In the second half of 2014, the crisis of the "guarantee circle" in the Zibo area began to erupt.

The so-called guarantee circle refers to the loan from the bank by mutual guarantee between private enterprises. The disadvantage of this type of loan is that once a private enterprise falls into debt crisis and is unable to repay the bank loan, it will affect the enterprise that provided the guarantee.

Chen Tongsheng is one of the members who is caught in the crisis of the guarantee circle. Henghui Electronics and Kaisheng Electronics, which he actually controlled, were unable to repay large bank loans due to the impact of the "guarantee circle", the occupation of funds by related parties and large interest expenses.

In order to resolve the crisis of Chen Tongsheng, a company named Xinhenghui was born, which undertook the operating assets and employees of Henghui Electronics and Kaisheng Electronics, and became a new business entity, controlled by Yu Renrong and Ren Zhijun. Among them, Yu Renrong is also the actual controller of Weir shares (603501.SH), a listed company in the conductor industry.

The reborn new Henghui is in full swing, and the scale of the company has reached the point of listing. In June 2022, Xinhenghui submitted a statement to the Shenzhen Stock Exchange and sprinted to be listed on the GEM. Now Xinhenghui has passed the review of the stock exchange and submitted an application for registration to the China Securities Regulatory Commission, which is only one step away from listing.

In recent years, Xinhenghui's revenue has increased year by year, the profit scale has maintained more than 100 million yuan, the asset-liability ratio has also decreased year by year, and the financial indicators are very bright.

However, the company also has some unusual features, such as the existence of a debt relationship between the two actual controllers, and the company's actual controllers and senior executives have worked for the largest customer.

　　01

It was established as a result of debt restructuring, and the two actual controllers have a debt relationship

New Henghui was founded to solve Chen Tongsheng's debt crisis.

Henghui Electronics and Kaisheng Electronics are both companies controlled by Chen Tongsheng, the former is engaged in flexible lead frame product business, and the latter is engaged in smart card module packaging and testing business. In 2017, Henghui Electronics and Kaisheng Electronics fell into a debt crisis and planned to seek restructuring.

In December 2017, Xinhenghui was established with a registered capital of 125 million yuan, which is held by Henghui Electronics, Chen Tongqiang and Zibo Zhilintang 90.29%, 5.83% and 3.88% respectively. Among them, Henghui Electronics contributed with part of the operating assets, Chen Tongqiang and Zibo Zhilintang contributed in cash, and Chen Tongqiang's shareholding was held on behalf of Chen Tongsheng, and the two were brothers.

In January 2018, investors Yu Renrong, Ren Zhijun and Shanghai Si Peng acquired 90.29% of the shares of New Henghui held by Henghui Electronics for 465 million yuan, and after the transfer was completed, Henghui Electronics no longer held New Henghui, and the proceeds of Henghui Electronics were used to solve the debt problem of the company and Kaisheng Electronics.

After the completion of the equity transfer, Xinhenghui is held by Yu Renrong, Ren Zhijun, Shanghai Si Peng, Chen Tongqiang and Zibo Zhilintang 45.15%, 22.57%, 22.57%, 5.83% and 3.88% respectively.

Subsequently, the main business and assets of Henghui Electronics and Kaisheng Electronics were all transferred to Xinhenghui, and the actual controller of Xinhenghui Co., Ltd. was changed from Chen Tongsheng to Yu Renrong and Ren Zhijun, and Chen Tongsheng only served as a consultant in Xinhenghui.

In October 2020, Xinhenghui was changed to a limited liability company, with a total share capital of 167 million shares and a par value of 1 yuan per share. After the completion of the change, the company's largest shareholder is Yu Renrong, holding 33.86% of the shares, and the second largest shareholder is Ren Zhijun, holding 16.93% of the shares.

Until the submission of the statement, the total share capital of Xinhenghui is 180 million shares, and the actual controllers are Yu Renrong and Ren Zhijun, who hold 31.41% and 16.21% of the shares respectively, in addition, Yu Renrong also indirectly holds 0.53% of the shares of Xinhenghui through Feng Yuan Huixin, and Ren Zhijun also indirectly holds 3.10% of the shares of Xinhenghui through Gongqingcheng Zhilintang.

In addition to the two, Xinhenghui also has 16 shareholders, of which Gongqingcheng Zhilintang, Gongqingcheng Henghui Hongrun, Gongqingcheng Hongrun No. 1 and Gongqingcheng Hongrun No. 2 are all employee shareholding platforms of Xinhenghui.

It is worth mentioning that there is a debt relationship between Yu Renrong and Ren Zhijun. When acquiring the equity of Xinhenghui from Henghui Electronics, Ren Zhijun's funds mainly came from the loans provided by Yu Renrong. As of the deadline, Ren Zhijun still owes Yu Renrong 116 million yuan, the borrowing interest rate is 12%/year, and the latest repayment date of the loan is January 25, 2029.

Ren Zhijun intends to use the dividends and transfer the equity of Xinhenghui to Yu Renrong to repay debts after the listing of Xinhenghui. It is estimated that after Ren Zhijun implements the repayment plan, his shareholding will be reduced to 11.80%.

If Xinhenghui fails to be listed before January 25, 2029, Ren Zhijun will repay the loan with self-raised funds, and part of the failure to repay the debt will be offset by the discount of Xinhenghui shares.

What makes people wonder why Yu Renrong did not buy the equity of Xinhenghui alone, but lent money to Ren Zhijun to make the acquisition.

However, in terms of corporate governance, Ren Zhijun serves as the chairman of Xinhenghui and participates in the company's major business decisions and daily operation and management, while Yu Renrong only participates in the company's major business decisions as a director. In 2023, Ren Zhijun's salary in Xinhenghui will be 2.0801 million yuan, while Yu Renrong will not receive a salary in Xinhenghui.

In addition to Ren Zhijun and Yu Renrong, the board of directors and senior management of Xinhenghui include: General Manager Zhu Lin; Wu Zhongtang, Director, Deputy General Manager and Chief Financial Officer; Deputy General Manager Chen Changjun; directors Lv Dalong, Li Bin and Chen Duo; Secretary of the Board of Directors Zhang Jiandong.

　　02

The actual controller and senior management have worked for large customers and purchased from related parties

Xinhenghui is an integrated circuit enterprise integrating R&D, production, sales and packaging and testing services of chip packaging materials, and its main business includes smart card business, etched lead frame business and Internet of Things eSIM chip packaging and testing business.

From 2021 to June 2024, the main business income of Xinhenghui will be 532 million yuan, 665 million yuan, 744 million yuan and 401 million yuan, of which the smart card business is the main source of income of Xinhenghui, and the business income of each period accounts for 77.44%, 84.45%, 78.35% and 70.72% of the total main business income.

In terms of regions, the main business income of Xinhenghui mainly comes from domestic sales revenue, and the domestic revenue in each period accounts for 80.26%, 78.88%, 78.93% and 76.71% of the total main business income. At the same time, it can be found that the proportion of the company's overseas revenue is generally on the rise.

Xinhenghui's customers include Ziguang Guowei (002049. SZ), China Power Huada, Fudan Micro (688385. SH), Datang Microelectronics, etc., and a number of well-known security chip design manufacturers and Hanbao Co., Ltd. (002104. SZ), Chu Tianlong (003040. SZ), Dongxin Peace (002017. SZ), IDEMIA and other domestic and foreign smart card manufacturers.

From 2021 to the first half of 2024, the revenue contributed by the top five customers to Xinhenghui accounted for 45.07%, 55.54%, 46.88% and 42.79% respectively, and the revenue contributed by the largest customers accounted for 14.68%, 21.72%, 17.67% and 13.48% respectively.

During the reporting period, the largest customers of Xinhenghui were all Unisplendour Tongxin, a subsidiary of Unisplendour Guowei.

It is worth mentioning that Ren Zhijun, the actual controller and chairman of Xinhenghui, and Wu Zhongtang, director, deputy general manager and chief financial officer, have all worked in Ziguang Guowei or its affiliates.

Ren Zhijun served as the executive vice president of Tsinghua Unigroup from January 2015 to October 2015, and the vice president, president, vice chairman and president of Tsinghua Unigroup from November 2015 to January 2018. From December 2015 to October 2017, Wu Zhongtang served as the director of the operation center of UNISOC (Shanghai) Technology Co., Ltd.

The indirect controlling shareholders of UNISOC (Shanghai) Technology Co., Ltd. and UNISPLC Guowei are both Tsinghua Unisplendour Group. Both Ren Zhijun and Wu Zhongtang joined the company one month after its establishment.

In terms of procurement, Shandong Qihuan and Zhongshan Xinnuo both provided machinery and equipment to Xinhenghui. In 2021, Xinhenghui purchased 30.1416 million yuan from Zhongshan Xinnuo, and from 2021 to 2023, it purchased 6.2191 million yuan, 741,200 yuan and 23,900 yuan from Shandong Qihuan, respectively.

Both suppliers are related parties of Xinhenghui. Among them, Shandong Qihuan is actually controlled by Chen Duo, a director of Xinhenghui, and Lv Dalong, a director of Zhongshan Xinnuo, is also a director of Xinhenghui.

It is mentioned in the prospectus that in the field of etched lead frame production, Xinhenghui has adopted the coiled maskless laser direct exposure (LDI) technology for the first time. The production of this technology requires a high-precision double-sided laser exposure machine as the core equipment. Zhongshan Xinnuo provides double-sided laser exposure machine for Xinhenghui, and Xinhenghui bluntly said that there is a certain risk of relying on the customized lithography equipment supplied by Zhongshan Xinnuo.

The fourth largest supplier of Xinhenghui in 2021 is Kunshan Yibang Chemical Co., Ltd., from which Xinhenghui purchased 15.4099 million yuan during the period. According to investigation, Kunshan Yibang Chemical Co., Ltd. was established in June 2010 with a registered capital of only 500,000 yuan, which is held by Wu Xingbang and Wu Yuepeng 60% and 40% respectively.

Xinhenghui said that although Kunshan Yibang has a small registered capital, it has the qualification of authorized agent of many overseas material brands, so the company purchases a variety of imported raw materials through Kunshan Yibang.

　　03

More than 30% of the revenue is accounts receivable, and the government subsidy is 34.555 million yuan

In addition to the main business income, Xinhenghui also has part of the sales revenue of electrolytic copper and other scraps. From 2021 to the first half of 2024, Xinheng's consolidated revenue will be 548 million yuan, 684 million yuan, 767 million yuan and 414 million yuan respectively.

As of the end of 2021 to the end of 2023, the balance of accounts receivable of Xinhenghui was 176 million yuan, 217 million yuan and 297 million yuan respectively, accounting for 32.19%, 31.75% and 38.77% of the revenue during the period. In other words, more than 30% of the "white strip" part of the income of Xinhenghui is "white".

From 2021 to the first half of 2024, the gross profit margin of Xinhenghui's main business will be 33.76%, 33.10%, 38.53% and 38.37%.

In terms of business, the gross profit margin of flexible lead frames and smart card modules in the smart card business of Xinhenghui is relatively high. During the period, the gross profit margins of flexible lead frames were 48.40%, 47.02%, 47.77% and 48.07%, respectively, and the gross profit margins of smart card modules were 36.40%, 43.87%, 47.11% and 45.96%, respectively. The gross profit margin of these two products in each period is higher than that of the company's main business.

The gross profit margin of packaging and testing services in the smart card business of Xinhenghui was relatively inferior, with 21.51%, 20.29%, 35.94% and 37.75% respectively in each period.

In terms of expenses, the sales expenses of Xinhenghui are relatively low, with 6.9286 million yuan, 7.4542 million yuan, 10.39 million yuan and 5.5472 million yuan respectively in each period, and the sales rates are only 1.26%, 1.09%, 1.36% and 1.34%.

The company's main expenses are management expenses and research and development expenses, of which the management expenses are 41.1096 million yuan, 43.3909 million yuan, 42.8233 million yuan and 17.5989 million yuan respectively, and the expense ratio is 7.50%, 6.35%, 5.59% and 4.25% respectively, showing a downward trend.

The R&D expenses of Xinhenghui in each period were 41.748 million yuan, 42.6731 million yuan, 53.9413 million yuan and 23.2092 million yuan respectively, with expense ratios of 7.62%, 6.24%, 7.04% and 5.60% respectively.

From 2021 to the first half of 2024, Xinhenghui received a lot of government subsidies, with each period being 17.0606 million yuan, 7.7328 million yuan, 3.9729 million yuan and 5.7887 million yuan respectively, totaling 34.555 million yuan.

　　04

After submitting the balance sheet, the debt repayment exceeded 200 million, and the asset-liability ratio was as low as 9.79%.

From 2021 to the first half of 2024, the net profit of Xinhenghui will be 100 million yuan, 111 million yuan, 153 million yuan and 101 million yuan respectively. Due to the continuous profitability, the operating cash flow of Xinhenghui maintained a net inflow, which was 100 million yuan, 94.6278 million yuan, 101 million yuan and 95.193 million yuan respectively in each period.

During the same period, the financing cash flow of Xinhenghui recorded a net outflow of 79.4231 million yuan, -35.1839 million yuan, -41.1954 million yuan and -4.2619 million yuan respectively in each period, and the main outflow was cash paid for debt repayment, which was 5 million yuan, 115 million yuan, 56.2366 million yuan and 30 million yuan respectively in each period.

It can be found that after submitting the statement, Xinhenghui's debt repayment efforts have increased significantly, and the debt repayment amount will reach 201 million yuan from 2022 to the first half of 2024.

As of the end of June 2024, the cash and cash equivalents on hand of Xinhenghui were 298 million yuan, and at the end of the same period, the company's short-term borrowings were 20.0148 million yuan, which did not exceed the company's cash on hand.

On the whole, the asset-liability ratios at the end of each period of each period were 23.24%, 17.44%, 10.79% and 9.79% respectively, which were at a low level and declining year by year.

Attached: List of intermediaries for the listing and issuance of Xinhenghui