Shenzhen Ocean King Lighting Technology Co., Ltd. (hereinafter referred to as "Ocean King") failed to seize the last wave of IPO listings in 2012. Recently, it disclosed a prospectus (application draft) on the website of the China Securities Regulatory Commission to "make a comeback" and continue to be listed on the Shenzhen Stock Exchange. The sponsor is China Merchants Securities.
Looking at the two prospectuses disclosed by Ocean King in 2014 and 2012, it was found that although they were two years apart, the industry reports cited in the 2011 industry report on 2010 were quoted, and the prospectus did not explain this; and the decline in operating income and performance of Ocean King in 2012 was also inconsistent with the description of the industry report it quoted.
Some people in the industry said that quoting industry reports in this way is indeed not timely. As a sponsor, you should try to find the latest industry reports. However, this also comes at a certain price. You may need to pay a consulting agency to "tailor-make" it. At present, regulatory authorities do not believe the reports provided by some consulting companies.
Quoting "expired" reports is questioned
Ocean King is engaged in the research and development, production, sales and service of special environmental lighting equipment. Its products include three series of fixed lighting equipment, mobile lighting equipment and portable lighting equipment, mainly positioned in the mid-to-high-end market.
Ocean King's prospectus, signed on April 17, 2014, shows in its "Competitive Position of the Issuer in the Industry": "According to the "2009 Mainland China Lighting and Professional Lighting Market Research Report" and "2010 Special Environment Lighting Market Analysis" published by the China Illuminating Society, in the special environment lighting market in Mainland China In 2008, 2009 and 2010, the company's sales and market share ranked fourth, second only to international manufacturers Philips, Cooper and Osram, and ranked first among many domestic manufacturers. " From 2008 to 2010, Ocean King's market share was 8.73%, 7.91% and 8.2%. Its industry report states that the market size of special environment lighting equipment in mainland China is expected to be 17.62 billion yuan, 21.19 billion yuan and 25.73 billion yuan respectively from 2011 to 2013. The compound annual growth rate of the market size from 2011 to 2013 is 20.84%, and the future market capacity will be large. In terms of financial data, Ocean King has made an update and disclosed financial data from 2011 to 2013.
"It cannot be justified using data from 2010. If we were responsible for this project, we would consider deleting the industry data. Because the data that is too old seems unprofessional, the company may have concealed certain information." The person in charge of the investment banking project of a securities firm in South China said that industry analysis reports hired by consulting firms before some companies go public often cost hundreds of thousands of yuan. Most companies like to brag that they are the "leader" of the industry, so they will rack their brains to produce an industry analysis report. "If you are not among the top few in a large industry, look for subdivided industries as detailed as possible."
"If the company is in a very subdivided industry, it may not be able to find the latest industry data, not necessarily because it wants to hide something." An executive from the investment banking department of an East China securities firm said that even among some well-known consulting agencies, or even different government departments, their statistical calibers are different, which will make the data different.
He also said that in fact, regulatory authorities do not believe the data produced by some consulting companies. When sponsors write industry materials in prospectuses, if they cannot find a more suitable third-party research report, they may purchase reports from some relevant research institutions and require these institutions to write according to the sponsor's requirements and pay certain fees to these third parties. In fact, these reports have lost their independence, and regulatory authorities may not believe such reports when reviewing them. As a sponsor, you should look for updated industry data reports; however, for some emerging sub-industries, if there is no industry data, the company to be listed can also choose not to disclose it. The regulatory authorities do not have strict requirements in this regard.
Previously, the prospectus of Jiawei Shares, whose performance changed drastically after its listing, also quoted a report from the China Illuminating Society. "According to statistics from the China Illuminating Society, with the improvement of photovoltaic lighting technology and the promotion of energy-saving and environmental protection policies, as well as the substitution effect of solar lawn lamps on traditional lawn lamps, solar lawn lamps will maintain an average annual growth of about 50% in the next few years."
Jiawei Shares, which had just listed on the GEM in May 2012, was quickly nicknamed "fake shares" by the market, because just two months later, in mid-July, the company issued an announcement stating that its net profit in the first half of 2012 dropped sharply by more than 90%, which was inconsistent with the bright prospects described in its report. The China Securities Regulatory Commission believed that Jiawei Shares did not promptly disclose the decline in performance in the first quarter of 2012, and punished it.
State-owned enterprises that rely on income are facing competition
Although Ocean King described good growth prospects from 2011 to 2013 in the industry report, saying that "201 The compound annual growth rate of the market size from 1 to 2013 was 20.84%." However, its prospectus also stated that the prosperity of some downstream industries decreased in 2012, which reduced the demand for special environmental lighting equipment, resulting in the company's operating performance in 2012 declining compared to 2011. In 2012, operating income decreased by 16.97% compared with 2011; net profit decreased by 11.53% compared with 2011.
In 2013, operating income increased by 3.00% compared with 2012; net profit increased by 2.67% compared with 2012. The net profit of 172 million yuan in 2013 was still far lower than the 190 million yuan in 2011, and the operating income of 1.131 billion yuan in 2013 was also far lower than the 1.323 billion yuan in 2011. It can be seen that Ocean King’s actual operating conditions are not consistent with the industry reports it cited.
Ocean King's products are used in important infrastructures related to the national economy and people's livelihood, such as electric power, metallurgy, railways, oil fields, petrochemicals, public security, fire protection, coal, military, ports, venues, civil aviation, ships and machinery manufacturing. In basic industries, fluctuations in national macroeconomics and adjustments to relevant economic policies directly or indirectly affect the development of the above-mentioned related fields, which is likely to lead to a decline in investment and growth rates in many industries, reducing the demand for special environmental lighting equipment, thus having a certain impact on operations.
The prospectus also states that the future market competition in the special environmental lighting industry will become increasingly fierce. Companies that were not originally part of this industry include Haier Group, Foxconn Technology Group, Midea Group, TCL Group, NVC Lighting and other well-known companies have entered the industry and are expanding their business scale and increasing product market share through various competitive strategies. At the same time, well-known international companies such as Philips, Cooper, Osram, and GE Lighting have gradually increased their investment in the Chinese market, with the development goal of occupying the domestic high-end special environmental lighting market.
ANNA