"Electric Eel Express" text/Yin Qiutong

On February 2, Zhang Xiaoquan Co., Ltd. (hereinafter referred to as "Zhang Xiaoquan") was approved for the GEM IPO and will become an A-share "Cut the first strand with a knife." Zhang Xiaoquan is expected to issue 39 million shares to the public in this issuance and listing, and plans to raise 455 million yuan in funds. An investigation by "Electric Eel Express" found that the company's IPO prospectus contains many doubts, especially the family holdings, the chairman's actual control of 99 companies, and the surprise dividend distribution before listing, which are incredible.

"Electric Eel Express" sent a confirmation letter to the company regarding relevant questions. In the company's reply, it was obvious that it avoided the important and ignored the trivial, which was very official and insincere.

Commitment to guarantee the interests of small and medium-sized shareholders

The prospectus shows that as of the IPO, Zhang Guobiao, Zhang Zhangsheng and Zhang Xincheng held a total of 71.83 shares and were the actual controllers. Among them, Zhang Guobiao and Zhang Zhangsheng are brothers, and Zhang Guobiao and Zhang Xincheng are father and son. Market participants believe that concentrated ownership and "one dominant shareholder" have long been regarded as stumbling blocks to improving the governance structure of listed companies. If the actual controller of such a family-owned enterprise exerts an adverse influence on the company's operations, financial decisions, major personnel appointments and removals, and profit distribution through the exercise of voting rights or other means, there will be a risk of harming the interests of the company and small and medium-sized shareholders.

When Zhang Xiaoquan responded to the letter of verification, he said: "The company has improved its legal person governance structure in accordance with the modern enterprise system, and will strictly operate in accordance with the requirements of the Company Law and other laws, regulations and normative documents, and implement it conscientiously." "Three Meetings" "Rules of Procedure, and effectively take relevant measures to protect the interests of the company and other small and medium-sized shareholders of the company."

According to Tianyancha data, Zhang Xiaoquan, Chairman Zhang Guobiao, has 23 job information, and serves as a shareholder of 2 companies , and served as senior executives in 22 companies, with actual control over as many as 99 companies. What is particularly noteworthy is that Zhang Guobiao has 16 surrounding risks and 430 early warnings. Among them, Zhang Xiaoquan Co., Ltd., where he serves as the legal representative, has been sued 10 times for trademark infringement disputes, and Hangzhou Likun Investment Development Co., Ltd., where he serves as a senior executive, has been sued for disputes over housing lease contracts. Hangzhou Fuyang Hangjia New Building Materials Co., Ltd. was once sued over a dispute over a sales contract. Fuyang Fulun Real Estate Co., Ltd., which serves as the legal representative, was once sued over a dispute over a house rental contract. Fuyang Furun Real Estate Co., Ltd., which serves as the legal representative, was once Sued over a dispute over a financial loan contract...

Although Zhang Xiaoquan emphasized that he would strictly operate in accordance with the requirements of the "Company Law" and other laws, regulations and normative documents, and conscientiously implement the "Three Meetings" rules of procedure, However, it still cannot eliminate the market's doubts: in the future, there will still be the possibility that the company's controlling shareholders and actual controllers will use their control positions to harm the interests of the issuer or make decisions that are not conducive to the interests of the issuer.

The surprise dividend was explained as "reasonable return"

Zhang Xiaoquan made a surprise dividend on the eve of the IPO. According to the latest profit distribution plan, based on the total share capital of 117 million shares at the end of 2019, the company will distribute a cash dividend of 3 yuan to all shareholders for every 10 shares, with a cumulative cash dividend of 35.1 million yuan, close to 50% of the year's net profit (the net profit in 2019 was 72.3 million yuan). Public information shows that there are four natural persons among the top ten shareholders of Zhang Xiaoquan. In addition to Jin Yan, who holds 4.67 million shares, the other two natural persons, Chen Dejun and Yu Buxiao, each hold 2 million shares, accounting for 1.17. Once Zhang Xiaoquan is successfully listed, the original shareholders of Moments will definitely be the biggest beneficiaries.

In reply to the "Electric Eel Express" request for verification letter, Zhang Xiaoquan said, "In 2017, the company actively introduced a number of strategic investors by increasing capital and shares. The company implements a continuous and stable profit distribution policy. Profit distribution focuses on reasonable investment returns to shareholders and takes into account the company's sustainable development. If the company has the conditions for cash dividends, it will give priority to distributing profits in the form of cash dividends. "The implication is that it is a reasonable return and is by no means enriched.

We also found that in this IPO, the company plans to raise no more than 455 million yuan for the Zhang Xiaoquan Yangjiang Knife and Scissors Intelligent Manufacturing Center project, enterprise management information transformation project and to supplement working capital. As of December 31, 2019, the company still had 153 million yuan in monetary funds on its books and no long-term or short-term interest-bearing loans. There is no shortage of money in the books, and there is no hesitation in distributing dividends. What does Zhang Xiaoquan want to do?

In this regard, Zhang Xiaoquan said that from the perspective of the management, Zhang Xiaoquan’s listing is first of all to serve the cause. developed. To realize the ambition of "being the Zhang Xiaoquan of the world", Zhang Xiaoquan needs a platform that can satisfy our future capital operations, attract high-end talents from around the world, further establish and consolidate our brand status, and satisfy us. With the four requirements of parallel docking with world-class friends, listing becomes the most direct choice.

The explanation that 60% of the products are OEM is “in line with development”

It is understood that Zhang Xiaoquan’s production model is divided into two types: independent production model and OEM model. OEM model Model refers to the production model that entrusts external OEM manufacturers to perform processing and production. "Electric Eel Express" found that in 2019, Zhang Xiaoquan's sales volume of scissors was 27.0614 million pieces, knives sales were 5.0994 million pieces, and knife and scissor sets were 1.7812 million sets, totaling 33.94 million pieces; among them, homemade ones There are 8.038 million scissors and 5.2923 million knives, totaling 13.33 million pieces, accounting for less than 40% of the total sales. That is to say, Zhang Xiaoquan currently has more than 60 products produced through OEM and other methods. .

Zhang Xiaoquan said that the main reason is that the production capacity has been saturated, so some products are entrusted to outsourced processing manufacturers for production. Is the quality of outsourcing OEM products guaranteed? Zhang Xiaoquan said that clear regulations on outsourcing supplier access, outsourcing processing quality control, etc. have been made and effectively implemented, and no major product quality problems caused by outsourcing manufacturers have occurred. Or the supply is not timely. But at the same time, Zhang Xiaoquan said that if we cannot continue to maintain good management of external suppliers, there will be risks of affecting product quality and delaying production progress, which will have an adverse impact on the overall operation.

In this reply, Zhang Xiaoquan said that the company’s current business model is consistent with the general business practices of the hardware supplies manufacturing industry. It is continuously explored and improved in the company’s long-term development and can meet the needs of downstream customers. Customer requirements are in line with own development and industry characteristics. Regarding product quality, the company emphasizes that it has formulated a strict product quality management system, conducts full-process quality control from all aspects of procurement, production, and sales, and responds to customer needs in a timely manner through after-sales service to ensure the stability of product quality.

The dilemma of "production exceeds sales" is a proactive decision

It is worth noting that due to the low technical threshold of the tool market, there are still a large number of off-brand tool products on the market. Knives are durable goods, they are slow to update and have limited annual market demand. Published information shows that Zhang Xiaoquan’s revenue growth has slowed down. In 2018, Zhang Xiaoquan's revenue increased by 20.23% compared with 2017, while in 2019 his revenue only increased by 18.05% compared with 2018. Changes in expenses and asset impairment losses are the main disturbing factors for dramatic fluctuations in earnings.

"Electric Eel Express" found that Zhang Xiaoquan's various expenses increased significantly in 2018. Among them, sales expenses increased from 39.46 million in 2017 to 54.59 million in 2018, and then increased again to 2019. of 64.2858 million yuan, an increase of 62.90 in three years. At the same time, there was an asset impairment loss of 1.426 million yuan. In 2019, Zhang Xiaoquan once again suffered an asset impairment loss of 1.6425 million yuan, all of which were losses from inventory depreciation. This risk is still increasing, mainly because the company's inventory scale is still rising.

According to disclosures, from 2017 to 2019, the book values ??of Zhang Xiaoquan’s inventory were 65.5308 million yuan, 81.5178 million yuan, and 113 million yuan respectively, accounting for 32.44, 31.86, and 37.51 of current assets respectively. Among them, in 2019, inventory increased by 37.95% year-on-year. Not only was the inventory amount larger, but it also accounted for a higher proportion of current assets. During the reporting period, Zhang Xiaoquan’s inventory turnover times also dropped from 3.65 times/year to 2.90 times/year, a drop of nearly 2%. into, significantly lower than the industry average of 3.81. More than half of Zhang Xiaoquan's inventory is stocked goods, and the proportion of stocked goods in the inventory is increasing year by year. The increase in the value of inventory goods indicates to a certain extent that Zhang Xiaoquan is facing the dilemma of production exceeding sales.

In response to market doubts, Zhang Xiaoquan replied: The growth trend is consistent with inventory growth and is within a controllable range. The company's inventories are mainly inventories that the company maintains based on forecasts of market demand. From 2017 to 2019, the company adopted a response strategy of stocking core raw materials in advance. At the same time, before the Spring Festival, it is the company’s peak sales season. As the company’s business scale increases year by year, the company will increase the inventory of hot-selling products at the end of each reporting period to ensure Prompt supply.

Zhang Xiaoquan also emphasized that "the decline in inventory turnover rate and the increase in the book value of inventory are due to the company's good sales conditions and the initiative to increase product inventory." In recent years, the increase in the book value of the company's inventory is mainly due to Because the sales scale continues to expand, the company's stocking scale has increased accordingly. The company's inventory turnover rate is lower than the average level of comparable listed companies in the same industry. The main reason is that the company's operating conditions have been good in recent years, and production and sales have increased year by year. In order to improve production efficiency and ensure product delivery, the company has adopted a strategy of stocking core raw materials in advance. At the same time, before the Spring Festival is the company's peak sales season, as the company's business scale increases year by year, the company will increase the inventory of hot-selling products at the end of each year to ensure timely supply.