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Article | Lan Media Finance, Author | Lan Wangji, Editor | Lan Meier
A company that started by selling data lines is ready to sprint into the capital market.
On June 2, according to the information disclosed by the Shenzhen Stock Exchange, the IPO application of Shenzhen Lvlian Technology Co., Ltd. (hereinafter referred to as “Lvlian Technology”) has been accepted. The sponsor and lead underwriter are Huatai United Securities. .
According to the prospectus, Lvlian Technology, which is preparing to sprint to the GEM of the Shenzhen Stock Exchange, plans to raise 1.5 billion yuan this time. Among them, 550 million yuan is used for product research and development and industrialization construction projects, 110 million yuan is used for intelligent warehousing and logistics construction projects, 392 million yuan is used for headquarters operation center and brand building projects, and 450 million yuan is used to supplement working capital.
Lvlian was originally located in Huaqiangbei, Shenzhen. It started out with the business of manufacturing and OEM data lines for foreign customers. After years of development, Lvlian has expanded into a variety of product categories and occupied a place in the domestic 3C accessories market.
However, although the revenue of Lvlian has been increasing in recent years, in 2021, it will fall into the situation of “increasing revenue without increasing profit”. According to its prospectus, from 2019 to 2021, Lvlian Technology’s operating income will be 2.045 billion yuan, 2.738 billion yuan and 3.446 billion yuan, respectively, and the net profit after deduction will reach 220 million yuan, 287 million yuan and 276 million yuan respectively. In 2021, Lvlian Technology’s revenue will increase by 25.88%, while non-net profit will drop by 3.82%.
At the same time, the company’s gross profit margin has declined rapidly in recent years. From 2019 to 2021, the comprehensive gross profit margin of Lvlian Technology was 49.67%, 38.01% and 37.15%, a drop of more than 12 percentage points in just two years.
In addition, the founder of the company once sold old shares to Hillhouse, a well-known investment institution, for private cash out of 300 million yuan. Today, Hillhouse Capital is the largest external shareholder of Green Alliance.
So, does the Green Alliance have its own hard power? “Relying on the data line” can be listed, what is the confidence?
Started as a data line, how to achieve an annual revenue of 3.4 billion?
In 2009, Zhang Qingsen, the founder of the Green Alliance at this time, had graduated for two years. His first work experience was related to international finance, which he majored in at university: working as a foreign trade clerk in a company called Shenzhen Dexing Technology.
Thanks to the foreign trade experience accumulated in the previous company, OEM and production data lines for foreign customers became the initial source of profit for Lvlian. At that time, the expensive original data lines supported many startups including Lvlian. .
The foundry business is often plagued by malicious bidding from peers. Zhang Qingsen began to turn to Tmall Mall, which is re-launching its brand strategy, and chose to develop abrasives as its own products, focusing on customer service as an important department to improve user experience.
Such an approach quickly made Lvlian well-known in the industry. In the past, the data cable of domestic HDTVs was mostly 1.8 meters, and Lvlian quickly developed products with specifications that can meet more consumers and usage scenarios. : 0.5m, 1m, 1.5m, 2m…
In 2014, Amazon China, which was defeated in the Chinese e-commerce war, began to focus its business on the export business serving Chinese buyers. Seeing the changes in this situation, Green Alliance also took this opportunity to develop and expand. own overseas business. Half a year after entering Amazon China, Lvlian’s single-day sales on the platform exceeded 20,000 US dollars.
In the same year, Green Alliance passed Apple’s strict MFi (Made for iPhone / iPad / iPod) certification, which also means that all Apple-related products produced by Green Alliance can meet the technical standards officially recognized by Apple and can be printed on product packaging. Has the official MFi certification label.
In 2015, Lvlian introduced a number of upstream suppliers closely related to its products into its own industrial park, which greatly reduced product costs. For example, Shenzhen Xiangfan Technology, Feixuan Electronic Technology, Xieyuan Technology Industry and Green Alliance are all located in Longcheng Industrial Zone, Longhua District, Shenzhen, and all three of them are among the top five suppliers of Green Alliance.
After years of development, in addition to transmission 3C accessories, which account for more than one-third of revenue, audio and video, charging, mobile peripherals and storage are also product categories under Lvlian. E-commerce sales are Lvlian’s main revenue channel, which can also be seen from its prospectus: in the past three years, the company’s revenue through online e-commerce platforms accounted for 82.41% and 82.35% of its main business revenue, respectively. % and 78.14%.
At present, the proportion of domestic and overseas sales of Green Alliance is relatively balanced. During the reporting period, the company’s overseas sales revenue accounted for approximately 43.49%, 47.38% and 46.09% of the current operating income, respectively.
Too much reliance on suppliers, does Lvlian have hard power?
Although Lvlian has made remarkable achievements, in the eyes of many end consumers, it is still equated with “selling data cables”. Of course, there is cognitive inertia behind such an impression, but it is not difficult to read the prospectus of the Green Alliance, and it is not difficult to find that the Green Alliance does have a lot of room for improvement in terms of hard power.
According to its prospectus, Lvlian’s products are mainly based on independent research and development, and adopt the mode of purchasing finished products through external cooperation. From 2019 to 2021, the company’s external production amount accounted for 75.78%, 76.10% and 75.62% respectively. %, very dependent on upstream suppliers.
Its own production capacity is weak, and Lvlian has also tried to change this situation. It is reported that in the past three years, Lvlian has always had the idea of building its own factory and expanding its production capacity. However, due to the fast iteration cycle of its main business 3C digital accessories, it would be difficult to ensure the production cycle and delivery quality if it built its own factory. Therefore, the “helpless” Lvlian We can only see upstream suppliers keep getting bigger.
The mode of over-reliance on the production of suppliers will obviously become a hidden danger in the operation of the enterprise. In this regard, Green Alliance did not shy away from it in the prospectus, saying that if the supplier stops work, or there is friction in cooperation with the company, the cooperation between the two parties will be ahead of schedule. termination, and the company fails to replace suitable suppliers in a timely manner, there may be a delay in the supply of products, which will adversely affect the company’s operating results and financial condition.
In addition to the disadvantages caused by the weak self-owned production capacity and the dependence on suppliers in production, another major problem is more likely or has become a constraint on the further development of the Green Alliance.
Also according to Lvlian’s prospectus, it can be found that Lvlian Technology’s R&D expense ratio is relatively low compared to comparable listed companies Anker Innovation, Bull Group and Haineng Industry. From 2019 to 2021, the R&D investment of Lvlian Technology was 64 million yuan, 95 million yuan and 156 million yuan respectively, accounting for 3.17%, 3.47% and 4.54% of the operating income respectively.
Of course, less investment in research and development is related to the stage of the company, but this situation makes it impossible for Lvlian to get a high premium in the field of 3C products, because there are many types of 3C digital accessories and different core technologies. To complete the upgrade of product strength, It is necessary to invest heavily in personnel and funds. There is no high premium, which means that it is difficult for Lvlian to break through the “curse” of cost performance in the short term.
If the market is in a stable period, cost-effective products will naturally survive as cost-effective products, but once the upstream costs generally rise, profit margins will be greatly eroded.
In 2021, the unit price of transmission products, audio and video products and charging products under Lvlian will increase by 7.32%, 15.77% and 21.09% respectively, and only the unit price of transmission products will decrease slightly throughout the reporting period. However, in the downstream market, the average increase in the sales price of Lvlian products is only 2.19%, that is, the increase in procurement costs greatly exceeds the increase in the terminal sales price. profit” main reason.
Rarely introduced external investment, Hillhouse became the largest external shareholder
Before this impact on the capital market, Zhang Qingsen, who served as the company’s chairman, was the largest shareholder of Greenlink Technology, directly holding 187,832,050 shares of the company, accounting for 50.3019% of the company’s total share capital, and was the company’s controlling shareholder and actual control. people.
Lvlian Consulting, Lvlian Heshun, Heshun No. 2, Heshun No. 3, Heshun No. 4, Heshun No. 5, Heshun No. 6, Heshun No. 7 and Heshun No. 8 appearing in the shareholder list are all employee stock ownership platforms.
In the previous development history, Lvlian rarely introduced external investment. It was not until the first half of last year that the founder sold old shares for private cash out, and the situation changed.
In April 2021, Green Alliance Technology founder Zhang Qingsen and co-founder Chen Junling transferred their original 3.7% and 1.85% of their shares to Hillhouse Xiheng, a subsidiary of Hillhouse Capital, at a price of 200 million yuan and 100 million yuan respectively. , Combined with the changes in funds absorbed by financing activities shown in the cash flow statement in the prospectus, it can be seen that this 300 million yuan belongs to the private cash out of the two company founders and is not used for company operations.
Soon, Lvlian Technology has a new financing move. In June 2021, Hillhouse Xiheng once again led the investment of 250 million yuan in Green Alliance, and institutional investors such as Shenzhen Shiheng, Yuanda Fanglue and Nut Capital invested 20 million yuan, 15 million yuan and 15 million yuan respectively. After this round of financing, Lvlian’s valuation reached 5.7 billion yuan. This is the first time that Lvlian has shown to the outside world that it wants to impact the listing. It has rarely raised funds for a long time, and suddenly introduced capital injections from big-name institutions at a certain point in time. The significance of this is self-evident.
However, the introduction of external investment will inevitably lead to “factional disputes”, and there are many nepotisms within the Green Alliance.
According to media reports, when Hillhouse first became a shareholder in the Green Alliance, Gu Jiexiang was appointed as a director, but Gu Jiexiang resigned as a director of the company at the sensitive time of the sprint listing. The external explanation was due to personal health reasons, and the director of the by-election was the Green Alliance The direct line of the technology itself – Chen Yan, one of the executives of the founding team.
In terms of directors, Zhang Bijuan, the senior after-sales service director of Lvlian Technology, is the sister of Zhang Qingsen, the company’s chairman, Li Qingzhen, the warehouse manager, is the spouse of Zhang Bijuan, and Zeng Qiuyang, the director of foreign trade operations, is the spouse of the company’s supervisor, Lei Shubin.
Therefore, in terms of balancing the interests of internal executives and external investors, and in terms of corporate governance that takes into account fairness and efficiency, Green Alliance also leaves some room for the outside world to worry.
Starting from a data line, to an annual revenue of 3.4 billion yuan, Lvlian took the shuttle bus of e-commerce dividends and brand traffic, and made a certain differentiation and branding on the product side, so from a crowd to 3C Digital accessories companies have broken through the siege, but if they want to go further in the future, it is obvious that they need to work harder on product research and development, capacity expansion, and corporate governance.
Some people joked that Lvlian “killed” many small stalls that originally sold wire rods in Huaqiangbei, Shenzhen, but to become stronger, Lvlian needs to “kill” many more.
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