Author: Suhang

Product: IPO Insights

In 2022, the wealth-making effect of photovoltaics will not only be transmitted to the upstream and downstream of the entire industrial chain, but also spread to the surrounding equipment manufacturing and other industries.

Recently, the IPO of Laplace New Energy Technology Co., Ltd. (hereinafter referred to as "Laplace"), a supplier of photovoltaic cell chip manufacturing equipment, was accepted, and the sponsor was Huatai United Securities.

Driven by the substantial growth in the overall scale of the photovoltaic industry, Laplace's revenue and net profit have achieved significant growth in the past few years. However, the sustainability of the growth achieved by relying on a few giants is in doubt, and the cloud of overcapacity hangs over the photovoltaic industry. Will the low shareholding ratio of the actual controller lay hidden dangers for the future.

01

alumni as directors, cousin in charge of finance

The prospectus shows that Laplace is a provider of core process equipment and solutions for high-efficiency photovoltaic cells. The main products include the thermal process and coating equipment required in the production process of photovoltaic cells, as well as supporting automation equipment.

Thermal process equipment mainly includes boron diffusion, phosphorus diffusion, oxidation and annealing equipment, etc.; coating equipment mainly includes LPCVD and PECVD equipment, etc.; automation equipment can effectively improve the production efficiency of process equipment supporting loading and unloading equipment.

Photo Credit: Laplace Prospectus

In 2016, with the introduction of the "Opinions on Promoting the Application of Advanced Photovoltaic Technology Products and Industrial Upgrading" the previous year, there was a wave of "rush to install" in the domestic photovoltaic industry, coupled with the "photovoltaic poverty alleviation" policy and the "Solar Energy Development" Thirteenth Five-Year Plan ", as well as the subsidy retreat mechanism and other stimuli, the photovoltaic industry ushered in explosive growth.

In the same year, Dr. Lin Jia, who was also the general manager of the R & D center of Shanghai Shenzhou New Energy Development Co., Ltd., let his brother-in-law hold the shares and jointly funded the establishment of Laplace with investment institutions Shanghai Chunhe and Feng Wei. In February 2017, Lin Jia's successor was released.

looking at Lin jiaji's personal resume, he is a typical "other people's child". born in 1983, he received a bachelor's degree in physics from Xiamen university at the age of 21, a master's degree one year later, a doctoral degree in Nanyang technological university in Singapore in 2005, a doctor's degree in three years and a member of Singapore solar energy research institute. after returning to China in 2012, he successively took up research and development positions in hanhua new energy and Shanghai shenzhou new energy development co.

Lin Jia, who was born in physics, followed Musk's hobby and liked to name the company after scientists. in addition to the company's name coming from French astronomer and mathematician Laplace, he also named the employee stock ownership platform after Fourier, Descartes and Planck.

Lin Jia also likes to promote alumni, Lin Yiting, director and financial director of the company, Xia Rongbing, director, deputy general manager and secretary of the board of directors, Pang Aishuo, director and research and development director of the technology research and development department, Huang Xinqi, supervisor and Li Shijun, independent director, graduated from Xiamen University.

It is worth mentioning that Lin Yiting is also the cousin of Lin Jia's stepspouse. She entered Laplace after graduating from university in 2018 and was appointed as the financial director in 2022.

In the first few years of its establishment, Laplace was in the research and development stage of LPCVD equipment, boron diffusion equipment and other products, and did not form mass production and shipment. It was not until 2020 that sales were gradually on the right track.

Since 2022, the photovoltaic industry has entered a new long-term, PERC battery conversion efficiency is close to the theoretical limit value, mainstream manufacturers gradually add TOPCon battery chips, focusing on this layout of Laplace sales have also soared.

From 2020 to 2022 (the "reporting period"), Laplace's operating income was $40.7233 million, $0.104 billion, and $1.266 billion, respectively, with revenue growth of a staggering 154.35 percent and 1122.08 percent in 2021 and 2022.

its net profit also turned positive at the same time, with -45.9963 million yuan, -57.1125 million yuan and 0.119 billion yuan respectively during the reporting period.

02

Longji green energy and jingke energy all the way support

The actual controller's shareholding ratio is low

In fact, in the field of photovoltaic cell equipment, Laplace is an absolute latecomer. Industry-leading companies such as northern huachuang (002371.SZ) and jiejia weichuang (300724.SZ) were established in 2001 and 2007 respectively, while micro-conductive nano (688147.SH) and ideal crystal extension, which were established at similar times, have much lower sales and growth rates than laplace.

Photo Credit: Laplace Prospectus

The reason why Laplace, as a "novice", can achieve such a high performance growth is not only related to the company's TOPCon route and the recent market hot spots, but also related to the bosses behind it.

in January 2019, Liancheng CNC (835368.BJ) invested in Laplace and signed a performance-related gambling agreement; in April 2020, Liancheng CNC obtained Laplace's new registered capital of 2.846894 million yuan at a consideration of 50 million yuan.

Laplace did not receive the second phase of the 50 million yuan capital increase because he did not complete the gambling agreement. Up to now, Liancheng CNC holds 16.87 per cent of the company's shares, making it the largest shareholder.

and Liancheng numerical control and longji green energy (601012.SH) are inextricably linked. a brief description is that Zhong baoshen, one of the actual controllers of Liancheng numerical control, is the chairman of longji green energy, and its chairman Li chunan has also served in longji green energy for many years and is regarded as one of the soul figures of longji green energy by the outside world.

in 2020, Longji green can purchase 31.1242 million yuan from Laplace, accounting for 77.67 of the company's main business income in that year. In 2021 and 2022, Longji green energy also ranked the second and third largest customers respectively, with purchase amounts of 46.6315 million yuan and 0.184 billion yuan respectively.

starting from 2021, jingke energy will replace longi green energy as the largest customer, while laplace's investment platform shangrao changxin holds a 2.36 per cent stake in jingke energy. In 2021 and 2022, JinkoSolar purchased 55.5112 million yuan and 0.613 billion yuan from Laplace, respectively, accounting for 54.21 percent and 48.55 percent of the main business income of the proposed listed company.

in addition, Laplace's fifth largest customer in 2022 linyang energy (601222.SH) also holds 0.26 percent of the company through its wholly-owned subsidiary linyang venture capital.

Related transactions have always been the focus of regulators. According to statistics, among the 11 companies that will be rejected in the first half of 2023, 4 were asked about related relationships or related transactions in the Shanghai Municipal Committee meeting.

In addition, Laplace's accounts receivable were $15.2191 million, $31.3077 million, and $0.332 billion for each of the reporting periods.

In 2022, Laplace has $4.308 million in accounts receivable aged 2 to 3 years, for which Laplace has a provision of $2.154 million in bad debts. And in 2020 its accounts receivable customers only Longji Green Energy, Jingke Energy two, have to let people sigh hundreds of billions of large factories will also default on the supplier payment?

It is worth noting that "Insight IPO" looked through the prospectus and found that Laplace may still have the risk that the actual controller's shareholding ratio is too low.

at present, Lin Jia, the actual controller of the company, directly holds 9.4972 percent of the shares, and indirectly holds 10.119 percent of the shares through the controlled ann is new energy, mutual aid partnership, self-improvement partnership, Descartes partnership, Fourier partnership, Planck partnership and Planck 6, holding 19.6162 percent of the total shares and controlling 33.20 percent of the voting rights of the company.

Lin Jia's total shareholding ratio is only slightly higher than that of Liancheng CNC, the largest shareholder, by less than three percentage points and less than 30%. After the issuance, his shareholding ratio will be further diluted, but the relevant content is not disclosed in the prospectus.

03

The industry has fallen into a "strange circle" of expanding production

Can equipment vendors be left alone?

In recent years, the two voices about the photovoltaic industry have continued to clash. Some people believe that the photovoltaic industry is under the catalysis of global energy shortage and "carbon neutrality", and the market space is infinitely vast, especially after China has become the world's largest photovoltaic producer and power generation country.

However, there is also a voice that believes that photovoltaics, especially cell production capacity, are facing a serious crisis of excess. Even Li Zhenguo, president of Longji Green Energy, said in May 2023 that "overcapacity may be next month, the next quarter, or the second half of the year."

but the blame is that on the one hand, the market is shouting to be alert to overcapacity, while on the other hand, photovoltaic enterprises are riveting enough to launch new production capacity.

according to incomplete statistics, since the second quarter of 2023, industry leaders jingke energy, jingao technology (002459.SZ), tongwei shares (600438.SH), longji green energy, trina solar energy (688599.SH) and other investment plans are approaching 100 billion yuan.

during the reporting period, Laplace's new orders amounted to 0.123 billion yuan, 1.069 billion yuan and 4.265 billion yuan respectively. Orders in hand as of the end of April 2023 were $8.732 billion.

Photo Credit: Laplace Prospectus

in the future photovoltaic industry, the Matthew effect is becoming more and more obvious and almost certain. in the face of strong downstream customers, laplace will need to face, in addition to the accounts receivable problem mentioned above, or there will be the problem of high inventory.

At the end of each reporting period, the carrying balances of Laplace's inventory were $0.101 billion, $0.401 billion and $2.154 billion, respectively.

As there is a certain period from delivery to acceptance of photovoltaic equipment, the relevant equipment enterprises need to pay cash in advance for procurement and production. And the company usually adopts the "advance payment-payment-acceptance payment-warranty payment" model to collect payment in stages, so there is a certain time difference between the time of collection and revenue recognition.

according to the statement in the prospectus that "some downstream customers of the company will start large-scale investment in the industrialization of new high-efficiency photovoltaic cells in 2021 and early 2022, and after installation, commissioning and trial operation, the equipment acceptance will be completed and the production line will reach production in the fourth quarter of 2022", the time difference may be as long as nearly one year.

this also resulted in the net cash flow from the company's operating activities being -57.6967 million yuan, -0.16 billion yuan and -0.178 billion yuan respectively during the reporting period, which was quite different from the net profit.

Standing at the moment, whether it is all links of the photovoltaic industry chain or equipment manufacturers, they will still achieve high growth for a period of time, but the sword of Damocles, which is overcapacity and the industry reshuffle, is still hanging in the head of each related enterprise.

It may still be too early to say whether Laplace will have the last laugh.