said that the company’s ending inventory is relatively large, and may further increase with the expansion of the company’s operating scale.
From 2018 to January-June 2021, the inventory turnover rate of Jiangbolong was 3.04 times, 3.23 times, 3.15 times and 2.95 times respectively, and the average of comparable companies in the same industry was 5.21 times, 5.31 times, 5.25 times and 4.23 times respectively.
From 2018 to January-June, 2021, the inventory turnover of Smart Global, a comparable company in the same industry, was 5.72 times, 5.73 times, 6.43 times and 4.97 times respectively, the inventory turnover of Weigang was 6.13 times, 5.71 times, 4.60 times and 3.50 times respectively, and the inventory turnover of pirate ships was 5.64 times, 5.82 times and 5.50 times respectively.
From 2018 to January-June, 2021, Jiang Bolong’s short-term loans were 271 million yuan, 350 million yuan, 414 million yuan and 574 million yuan respectively, accounting for 41.82%, 39.72%, 26.57% and 37.15% of current liabilities respectively.
From 2018 to January-June, 2021, the comprehensive gross profit margin of Jiangbolong was 7.62%, 10.71%, 11.96% and 21.59% respectively, and the gross profit margin showed an overall upward trend.
From 2018 to January-June, 2021, the average gross profit margins of comparable companies in the same industry were 15.17%, 17.42%, 19.05% and 21.54% respectively. Among them, the gross profit margins of Smart Global are 22.62%, 19.60%, 19.28% and 18.44% respectively, while those of Weigang are 6.05%, 11.07%, 14.82% and 18.60% respectively, and those of pirate ships are 11.95%, 16.14% and 20.53 respectively.
According to Jiangbolong’s product categories, the gross profit margin of embedded storage is 6.41%, 14.21%, 10.84% and 24.63%, the gross profit margin of solid-state disk is 4.60%, 5.27%, 9.75% and 15.33%, and the gross profit margin of mobile storage is 10.16%, 10.34% and 18.33% respectively.
From 2018 to January-June, 2021, the sales amount of Jiangbolong to the top five customers was 929 million yuan, 1.803 billion yuan, 2.510 billion yuan and 1.789 billion yuan respectively, accounting for 21.98%, 31.51%, 34.49% and 33.74% of the total sales respectively.
It is worth noting that in 2018, the largest customer of Jiangbolong was the listed company Weir, and the sales amount of Jiangbolong to Weir in that year was 315 million yuan. By 2019, Weir was ranked as the fourth largest customer of Jiangbolong, and the sales amount of Jiangbolong to Weir in that year was 236 million yuan. From January to June in 2020 and 2021, Weir withdrew from the list of the top five customers of Jiangbolong.
From 2018 to January-June, 2021, the purchase amount of Jiangbolong from the top five suppliers was 2.861 billion yuan, 3.962 billion yuan, 4.980 billion yuan and 3.879 billion yuan respectively, accounting for 73.41%, 70.37%, 71.96% and 72.40% of the total purchase amount respectively.
From 2018 to January-June, 2021, the overseas sales accounted for 85.24%, 85.19%, 84.74% and 83.59% respectively, and the overseas purchases accounted for 95.65%, 93.38%, 87.61% and 87.93% respectively.
From 2018 to January-June 2021, the domestic income of Jiangbolong was 624 million yuan, 847 million yuan, 1.110 billion yuan and 870 million yuan respectively, accounting for 14.76%, 14.81%, 15.26% and 16.41% of the main business income respectively.
From 2018 to January-June 2021, Jiangbolong’s overseas income was 3.604 billion yuan, 4.873 billion yuan, 6.165 billion yuan and 4.431 billion yuan respectively, accounting for 85.24%, 85.19%, 84.74% and 83.59% of the main business income respectively.
After long-term technology accumulation, Jiangbolong has formed 47 core technologies closely related to its business, achieved 12 achievements based on core technology research and development, and is engaged in 25 major research and development projects. The Shenzhen Stock Exchange raised questions about the company’s core technology and core competitiveness in the first round and the second round of inquiries about Jiang Bolong. These include: explaining the reasons why the number of invention patents obtained during the reporting period is significantly less than that outside the reporting period, whether most of the current patents of the issuer are obsolete and have no great commercial value, and whether the core technology of the issuer is advanced; Explain the importance of the relevant license of SD memory card to the issuer, the relevant license fee and license period, and whether it can ensure the issuer’s long-term use; Before the signing of the license agreement in June 2019, whether the issuer involved in the use of relevant licenses, whether there were disputes or potential disputes.
According to the prospectus, there are a number of related party transactions in Jiang Bolong, among which a related party sales amount reached 114 million yuan in 2019, which was for Jiang Bolong to sell storage products such as solid state drives to U Lucky International (HK) Co., Ltd. (Youxiang International (Hong Kong) Co., Ltd.). The company is an enterprise in which Xing Xiaobo, the brother of Cai Huabo’s eldest brother and spouse, one of Jiang Bolong’s real controllers, holds 100% shares. In addition, Jiang Bolong’s real controllers Cai Huabo, Cai Lijiang and others have provided unlimited guarantee for Hong Kong Jiang Bolong, a wholly-owned subsidiary of the company.
The price of products sold by Jiang Bolong to related parties is much lower than the unit price of similar products. Shenzhen Stock Exchange’s second round of audit inquiry on Jiang Bolong shows that in 2019, Jiang Bolong sold 114 million yuan to related party Youxiang International (Hong Kong); In 2018-2019, it sold 20,035,100 yuan and 13,083,700 yuan to Hengchu Trade respectively, and sold 6,825,800 yuan and 24,214,400 yuan to friends and partners. In 2020, it will sell 25,855,700 yuan to CLP Port. The selling price of Jiangbolong to related parties is far lower than the selling unit price of similar products. For example, the selling unit price of Jiangbolong to Youxiang International in 2018-2019 ranged from 14.71 yuan/piece to 26.57 yuan/piece, while the average selling unit price of Jiangbolong’s solid-state drives in the same period was 108.74 yuan/piece and 143.28 yuan/piece.
Shenzhen Stock Exchange requires Jiang Bolong to explain the fairness of related party transactions, the reason why the issuer’s sales price to related parties is much lower than the unit price of similar products, whether there is a big difference between the content and model of products sold by the issuer to the related parties and the issuer’s main product sales structure, the necessity and rationality of related transactions, and whether there is any interest transfer situation.
In addition, Jiang Bolong’s equity transfer has also caused the Shenzhen Stock Exchange to pay attention to the inquiry, whether it obviously regulates profits and whitewashes performance. Shenzhen Stock Exchange’s first inquiry about Jiang Bolong showed that the company’s investment income from the disposal of long-term equity investment in 2020 was 107 million yuan, mainly due to the sale of a 2.61% stake in Microelectronics. In November, 2020, Jiangbo Longzi Company Tibet Yuanshi transferred 0.78% and 1.83% equity of a microelectronics company to Kaiying Venture Capital and Chuangke Town respectively. After the completion of the above-mentioned equity transfer, Jiang Bolong’s remaining shareholding ratio in a microelectronics company was 4.79%. At the same time, he no longer sent directors to a microelectronics company and did not participate in its daily operation and management activities, which was considered to have no significant impact on it. He adjusted the remaining 4.79% equity to other non-current financial assets and re-measured it at fair value. As the fair value of a microelectronics company’s equity was higher than the book value of long-term equity investment, a large amount of current investment income was recognized. According to public information, after the transfer, Jiang Bolong remains the third largest shareholder of Deyi Microelectronics.
Shenzhen Stock Exchange requires Jiang Bolong to explain the rationality of the issuer’s confirmation of the investment income of a microelectronic equity sold until 2020 in combination with the payment time and the change time of industrial and commercial registration. Whether the above-mentioned equity transfer time is close to the end of the reporting period has obvious motives for regulating profits and whitewashing performance shows whether Kaiying Venture Capital and Maker Town are related or closely related to the issuer’s actual controller, Dong Jiangao and their related parties.
According to the data released by China Flash Memory Market (CFM) and Omdia(IHS Markit), in 2020, the company ranked seventh in the global market share of eMMC products, third in the global market share of Lexar memory cards and fourth in the global market share of Lexar flash drives. According to public information, the market share of DDR5 is expected to rapidly surpass DDR4.
The Shenzhen Stock Exchange asked Jiang Bolong to briefly explain the differences in application fields, implementation functions, storage capacity and technical routes of various products of the issuer; Explain the difference between the technical level of the issuer’s main products and its main competitors, and the price difference between the issuer’s main sales price and the similar products with the same specifications of its main competitors, and analyze whether the issuer is competitive compared with its main competitors; Combined with the substitution of DDR5 for DDR4 and the latest technology development in the storage industry, this paper explains whether the issuer’s main product types and technical routes are facing the risk of being replaced or eliminated, and gives a risk warning in the prospectus.
Jiang Bolong said in his reply that the global semiconductor memory market is huge, and the company’s operating income is growing rapidly, but the market share is small and there is broad room for growth.
Jiang Bolong has a commercial secret infringement dispute litigation. According to the prospectus, the case is in the first instance stage and is currently undergoing judicial appraisal related to the facts of the case. Jiang Bolong sued the Shenzhen Intermediate People’s Court on the grounds that the defendants Hao Lu, Zhao Ying and Shenzhen Jingcun Technology Co., Ltd. infringed the commercial secrets of Jiang Bolong’s testing technology. On June 22, 2020, the Shenzhen Intermediate People’s Court issued the Notice of Accepting Cases to accept the case. Defendant Hao Lu was a retired employee of Jiang Bolong and participated in the research and development of LPDDR3 testing technology. Jiang Bolong discovered that the defendant was selling products containing the above testing technology in the market at the end of 2018, so he sued the defendant to stop the infringement and jointly compensated Jiang Bolong for economic losses and punitive damages totaling 132,044,800 yuan. Jiang Bolong disclosed the draft prospectus on December 9, 2021, showing that as of the signing date of the prospectus, the case was in the first instance stage. At present, judicial expertise related to the facts of the case is being carried out. In addition, Jiang Bolong’s WeChat WeChat official account published a message on July 13, 2020. On July 7, 2020, the company suddenly received a lawyer’s letter from Jingcun Company, claiming that Jiang Bolong deliberately concealed the facts and framed others.
According to the prospectus, Cai Huabo, the controlling shareholder of Jiang Bolong, was involved in the case of Ji Zhen, the former deputy head of Nanshan District, Shenzhen, as a witness. According to the criminal judgment No.350 (2017) at the beginning of Guangdong 03 Criminal Sentence made by Shenzhen Intermediate People’s Court on December 18th, 2017 and the Criminal Ruling No.395 (2018) at the end of Guangdong Criminal Sentence made by Guangdong Higher People’s Court on June 8th, 2018, Ji Zhen introduced Huade Company and Jiang Bolong to Cai Huabo on the grounds of supporting his student Zeng Moming to start a business. Huade Company’s business scope includes integrated circuit business and Jiangbolong Co., Ltd. has outsourcing cooperation with other manufacturers in testing business. Therefore, Jiangbolong Co., Ltd. signed an entrusted testing contract with Huade Company and paid a testing fee of 1 million yuan, but Huade Company failed to fulfill its corresponding contractual obligations, and this testing fee was actually occupied by Ji Zhen. Hou Jizhen was convicted of accepting bribes and corruption, and the case has been closed.
According to the refereeing document network, in the first half of 2013, Shenzhen Jiangbolong Electronics Co., Ltd. (hereinafter referred to as "Jiangbolong Company") applied to the Nanshan District Government for funding for science and technology projects, and with the help of the defendant Ji Zhen, it finally won the funding for science and technology projects of RMB 2 million. Since then, Ji Zhen asked Cai Mobo, the chairman of the company, that the company sign an entrusted test contract with Huade Company and pay the test fee of RMB 1 million. Cai Mobo agreed. On November 27th, 2013, Ji Zhen appointed Zeng Moming to sign a contract with Jumbolong Company on behalf of Huade Company. On January 6, 2014, Jumbolong Company transferred RMB 1 million to Huade Company. The contract was not actually performed, and it was a false contract. The so-called test fee was the benefit fee charged by Ji Zhen to Jiang Bolong Company, which was used by Ji Zhen for personal purchase.
According to the prospectus, Jiang Bolong distributed cash dividends of 20 million yuan and 59.3383 million yuan in April 2018 and May 2021 respectively. Regarding the above cash dividends, Shenzhen Stock Exchange asked Jiang Bolong to analyze and explain the necessity and appropriateness of the relevant large cash dividends, and whether they match with Jiang Bolong’s financial situation, focusing on analyzing and explaining the rationality of Jiang Bolong’s cash dividends in the case of losses in 2018, such as the articles of association of Jiang Bolong. Explain the use of dividend funds of Jiang Bolong’s actual controller and major shareholders.
Mainly engaged in the research, development, design and sales of Flash and DRAM memories.
Jiang Bo is mainly engaged in the research, development, design and sales of Flash and DRAM memories. The company faces the application market and consumer market of consumer electronics, industry, communication, automobile, security, monitoring and other industries, and provides customers with high-performance, high-quality and innovative memory chips and products. The company has four product lines: embedded storage, solid-state hard disk, mobile storage and memory stick.
The draft prospectus disclosed by Jiang Bolong on December 9, 2021 shows that as of the signing date of the prospectus, the controlling shareholder of the company is Cai Huabo, and the actual controllers are Cai Huabo and Cai Lijiang. Cai Huabo and Cai Lijiang are brothers and sisters. Together, they directly and indirectly control 246 million shares, accounting for 66.33%, of which Cai Huabo directly holds 162 million shares, accounting for 43.68%. Cai Lijiang directly holds 14.7 million shares, with a shareholding ratio of 3.96%; At the same time, Cai Huabo indirectly controlled 69.3 million shares, accounting for 18.69%, by being the executive partner of Longxi No.1, Longxi No.2, Longxi No.3, Longjian Management and Longxi No.5..
Cai Huabo is the largest shareholder of Jiang Bolong, with a shareholding ratio of 43.68%; The National IC Fund is the second largest shareholder of the company, with a shareholding ratio of 6.93%; Cai Lijiang is the eighth largest shareholder of the company, with a shareholding ratio of 3.96%; Longxi No.1, Longxi No.2 and Longxi No.3 are the fourth, fifth and sixth largest shareholders of the company respectively, with shareholding ratios of 5.13%, 5.13% and 4.80% respectively; Longxi No.5 is the twelfth largest shareholder of the company, with a shareholding ratio of 1.70%.
According to the prospectus, Cai Huabo is a China citizen with no permanent residency abroad. He was born in 1976 and has a high school education. From 1996 to 1999, he served as a salesman of Shenzhen Haiyangwang Investment Development Co., Ltd.; Jiang Bolong Co., Ltd. was founded in 1999 and has served as general manager, executive director and chairman of Jiang Bolong Co., Ltd.; From 2015 to 2018, he served as an independent director of Beijing Junzheng Integrated Circuit Co., Ltd.; He is currently the chairman and general manager of the company.
Cai Lijiang, a China citizen with no permanent residency abroad, was born in 1976 and graduated from Jiangxi Hualian Institute of Foreign Trade with a junior college degree. From September 1998 to October 1999, he served as a design engineer of Shenzhen Baoan Debao Industrial Development Co., Ltd.; Since October 1999, he has worked in Jiang Bolong, and now he is the senior vice president of the company.
Jiang Bolong plans to be listed on the Growth Enterprise Market of Shenzhen Stock Exchange this time. The number of public offerings is not less than 10% of the total share capital of the company after the issuance, and it does not exceed 42 million shares. The sponsor and lead underwriter are CITIC Jiantou Securities Co., Ltd., and the joint lead underwriter is HSBC Qianhai Securities Co., Ltd. Jiang Bolong plans to raise 1.5 billion yuan this time. After deducting the issuance expenses, he will invest in the following projects:
1. The second phase construction project of Jiangbolong Zhongshan Storage Industrial Park, with a total investment of 700 million yuan, plans to invest 700 million yuan to raise funds; 2. Enterprise-level and industrial-level memory research and development projects, with a total investment of 361 million yuan, and plans to invest 350 million yuan to raise funds; 3. Replenish the working capital. The total investment of the project is 450 million yuan, and it is planned to invest 450 million yuan to raise funds.
In the first half of 2021, the operating income was 5.302 billion yuan, and the net profit was 680 million yuan.
From 2018 to January-June, 2021, Jiangbolong’s operating income was 4.228 billion yuan, 5.721 billion yuan, 7.276 billion yuan and 5.302 billion yuan respectively, of which the main business income was 4.228 billion yuan, 5.721 billion yuan, 7.276 billion yuan and 5.301 billion yuan respectively.
From 2018 to January-June, 2021, Jiang Bolong received cash of 4.135 billion yuan, 5.874 billion yuan, 7.539 billion yuan and 5.338 billion yuan, respectively.
From 2018 to January-June, 2021, Jiangbolong’s net profit was-58,436,900 yuan, 127 million yuan, 276 million yuan and 680 million yuan respectively, of which the net profit attributable to the owners of the parent company was-56,539,700 yuan, 128 million yuan, 276 million yuan and 680 million yuan respectively.
From January to June of 2018 to 2021, the net cash flow generated by Jiangbolong’s operating activities was-212 million yuan,-173 million yuan, 424 million yuan and-971 million yuan respectively.
In 2018, 2019 and January-June, 2021, the net cash flow generated by Jiangbolong’s operating activities was lower than the current net profit, mainly because with the expansion of production and operation scale, the company’s inventory scale grew rapidly, and the cash expenditure for purchasing goods and accepting labor services was relatively large; In 2020, the net cash flow generated by the company’s operating activities was higher than the current net profit, mainly because the downstream customers paid back more actively and the sales paid back well when the market was good and the storage products were in short supply. At the same time, the company adopted a more active purchasing and stocking strategy. In the fourth quarter of 2020, the inventory purchase scale was large, and the amount of accounts payable increased rapidly at the end of the credit period.
It is estimated that the annual operating income in 2021 will be 9.600 billion yuan to 10.140 billion yuan, and the net profit returned to the mother will be 960 million yuan to 1.035 billion yuan.
After review, from January to September 2021, the total assets of Jiangbolong were 6.091 billion yuan, an increase of 20.50% over the end of last year; Total liabilities were 1.751 billion yuan, up 9.98% from the end of last year.
From January to September 2021, Jiangbolong’s operating income was 7.679 billion yuan, a year-on-year increase of 67.45%; The net profit was 948 million yuan, a year-on-year increase of 3997.91%; The net profit attributable to shareholders of the parent company was 948 million yuan, a year-on-year increase of 3997.91%; The net profit returned to the mother after deduction was 871 million yuan, a year-on-year increase of 475.74%.
From January to September 2021, the net cash flow generated by Jiangbolong’s operating activities was-838 million yuan, compared with-2,645,900 yuan in the same period of last year, with a change ratio of-31,562.27%.
Jiang Bolong said in the prospectus that from January to September 2021, the net cash flow generated by the company’s operating activities was-838 million yuan, and the net outflow increased rapidly compared with the same period of last year, mainly because on the one hand, with the expansion of production and operation scale, the company’s inventory increased by 1.182 billion yuan at the end of September 2021 compared with the end of last year, and the cash expenditure for purchasing goods and accepting labor services was relatively large; On the other hand, the company’s operating income maintained steady growth, and the accounts receivable at the end of September 2021 increased by 309 million yuan compared with the end of the previous year.
In addition, based on the current operating conditions and market environment of Jiangbolong, the company expects its annual operating income to be 9.600 billion yuan to 10.140 billion yuan in 2021, an increase of 31.94% to 39.36% compared with 2020; The net profit attributable to shareholders of the parent company is 960 million yuan to 1.035 billion yuan, an increase of 247.53% to 274.68% compared with 2020; After deducting non-recurring gains and losses, the net profit attributable to shareholders of the parent company is 883 million yuan to 958 million yuan, an increase of 186.80% to 21.116% compared with 2020.
Jiang Bolong’s above-mentioned 2021 annual performance forecast is only a reasonable estimate of the management’s operating performance, and it does not constitute the company’s profit forecast or performance commitment without being audited or reviewed by certified public accountants.
In the first half of 2021, the total assets were 5.673 billion yuan and the total liabilities were 1.603 billion yuan.
From 2018 to January-June 2021, the total assets of Jiangbolong were 2.751 billion yuan, 4.033 billion yuan, 5.055 billion yuan and 5.673 billion yuan respectively, of which the current assets were 2.327 billion yuan, 3.475 billion yuan, 4.299 billion yuan and 4.723 billion yuan respectively.
From 2018 to January-June, 2021, Jiang Bolong’s total liabilities were 706 million yuan, 924 million yuan, 1.592 billion yuan and 1.603 billion yuan respectively, of which current liabilities were 647 million yuan, 881 million yuan, 1.560 billion yuan and 1.546 billion yuan respectively.
From 2018 to January-June 2021, the current ratio of Jiangbolong was 3.60 times, 3.95 times, 2.76 times and 3.06 times respectively, the quick ratio was 1.54 times, 1.87 times, 1.32 times and 0.86 times respectively, and the asset-liability ratio (parent company) was 5.30%, 9.19% and 0.86 times respectively.
From 2018 to January-June 2021, the average asset-liability ratio of comparable listed companies in the same industry was 56.77%, 54.01%, 51.65% and 54.49% respectively. Among them, Smart Global’s asset-liability ratio is 72.19%, 61.16%, 64.14% and 76.66%, Weigang’s asset-liability ratio is 66.34%, 66.89%, 65.80% and 63.09%, and the pirate ship’s asset-liability ratio is 79.94%, 79.54% and 66.
In the first half of 2021, the monetary fund was 603 million yuan.
From January to June of 2018 to 2021, Jiangbolong’s monetary funds were 531 million yuan, 1.198 billion yuan, 1.585 billion yuan and 603 million yuan respectively, accounting for 22.83%, 34.47%, 36.86% and 12.76% of current assets respectively.
From 2018 to January-June, 2021, the deposits in Jiangbolong Bank were 531 million yuan, 1.198 billion yuan, 1.585 billion yuan and 603 million yuan respectively, accounting for 99.98%, 99.99%, 100.00% and 99.99% of the monetary funds respectively.
The balance of accounts receivable in the first half of 2021 was 611 million yuan.
From 2018 to January-June 2021, the book value of Jiangbolong’s accounts receivable was 407 million yuan, 409 million yuan, 385 million yuan and 610 million yuan respectively, accounting for 17.50%, 11.77%, 8.96% and 12.93% of current assets respectively.
From 2018 to January-June, 2021, the balance of accounts receivable of Jiangbolong was 408 million yuan, 410 million yuan, 386 million yuan and 611 million yuan respectively, of which the balance of accounts receivable within three months was 397 million yuan, 405 million yuan, 353 million yuan and 611 million yuan respectively.
From 2018 to January-June, 2021, the amounts paid back by Jiang Bolong after the accounts receivable period were 408 million yuan, 409 million yuan, 386 million yuan and 537 million yuan, respectively, and the proportions of the paid back after the period were 99.87%, 99.90%, 100.00% and 87.88%.
From 2018 to January-June 2021, the turnover rate of accounts receivable of Jiangbolong was 13.83 times, 14.02 times, 18.33 times and 21.30 times respectively, and the average of comparable companies in the same industry was 7.79 times, 7.11 times, 7.39 times and 7.59 times respectively.
From 2018 to January-June, 2021, the accounts receivable turnover of Smart Global, a comparable company in the same industry, was 6.13 times, 5.33 times, 5.18 times and 5.61 times respectively, the accounts receivable turnover of Weigang was 9.75 times, 8.91 times, 9.66 times and 8.53 times respectively, and the accounts receivable turnover of pirate ships was 7.68 times and 6.76 times respectively.
The inventory balance in the first half of 2021 was 3.457 billion yuan.
From 2018 to January-June 2021, the book value of Jiangbolong’s inventory was 1.333 billion yuan, 1.825 billion yuan, 2.246 billion yuan and 3.393 billion yuan respectively, accounting for 57.26%, 52.53%, 52.24% and 71.84% of current assets.
From 2018 to January-June 2021, the inventory balance of Jiangbolong was 1.391 billion yuan, 1.852 billion yuan, 2.267 billion yuan and 3.457 billion yuan respectively, and the inventory depreciation reserve was 58.156 million yuan, 27.0826 million yuan, 21.3206 million yuan and 64.1743 million yuan respectively.
Jiang Bolong said that at the end of June 2021, the company’s provision for inventory depreciation increased, mainly due to the fluctuation of the market price of memory chips. From January to June 2021, the market demand for memory chips was strong, and the supply and demand of DRAM storage wafers were relatively tight. After the market price of memory chips rose rapidly in the first quarter, the price fell back in the second quarter. As a result, the company’s provision for inventory depreciation increased.
From 2018 to January-June 2021, the inventory turnover rate of Jiangbolong was 3.04 times, 3.23 times, 3.15 times and 2.95 times respectively, and the average of comparable companies in the same industry was 5.21 times, 5.31 times, 5.25 times and 4.23 times respectively.
From 2018 to January-June, 2021, the inventory turnover of Smart Global, a comparable company in the same industry, was 5.72 times, 5.73 times, 6.43 times and 4.97 times respectively, the inventory turnover of Weigang was 6.13 times, 5.71 times, 4.60 times and 3.50 times respectively, and the inventory turnover of pirate ships was 5.64 times, 5.82 times and 5.50 times respectively.
Jiang Bolong said that the company’s ending inventory is relatively large, and may further increase with the expansion of the company’s operating scale. Every year, the company makes corresponding provision for depreciation according to the amount that the net realizable value of the inventory is lower than the cost. Because the gross profit margin of the company’s products is relatively low and the inventory scale is relatively large, in the future, if the market supply and demand change greatly, the raw material price fluctuates greatly, the product market price and gross profit margin drop sharply, and the technical iteration leads to the decline or elimination of product demand, the company will face the risk of inventory depreciation loss, which will adversely affect the company’s financial situation and operating results.
In the first half of 2021, the short-term loan was 574 million yuan.
From 2018 to January-June, 2021, Jiang Bolong’s short-term loans were 271 million yuan, 350 million yuan, 414 million yuan and 574 million yuan respectively, accounting for 41.82%, 39.72%, 26.57% and 37.15% of current liabilities respectively.
Jiang Bolong said that at the end of each reporting period, the amount of short-term loans of the company showed an upward trend, mainly due to the increase in capital demand with the expansion of the company’s business scale.
In the first half of 2021, the comprehensive gross profit rate was 21.59%, which was lower than the industry average in the first three years.
From 2018 to January-June, 2021, the comprehensive gross profit margin of Jiangbolong was 7.62%, 10.71%, 11.96% and 21.59% respectively, and the gross profit margin showed an overall upward trend.
From 2018 to January-June, 2021, the average gross profit margins of comparable companies in the same industry were 15.17%, 17.42%, 19.05% and 21.54% respectively. Among them, the gross profit margins of Smart Global are 22.62%, 19.60%, 19.28% and 18.44% respectively, while those of Weigang are 6.05%, 11.07%, 14.82% and 18.60% respectively, and those of pirate ships are 11.95%, 16.14% and 20.53 respectively.
According to Jiangbolong’s product categories, the gross profit margin of embedded storage is 6.41%, 14.21%, 10.84% and 24.63%, the gross profit margin of solid-state disk is 4.60%, 5.27%, 9.75% and 15.33%, and the gross profit margin of mobile storage is 10.16%, 10.34% and 18.33% respectively.
Jiang Bolong said that from 2018 to January-June 2021, the gross profit margin of the company’s main business was 7.62%, 10.71%, 11.97% and 21.59%, respectively, showing an upward trend. The changes in the gross profit margin of the company’s products were comprehensively affected by factors such as product structure, supply of upstream raw materials, fluctuation of storage market demand and changes in market competition pattern.
In the second half of 2021, the purchase price of storage wafers and the sales price of storage products both fell after the rapid increase in the first half of the year, while the company’s inventory turnover days were about 3-4 months. Due to the interval between purchase and sales cycles, the change of the company’s product sales cost was lagging behind, which led to the decline of the company’s gross profit margin in the fourth quarter of 2021. It is estimated that the gross profit margin in the fourth quarter will be 14%-16%, compared with 2021.
In the future, if the company’s product structure cannot be continuously optimized, the storage wafer supply or storage market demand fluctuates greatly, the market competition becomes increasingly fierce, and the product market price drops sharply, the company will face the risk of fluctuation or decline in gross profit margin.
Risk of fluctuation of gross profit margin caused by fluctuation of wafer price.
The main raw material of Jiangbolong products is storage wafers. From 2018 to January to June 2021, the cost of storage wafers accounted for 78.04%, 75.57%, 79.76% and 79.86% of the company’s main business cost, respectively. The market price changes of storage wafers and storage products have a great impact on the company’s gross profit margin.
Storage products with general specifications usually have an open market reference price, and the market price transmission mechanism is smooth. The change trend of the sales price of storage products is usually consistent with the change trend of the purchase price of storage wafers. However, because the unit price of product sales is affected by the market price at the point of sale and the unit cost is affected by the market price at the point of purchase, there is a production and sales cycle interval between them, and the change of product unit cost lags behind the change of product sales unit price, which makes the gross profit margin of memory manufacturers fluctuate with the fluctuation of wafer price. Other things being equal, in the rising stage of market price, the sales unit price rises before the unit cost, and the gross profit margin usually shows an upward trend; In the stage of market price decline, the sales unit price falls before the unit cost, and the gross profit margin usually shows a downward trend; When the market price is stable or fluctuating, the difference between the unit selling price and the unit cost is small, and the gross profit margin is usually stable. Therefore, due to the market price fluctuation of storage wafers during the reporting period, the company’s gross profit margin fluctuated due to the periodic interval between wafer procurement and product sales.
In this context, if the market price of storage wafers rises sharply in the future, and the price increase of raw materials fails to be effectively transmitted, the sales price of the company’s products will not rise simultaneously; Or the market price of storage wafers has fallen sharply. Because it takes a certain period of time for procurement and production, the decline in product sales price precedes the decline in cost, which will cause the company to be unable to fully absorb the impact of wafer price fluctuation, so the company has the risk of fluctuation or decline in gross profit margin, which will adversely affect the company’s operating performance and profitability.
The listed company Weil Co., Ltd. was the largest customer of Jiangbolong in 2018 and withdrew from the list of the top five customers in 2020.
From 2018 to January-June, 2021, the sales amount of Jiangbolong to the top five customers was 929 million yuan, 1.803 billion yuan, 2.510 billion yuan and 1.789 billion yuan respectively, accounting for 21.98%, 31.51%, 34.49% and 33.74% of the total sales respectively.
It is worth noting that in 2018, the largest customer of Jiangbolong was the listed company Weir, and the sales amount of Jiangbolong to Weir in that year was 315 million yuan. By 2019, Weir was ranked as the fourth largest customer of Jiangbolong, and the sales amount of Jiangbolong to Weir in that year was 236 million yuan. From January to June in 2020 and 2021, Weir withdrew from the list of the top five customers of Jiangbolong.
Suppliers are relatively concentrated
From 2018 to January-June, 2021, the purchase amount of Jiangbolong from the top five suppliers was 2.861 billion yuan, 3.962 billion yuan, 4.980 billion yuan and 3.879 billion yuan respectively, accounting for 73.41%, 70.37%, 71.96% and 72.40% of the total purchase amount respectively.
Jiang Bolong said that the main raw material of the company’s products is storage wafers. Storage wafer manufacturing is a capital-intensive and technology-intensive high-barrier industry, with large capital investment, high technical threshold and obvious scale effect. These characteristics lead to a high concentration of global storage wafer supply and relatively concentrated suppliers.
From 2018 to January-June, 2021, the company’s purchases from the top five suppliers accounted for 73.41%, 70.37%, 71.96% and 72.40% respectively. In the future, if there is a shortage of major raw materials such as storage wafers due to unexpected events such as natural disasters and major accidents, or due to geopolitical changes, trade frictions, changes in import and export and tariff policies, and cooperation relations, the major raw materials such as storage wafers required for the company’s production may not be supplied in a timely and sufficient manner, and in extreme cases, the supply may be cut off, thus affecting the stability of the company’s production and supply, which may have a major adverse impact on the company’s production and operation.
Overseas sales and overseas purchases all exceed 80%.
From 2018 to January-June, 2021, the overseas sales accounted for 85.24%, 85.19%, 84.74% and 83.59% respectively, and the overseas purchases accounted for 95.65%, 93.38%, 87.61% and 87.93% respectively.
The company said that the scale and amount of overseas sales and purchases are relatively large, accounting for a relatively high proportion. The company’s product export and raw material procurement are mainly denominated and settled in US dollars, and the exchange rate change of RMB has a certain impact on the company’s operating performance. During the reporting period, the company’s exchange earnings were 8,886,400 yuan, 280,500 yuan, 3,356,600 yuan and-2,776,600 yuan, respectively, accounting for 0.19%, 0.99% and -0.35% of the total profits of the current period in 2019, 2020 and January-June 2021, respectively. If the RMB exchange rate fluctuates greatly due to the influence of domestic and foreign economic environment in the future, the company may face certain exchange rate fluctuation risk, which will adversely affect the company’s operating performance.
From 2018 to January-June 2021, the domestic income of Jiangbolong was 624 million yuan, 847 million yuan, 1.110 billion yuan and 870 million yuan respectively, accounting for 14.76%, 14.81%, 15.26% and 16.41% of the main business income respectively.
From 2018 to January-June 2021, Jiangbolong’s overseas income was 3.604 billion yuan, 4.873 billion yuan, 6.165 billion yuan and 4.431 billion yuan respectively, accounting for 85.24%, 85.19%, 84.74% and 83.59% of the main business income respectively.
Jiang Bolong said that during the reporting period, the company’s main business income mainly came from Chinese mainland, Hong Kong, Macao and Taiwan, and the company’s income in Hong Kong, Macao and Taiwan was relatively high, which was consistent with industry practice. Hong Kong has a mature business environment, developed logistics system and convenient transportation conditions, and has strong advantages in resources and supporting capabilities. It has become an important international distribution center for electronic products. Considering factors such as logistics, trading habits, taxation and foreign exchange settlement, delivery in Hong Kong has become an industry practice, and some domestic customers mainly purchase through their Hong Kong branches or supply chain companies.
Core technology and core competitiveness were questioned in two rounds.
After long-term technology accumulation, Jiangbolong has formed 47 core technologies closely related to its business, achieved 12 achievements based on core technology research and development, and is engaged in 25 major research and development projects. In addition, Jiangbolong enhances its competitiveness through continuous technological innovation. By June 30, 2021, the company had obtained 426 valid patents at home and abroad (103 overseas patents), including 165 invention patents, won the China Patent Excellence Award twice and owned 65 software copyrights.
Jiang Bolong suggested in the prospectus that the company has accumulated a number of core technological achievements and intellectual property rights through years of independent research and development, and established an internal control system related to core technologies. In the future, if the internal control system related to the company’s core technology is not effectively implemented, or the core technology is leaked due to gross negligence, malicious collusion and fraud, it may damage the company’s core competitiveness and adversely affect the company’s production and operation.
The Shenzhen Stock Exchange raised questions about the company’s core technology and core competitiveness in the first round and the second round of inquiries about Jiang Bolong. These include:
Combined with the substitution of DDR5 for DDR4 and the latest technology development in the storage industry, this paper explains whether the issuer’s main product types and technical routes are facing the risk of being replaced or eliminated, and gives a risk warning in the prospectus;
Explain the reasons why the number of invention patents obtained during the reporting period is significantly less than that outside the reporting period, whether most of the current patents of the issuer are obsolete and have no great commercial value, and whether the core technology of the issuer is advanced;
Explain the reasons why the number of invention patents applied for and obtained in the reporting period accounted for a small proportion of the number of invention patents issued by the issuer, and whether the issuer has strong innovation and creation attributes;
Explain the importance of the relevant license of SD memory card to the issuer, the relevant license fee and license period, and whether it can ensure the issuer’s long-term use; Before the signing of the license agreement in June 2019, whether the issuer involved in the use of relevant licenses, and whether there were disputes or potential disputes.
In 2019, related sales amounted to 114 million yuan.
According to the prospectus, there are a number of related party transactions in Jiang Bolong, among which a related party sales amount reached 114 million yuan in 2019, which was for Jiang Bolong to sell storage products such as solid state drives to U Lucky International (HK) Co., Ltd. (Youxiang International (Hong Kong) Co., Ltd.). The company is an enterprise in which Xing Xiaobo, the brother of the spouse of Cai Huabo, one of Jiang Bolong’s real controllers, holds 100% of the shares.
From January to June in 2018, 2019 and 2021, Jiang Bolong purchased the main control chips from Deyi Microelectronics and its subsidiaries for 15,569,300 yuan, 5,141,000 yuan and 21,972,500 yuan respectively. The company is a joint venture of Jumbo Longyuan, and part of its equity was transferred in November 2020; Li Zhixiong, director and deputy general manager of Jiang Bolong, once served as a director of the company, and retired in December 2020.
In 2018 and 2018, Jiang Bolong purchased solid-state hard disks from Shenzhen Haoyouban Technology Co., Ltd. for RMB 3,826,500 and RMB 12,163,800 respectively. The company is an enterprise in which Xing Xiaoling, the eldest brother and spouse of Cai Huabo, one of Jiang Bolong’s real controllers, holds 80% of the shares and serves as the general manager and executive director, and Xing Xiaobo, the younger brother of Xing Xiaoling, holds 20% of the shares.
From 2018 to 2020, Jiang Bolong purchased 21,000 yuan, 79,200 yuan and 174,500 yuan from Shenzhen Zhongdian Port Technology Co., Ltd. respectively. The company is an enterprise in which Cai Jing, director of Jiang Bolong, is a director.
In 2018, Jiang Bolong purchased SSD from Sunshine Disk Trading Limited for RMB 212,600. The company is an enterprise in which Xing Xiaoling, the spouse of Cai Huabo’s eldest brother, holds 100% shares.
In 2019 and 2020, Jiang Bolong purchased outsourcing accessories from Wuhu Jinsheng Electronic Technology Co., Ltd. for RMB 5500 and RMB 53000 respectively. The company is a company where Jiang Bolong’s director Zhu Yu once served as a director and retired in June 2018.
In 2018 and 2019, Jiang Bolong sold storage products such as SSDs to U Lucky International (HK) Co., Ltd. (Youxiang International (Hong Kong) Co., Ltd.) for RMB 3,317,300 and RMB 114 million respectively. The company is an enterprise in which Xing Xiaobo, the brother of Cai Huabo’s eldest brother’s spouse, holds 100% of the shares.
In 2018 and 2019, Jiang Bolong sold storage products such as mobile storage to Sunshine Disk Trading Limited for RMB 20,035,100 and RMB 13,083,700 respectively. The company is an enterprise in which Xing Xiaoling, the spouse of Cai Huabo’s eldest brother, holds 100% shares.
From 2018 to 2020, Jiang Bolong sold storage products such as solid-state disks to Shenzhen Haoyouban Technology Co., Ltd. for RMB 6,825,800, RMB 24,214,400 and RMB 280,500 respectively. The company is an enterprise in which Xing Xiaoling, the eldest brother and spouse of Cai Huabo, one of Jiang Bolong’s real controllers, holds 80% of the shares and serves as the general manager and executive director, and Xing Xiaobo, the younger brother of Xing Xiaoling, holds 20% of the shares.
From 2018 to January-June, 2021, Jiang Bolong sold 42,200 yuan, 43,500 yuan, 25,855,700 yuan and 6,895,600 yuan of embedded storage products to Shenzhen Zhongdian Port Technology Co., Ltd. respectively. The company is an enterprise in which Cai Jing, director of Jiang Bolong, is a director.
From 2018 to 2020, Jiang Bolong sold storage products such as solid-state disks to Shenzhen Andaxing Technology Co., Ltd. for 1,103,800 yuan, 443,200 yuan and 169,200 yuan respectively. The company was an enterprise in which Jiang Bolong and Cai Huabo held 20% and 40% shares respectively in the first 12 months of the reporting period, and withdrew in February 2017.
In 2018, Jiang Bolong sold storage products such as wireless memory to Shenzhen Yinglai Hechuang Electronics Co., Ltd. for 1,133,800 yuan. The company is an enterprise in which Cai Huabo’s eldest brother Cai Jinjiang holds 27.43% of the shares and serves as the executive director.
From 2018 to 2020, Jiang Bolong sold 761,100 yuan, 12,400 yuan and 10,900 yuan of embedded storage products to Deyi Microelectronics and its subsidiaries respectively. The company is a joint venture of Jumbo Longyuan, and part of its equity was transferred in November 2020; Li Zhixiong, director and deputy general manager of Jiang Bolong, once served as a director of the company, and retired in December 2020.
In 2018, Jiang Bolong sold storage products such as solid state drives to Wuhu Jinsheng Electronic Technology Co., Ltd. for 411,200 yuan. The company that changed the company to Jiang Bolong’s director Zhu Yu once served as a director has stepped down in June 2018.
In 2018 and 2019, Jiang Bolong sold storage products such as wireless memory to Shenzhen Smart Bay Technology Co., Ltd. for 33,000 yuan and 10,800 yuan respectively. The company is an enterprise in which Cai Huabo’s eldest brother Cai Jinjiang holds 51.14% of the shares and serves as the general manager and executive director.
Cai Huabo and Cai Lijiang, the actual controllers, have provided unlimited guarantees for wholly-owned subsidiaries.
According to the prospectus, Jiang Bolong’s actual controllers Cai Huabo, Cai Lijiang and others have provided unlimited guarantees for Hong Kong Jiang Bolong, a wholly-owned subsidiary of the company.
From July 29, 2015 to June 27, 2018, Cai Huabo provided unlimited guarantee for Hong Kong Jumbolong, which has been fulfilled; From June 29, 2016 to April 13, 2018, Cai Huabo, Cai Lijiang, Li Zhixiong and Netcom Technology (HK) Limited provided unlimited guarantee for Hong Kong Jumbolong, which has been fulfilled; From May 25, 2018 to August 19, 2021, Cai Lijiang provided unlimited guarantee for Hong Kong Jumbolong, which has been fulfilled; From June 27, 2018 to August 19, 2021, Cai Huabo provided Hong Kong Jiang Bolong with a guarantee of 75 million US dollars, which has been fulfilled. In addition, since January 12, 2018, Cai Huabo has continued to guarantee Hong Kong Jumbolong, which has not been fulfilled yet.
In order to meet the normal capital demand under the background of the rapid development of Jiangbolong’s business, the company borrowed funds from Netcom Technology (HK) Limited and Shenzhen Jiangbolong Holdings Co., Ltd., which were controlled by the actual controllers, for temporary capital turnover. The above-mentioned capital borrowing was completed in 2018, and the interest was paid to Netcom Technology (HK) Limited with reference to the Hong Kong Interbank Offered Rate in the same period. The interest was not accrued for the capital borrowing from Shenzhen Jiangbolong Holdings Co., Ltd. due to its short term and small amount. Wang Jingyang and Bai Hongtao used personal funds as the company’s working capital outside the reporting period, and the above-mentioned funds were cleared in 2019.
Jiang Bolong has twice borrowed funds from Netcom Technology (HK) Limited, amounting to US$ 4.9 million and US$ 12 million respectively; RMB 14 million was borrowed from Shenzhen Jiangbolong Holdings Co., Ltd..
Outside the reporting period, Wang Jingyang and Bai Hongtao used personal funds as the company’s working capital, amounting to 3.57 million yuan and 1.42 million yuan respectively.
In addition to the above matters, Jiang Bolong also has receivables and payables from related parties.
The associated sales price is low. Shenzhen Stock Exchange asks whether the benefits are transferred.
Shenzhen Stock Exchange’s second round of audit inquiry on Jiang Bolong shows that in 2019, Jiang Bolong sold 114 million yuan to related party Youxiang International (Hong Kong); In 2018-2019, it sold 20,035,100 yuan and 13,083,700 yuan to Hengchu Trade respectively, and sold 6,825,800 yuan and 24,214,400 yuan to friends and partners. In 2020, it will sell 25,855,700 yuan to CLP Port. The selling price of Jiangbolong to related parties is far lower than the selling unit price of similar products. For example, the selling unit price of Jiangbolong to Youxiang International in 2018-2019 ranged from 14.71 yuan/piece to 26.57 yuan/piece, while the average selling unit price of Jiangbolong’s solid-state drives in the same period was 108.74 yuan/piece and 143.28 yuan/piece.
Shenzhen Stock Exchange requires Jiang Bolong to explain the fairness of related party transactions, the reason why the issuer’s sales price to related parties is much lower than the unit price of similar products, whether there is a big difference between the content and model of products sold by the issuer to the related parties and the issuer’s main product sales structure, the necessity and rationality of related transactions, and whether there is any interest transfer situation.
Jiang Bolong said in his reply that Hong Kong Youxiang is mainly engaged in the trade of electronic products such as storage, and has certain customer resources and sales channels in the field of storage products. Through cooperation with it, the company aims to expand the market sales of storage products such as solid state drives with its customer resources and sales channels, and it is necessary and reasonable to sell products to it.
At the same time, in addition to selling to Hong Kong Youxiang, the company also sells the same model products to other unrelated third-party customers, accounting for about 20% of the sales to Hong Kong Youxiang, and the sales unit price is basically the same as that of unrelated third parties, so there is no interest transfer.
Therefore, the difference between the sales price calculated by the company from Hong Kong Youxiang and the overall sales unit price of the company’s solid-state hard disk is mainly due to the difference in storage capacity and specifications, and the price calculated based on storage capacity is relatively small; It is necessary and reasonable for the company to sell products to Hong Kong Youxiang. The sales of the same model products to Hong Kong Youxiang account for a relatively small proportion, and the sales unit price is basically the same as that of unrelated third parties, so there is no interest transfer.
When the time of equity transfer approached the end of the reporting period, it was asked whether it was obvious to regulate profits and whitewash performance.
Shenzhen Stock Exchange’s first inquiry about Jiang Bolong showed that the company’s investment income from the disposal of long-term equity investment in 2020 was 107 million yuan, mainly due to the sale of a 2.61% stake in Microelectronics.
In November, 2020, Jiangbo Longzi Company Tibet Yuanshi transferred 0.78% and 1.83% equity of a microelectronics company to Kaiying Venture Capital and Chuangke Town respectively. After the completion of the above-mentioned equity transfer, Jiang Bolong’s remaining shareholding ratio in a microelectronics company was 4.79%. At the same time, he no longer sent directors to a microelectronics company and did not participate in its daily operation and management activities, which was considered to have no significant impact on it. He adjusted the remaining 4.79% equity to other non-current financial assets and re-measured it at fair value. As the fair value of a microelectronics company’s equity was higher than the book value of long-term equity investment, a large amount of current investment income was recognized. According to public information, after the transfer, Jiang Bolong remains the third largest shareholder of Deyi Microelectronics.
Deyi Microelectronics is mainly engaged in the design, technical development and sales of master control chips, and is the upstream manufacturer of the issuer’s industrial chain. In 2018 and 2019, Jiang Bolong purchased master control chips from Deyi Microelectronics for 15.5693 million yuan and 5.1410 million yuan.
One of the questions asked by Shenzhen Stock Exchange to Jiang Bolong on the above issues is: combining the payment time and the change time of industrial and commercial registration, it shows that it is reasonable for the issuer to confirm the investment income of a microelectronic equity sold until 2020; whether there is obvious motivation to control profits and whitewash performance when the above equity transfer time is near the end of the reporting period, and whether Kaiying Venture Capital and Maker Town are related or closely related to the issuer’s actual controller, Dong Jiangao and their related parties.
Shenzhen Stock Exchange asked Jiang Bolong to explain the reasons for not appointing directors to Deyi Microelectronics in the light of the current composition of the board of directors of Deyi Microelectronics and the fact that the issuer’s shareholding ratio is higher than that of the above-mentioned shareholders who have appointed directors to Deyi Microelectronics. Whether the basis for determining that the issuer has no significant influence on Deyi Microelectronics is sufficient, whether it should be determined that it has a significant influence on Deyi Microelectronics in accordance with the principle of substance over form, and whether there are cases in which a large amount of investment income is confirmed by not appointing directors and changing the accounting of Deyi Microelectronics.
Jiang Bolong said in response to the two rounds of audit inquiries of Shenzhen Stock Exchange that the company’s equity transfer time was near the end of the reporting period, and it was fully considered to obtain a microelectronics equity financing arrangement, and it was determined through consultation with the counterparty that there was no motivation to regulate profits and whitewash performance, and there was no case of confirming a large amount of investment income by not sending directors or changing the accounting of Duiyimicroelectronics.
Small market share
According to the data released by China Flash Memory Market (CFM) and Omdia(IHS Markit), in 2020, the company ranked seventh in the global market share of eMMC products, third in the global market share of Lexar memory cards and fourth in the global market share of Lexar flash drives. According to public information, the market share of DDR5 is expected to rapidly surpass DDR4.
The Shenzhen Stock Exchange asked Jiang Bolong to briefly explain the differences in application fields, implementation functions, storage capacity and technical routes of various products of the issuer; Explain the difference between the technical level of the issuer’s main products and its main competitors, and the price difference between the issuer’s main sales price and the similar products with the same specifications of its main competitors, and analyze whether the issuer is competitive compared with its main competitors; Combined with the substitution of DDR5 for DDR4 and the latest technology development in the storage industry, this paper explains whether the issuer’s main product types and technical routes are facing the risk of being replaced or eliminated, and gives a risk warning in the prospectus.
Jiang Bolong said in his reply that the global semiconductor memory market is huge, and the company’s operating income is growing rapidly, but the market share is small and there is broad room for growth.
Memory, as an irreplaceable functional device in the fields of consumer electronics, communication equipment and Internet of Things, is now
One of the most widely used core components in the information industry, in the global integrated circuit market, memory cores
Chip has always been the product category with the largest market share of integrated circuits. According to the World Semiconductor Trade Statistics Organization
(WSTS) data, the scale of the global integrated circuit industry in 2020 is 361.226 billion US dollars, of which memory cores
The chip scale is $117.482 billion, accounting for 32.52% of the total scale of the integrated circuit industry.
In 2018, 2019 and 2020, the company’s operating income was 4.228 billion yuan, 5.721 billion yuan and 7.276 billion yuan respectively. Based on the global semiconductor memory market size calculated by the World Semiconductor Trade Statistics Organization (WSTS), the company’s operating income accounted for only 0.40%, 0.78% and 0.90% of the global semiconductor memory market size, and its market share remained.
Save a commercial secret infringement dispute litigation.
Jiang Bolong has a commercial secret infringement dispute litigation. According to the prospectus, the case is in the first instance stage and is currently undergoing judicial appraisal related to the facts of the case.
Trade secret infringement dispute: Jiang Bolong sued the Shenzhen Intermediate People’s Court on the grounds that the defendants Hao Lu, Zhao Ying and Shenzhen Jingcun Technology Co., Ltd. infringed the trade secret of Jiang Bolong’s testing technology. On June 22, 2020, the Shenzhen Intermediate People’s Court issued the Notice of Accepting Cases to accept the case. Defendant Hao Lu was a retired employee of Jiang Bolong and participated in the research and development of LPDDR3 testing technology. Jiang Bolong discovered that the defendant was selling products containing the above testing technology in the market at the end of 2018, so he sued the defendant to stop the infringement and jointly compensated Jiang Bolong for economic losses and punitive damages totaling 132,044,800 yuan.
The subject matter involved in the above case is a test algorithm protected by Jiang Bolong in the form of trade secrets, not Jiang Bolong’s patented technology. The relevant testing algorithms are mainly used for testing LPDDR3 DRAM products. When the defendant infringes, because Jiangbolong still sells LPDDR3 products, the relevant testing technology is of certain importance. With the iterative upgrade of Jiangbolong LPDDR DRAM product line, the sales revenue and proportion of LPDDR3 decreased year by year. However, because LPDDR3 is still widely used in the low-end market, the related technologies still have great economic value for storage enterprises that mainly focus on this market.
Jiang Bolong disclosed the draft prospectus on December 9, 2021, showing that as of the signing date of the prospectus, the case was in the first instance stage. At present, judicial expertise related to the facts of the case is being carried out.
In addition, Jiang Bolong’s WeChat WeChat official account published a message on July 13, 2020. On July 7, 2020, the company suddenly received a lawyer’s letter from Jingcun Company, claiming that Jiang Bolong deliberately concealed the facts and framed others.
Regarding the above lawyer’s letter, Jiang Bolong said that the company has sent a lawyer’s letter in time to reply, pointing out that the viewpoint of the other lawyer’s letter can’t be established at all, and reserves the right to safeguard its rights and interests by legal means.
In addition, Jiang Bolong still has a labor dispute.
On April 2, 2021, Jiang Bolong received the Notice of Respondent issued by the People’s Court of Nanshan District, Shenzhen, Guangdong Province. Ceng Sheng, a retired employee of Jiang Bolong, appealed for a judgment to order Jiang Bolong to fulfill the Supplementary Agreement of the Technology Transfer Framework Agreement, grant him 15,000 shares (tentatively 15,000 yuan) and bear the legal costs of the case.
On December 5, 2019, Jiang Bolong signed the Technology Transfer Framework Agreement with three natural persons, including Chengdu elegant demeanour Electronic Technology Co., Ltd. (hereinafter referred to as "Chengdu elegant demeanour") and Ceng Sheng, stipulating that Jiang Bolong would receive some technologies from Chengdu elegant demeanour; On December 6, Jiang Bolong and Ceng Sheng signed the Supplementary Agreement to the Framework Agreement on Technology Transfer, stipulating that Jiang Bolong hired Ceng Sheng and others as employees, who were entitled to join Jiang Bolong’s employee equity incentive plan; On December 11th, Shanghai Jiang Bolong and Ceng Sheng signed the Labor Contract.
On March 27th, 2020, Ceng Sheng and Shanghai Jiang Bolong signed the Agreement on Dissolution (Termination) of Labor Relations (hereinafter referred to as "Dissolution Agreement"), and Shanghai Jiang Bolong gave Ceng Sheng one-off compensation, and the Technology Transfer Framework Agreement, the Supplementary Agreement to the Technology Transfer Framework Agreement signed by Ceng Sheng and Jiang Bolong and the relevant equity incentives in the employment notice became invalid at the same time. On April 7th, 2020, Shanghai Jiangbolong paid all the severance compensation to Ceng Sheng in one lump sum according to the Termination Agreement.
On May 17th, 2021, the People’s Court of Nanshan District, Shenzhen City, Guangdong Province ruled that the case was not an ordinary civil contract dispute but a labor dispute, and dismissed the plaintiff Ceng Sheng’s lawsuit. On May 23, 2021, Ceng Sheng refused to accept the above ruling and appealed to the Shenzhen Intermediate People’s Court. On July 8, 2021, the Shenzhen Intermediate People’s Court issued a Civil Ruling (2021) No.19702, which rejected the appeal and upheld the original ruling.
In addition, Shanghai Jiang Bolong brought a lawsuit to the Yangpu District People’s Court in Shanghai for Ceng Sheng’s violation of the Agreement on Termination, requesting Ceng Sheng to return all the severance pay. On June 29th, 2021, the People’s Court of Yangpu District, Shanghai made the Civil Judgment (2021) No.11124 at the beginning of the Republic of China, and the judgment dismissed the claim. On August 10, 2021, Shanghai Jiang Bolong appealed to the Shanghai No.2 Intermediate People’s Court, and the case is still under trial.
Cai Huabo, the controlling shareholder, is a witness in the bribery case.
According to the prospectus, Cai Huabo, the controlling shareholder of Jiang Bolong, was involved in the case of Ji Zhen, the former deputy head of Nanshan District, Shenzhen, as a witness.
According to the criminal judgment No.350 (2017) at the beginning of Guangdong 03 Criminal Sentence made by Shenzhen Intermediate People’s Court on December 18, 2017 and the Criminal Ruling No.395 (2018) at the end of Guangdong Criminal Sentence made by Guangdong Higher People’s Court on June 8, 2018, Ji Zhen supported his student Zeng Moming to start a business. Introduce to Cai Huabo that Shenzhen Huade Innovation Technology Co., Ltd. (hereinafter referred to as "Huade Company") cooperated with Jiang Bolong Co., Ltd. in SSD testing. Huade Company’s business scope includes integrated circuit business and Jiang Bolong Co., Ltd. has outsourcing cooperation in testing business with other manufacturers. Jiang Bolong Co., Ltd. signed an entrusted testing contract with Huade Company and paid the testing fee of 1 million yuan, but Huade Company failed to fulfill the corresponding contractual obligations, and this testing fee was actually occupied by Ji Zhen. Hou Jizhen was convicted of accepting bribes and corruption, and the case has been closed.
Except for Cai Huabo, who assisted the public prosecution in this case, neither Jiang Bolong nor Cai Huabo was put on file for investigation or prosecution by the judicial authorities, and no criminal compulsory measures were taken. According to the Letter of Work issued by Shenzhen People’s Procuratorate on March 24th, 2021, Jiang Bolong Limited and Cai Huabo were not put on file for investigation by Shenzhen People’s Procuratorate, and were not prosecuted by Shenzhen People’s Procuratorate for suspected criminal offences. According to the Certificate of No Criminal Record issued by shenzhen public on February 8, 2021, Cai Huabo was not found to have a criminal record from March 6, 1976 to February 5, 2021.
According to the refereeing document network, in the first half of 2013, Shenzhen Jiangbolong Electronics Co., Ltd. (hereinafter referred to as "Jiangbolong Company") applied to the Nanshan District Government for funding for science and technology projects, and with the help of the defendant Ji Zhen, it finally won the funding for science and technology projects of RMB 2 million. Since then, Ji Zhen asked Cai Mobo, the chairman of the company, that the company sign an entrusted test contract with Huade Company and pay the test fee of RMB 1 million. Cai Mobo agreed. On November 27th, 2013, Ji Zhen appointed Zeng Moming to sign a contract with Jumbolong Company on behalf of Huade Company. On January 6, 2014, Jumbolong Company transferred RMB 1 million to Huade Company. The contract was not actually performed, and it was a false contract. The so-called test fee was the benefit fee charged by Ji Zhen to Jiang Bolong Company, which was used by Ji Zhen for personal purchase.
The testimony of the witness Zeng Moming (general manager of Huade Company) proves that one day in October 2013, Ji Zhen took Hua Mouzhi and me to visit Jiangbolong Company and introduced us to each other in the office of Cai Mobo, the head of Jiangbolong Company. A few days later, Ji Zhen asked me to go directly to Cai Mobo in the name of Huade Company, saying that there was a project cooperation between the two sides, amounting to 1 million yuan. As for the cooperation content, he did not mention it to me. After I met Cai Mobo, I asked him if he had a cooperation project of 1 million yuan. Cai Mobo said that Ji Zhen had already agreed with him, and there was no need to talk about it. Then he asked a manager surnamed Zhang from his company to come to his office to meet me specifically. I introduced the situation and left. A week later, Manager Zhang invited me to meet with Jiang Bolong Company. There were me, Manager Zhang and another manager Liu (female, in her fifties) of Jiang Bolong Company present. They put forward a contract on the spot, and the contents were not agreed, so they let me go back. Not long after, manager Zhang sent me the contract, the content of which was about testing the performance of memory. The contract was signed by manager Zhang on behalf of Jiangbolong Company. After I printed it, I signed and sealed it for Qiangmou and sent it back to Jiangbolong Company for signature and seal. At the beginning of 2014, Jumbolong Company transferred RMB 1 million to Huade Company by means of public-to-public bank transfer between companies, and Huade Company also provided corresponding invoices to Jumbolong Company.
The dividend for two years is nearly 80 million yuan.
According to the prospectus, Jiang Bolong distributed cash dividends of 20 million yuan and 59.3383 million yuan in April 2018 and May 2021 respectively.
On April 9, 2018, Jiang Bolong’s shareholders’ meeting reviewed and approved the profit distribution plan for 2017, and distributed a cash dividend of 20 million yuan (including tax) to all shareholders.
In 2019 and 2020, Jiang Bolong did not distribute dividends.
On May 20th, 2021, Jiangbolong shareholders’ meeting reviewed and approved the profit distribution plan for 2020, and distributed a cash dividend of 1.60 yuan (including tax) to all shareholders for every 10 shares, totaling 59.3383 million yuan (including tax).
Regarding the above cash dividends, Shenzhen Stock Exchange asked Jiang Bolong to analyze and explain the necessity and appropriateness of the relevant large cash dividends, and whether they match with Jiang Bolong’s financial situation, focusing on analyzing and explaining the rationality of Jiang Bolong’s cash dividends in the case of losses in 2018, such as the articles of association of Jiang Bolong. Explain the use of dividend funds of Jiang Bolong’s actual controller and major shareholders.
