Sales expenses increased by nearly 50% year-on-year! Qingdao Xinguang's semi-annual report mystery remains to be solved
On December 5, Xinguangzheng (834422.NQ), a company listed on the New Third Board in Qingdao, received a semi-annual report inquiry letter from the National Equities Exchange and Quotations. This inquiry letter lists in detail several concerns about Xinguangzheng's 2024 semi-annual report and requires the company to make a written explanation within the specified time.
Economic Herald reporter noted that the content of the above inquiry letter covers sales expenses, prepayments, performance growth, research and development expenses, and payment of large amounts of current accounts. These concerns not only reflect the market's attention to Xinguangzheng's operating conditions, but also reflect the regulatory authorities' strict requirements for the company's standardized operation.
New large prepayments
Financial data show that in the first half of 2024, Xinguangzheng's sales expenses were as high as 32.4496 million yuan, an increase of 47.63% over the previous period. Among them, employee salaries were 19.304 million yuan, employee welfare expenses were 93,200 yuan, and commissions were 7.1166 million yuan. The total number of sales staff in this period was 129, an increase of 15 from the previous period.
The inquiry letter requires Xinguangzheng to explain the reasons and rationality of the company's high sales expenses in combination with the existing business model, sales policy, sales channels, division of sales staff responsibilities and social security payment, marketing form and content, and comparable companies in the same industry. In this regard, an informed person close to Xinguangzheng told the Economic Herald reporter that the increase in sales expenses may be related to the company's active expansion of market share and increased marketing efforts; at the same time, the new sales staff also brought corresponding salary and welfare expenses.
In addition to sales expenses, the inquiry letter also paid attention to the changes in Xinguangzheng's prepayments. In the first half of 2024, Xinguangzheng added 14 million yuan in prepayments to Qingdao Binhe Urban Asset Management Co., Ltd. It is worth noting that the actual controllers of Qingdao Binhe Urban Asset Management Co., Ltd., the largest supplier disclosed in Xinguangzheng's 2023 annual report, and Qingdao Xinhe Runze Construction and Operation Co., Ltd., the company's largest customer, are both Pingdu State-owned Assets Management Service Center.
In response to this situation, the inquiry letter requires Xinguangzheng to explain the reasons and rationality of the new large prepayments based on the time of payment of large prepayments, the procurement contracts and contents based on them, the current progress of contract performance, procurement logistics, and whether the payment policy complies with industry practices; at the same time, it is also necessary to explain whether the supplier has the ability to perform the contract and whether there are other interest arrangements such as assisting customers in bridging funds based on the supplier's establishment time, main business, and operating conditions. The inquiry letter also paid attention to the fact that Xinguangzheng's largest supplier and largest customer belong to the state-owned assets management department of the local government. The National Equities Exchange and Quotations System requires the company to explain the reasons and rationality of this situation based on industry characteristics, its position in the industrial chain, and its business model.
"For the details of prepayments, the market generally pays attention to whether the company has potential risks such as related-party transactions. In this regard, Xinguangzheng needs to explain in detail the purpose and necessity of the new large prepayments, as well as the reliability and performance of the suppliers to eliminate market concerns." Mr. Song, a partner of an accounting firm in Shandong, analyzed to the Economic Herald reporter.
Public information shows that Xinguangzheng was established in June 2002 and focuses on the design, production, sales and installation of steel structure products. The company was listed on the New Third Board in December 2015 and is currently in the New Third Board Innovation Layer. On September 2, 2024, Xinguangzheng signed a coaching agreement with Founder Securities to publicly issue shares to unspecified qualified investors and list on the Beijing Stock Exchange, and submitted the coaching filing application materials to the Qingdao Securities Regulatory Bureau on the same day; on September 3, 2024, the Qingdao Securities Regulatory Bureau accepted its application. This means that Xinguangzheng has officially started its journey to list on the Beijing Stock Exchange.
In 2023, Xinguangzheng's operating income increased by 28.40% year-on-year to 936 million yuan, and its net profit attributable to shareholders increased by 176.84% to 46.0204 million yuan, and the profit data hit the highest level in the company's history.
Most of the R&D expenses in the first half of the year were employee salaries
In terms of performance, Xinguangzheng achieved operating income of 453 million yuan in the first half of 2024, an increase of 24.73% year-on-year. Among them, steel structure products achieved revenue of 326 million yuan, an increase of 75.45% year-on-year. The net profit after deducting non-operating items in this period was 24.8752 million yuan, an increase of 140.61% year-on-year. The contract assets at the end of this period were 88.1215 million yuan, a year-on-year decrease of 17.40%.
The inquiry letter requires Xinguangzheng to explain the reasons and rationality of the substantial growth in performance in combination with the order situation of major products, sales price, production cost, technical process and production line construction; at the same time, it is also necessary to explain the sustainability of performance growth in combination with the changes in orders and contract assets after the period, downstream market demand and competitive landscape.
"Xinguangzheng may benefit from the increase in industry demand and the improvement of its own competitiveness. However, under the background of greater uncertainty in the current macroeconomic environment, the sustainability of the company's performance growth needs further observation." Mr. Song said.
In terms of R&D, Xinguangzheng incurred R&D expenses of 3.8533 million yuan in the first half of 2024, of which employee salaries were 3.6723 million yuan and other expenses were 169,100 yuan. Compared with the first half of 2023, R&D expenses have increased. The company incurred R&D expenses of 572,700 yuan in the first half of 2023 and 10,778,000 yuan in the whole year of 2023. The inquiry letter requires Xinguangzheng to explain the reasons and rationality of most of the R&D expenses in 2023 being confirmed in the second half of the year and most of the R&D expenses in the first half of 2024 being employee salaries, based on the names of R&D projects, R&D content, R&D investment and specific progress.
In fact, for the changes in R&D expenses, the market generally pays attention to whether the company has increased its R&D investment and the output effect of R&D investment. Xinguangzheng needs to explain in detail the progress of R&D projects and the impact of R&D results on the company's future development.
In addition, the inquiry letter also focuses on other cash paid by Xinguangzheng related to operating activities. In the first half of 2024, the company paid 38.2662 million yuan in other cash related to operating activities, an increase of 70.43% year-on-year. Among them, the payment of other current accounts was 12.8972 million yuan, and the amount incurred in the previous period was 2.1798 million yuan.
For large-amount payments, the market is generally concerned about whether there are potential risks of related-party transactions or capital occupation. Therefore, Xinguangzheng needs to explain in detail the purpose and object of the payment of current accounts, as well as whether there is an associated relationship with the company, to eliminate market doubts.
In the view of the interviewees, the disclosure of the inquiry letter of Xinguangzheng's semi-annual report provides investors with an opportunity to gain an in-depth understanding of the company's operating conditions. At the same time, the company also needs to strengthen internal control and risk management to ensure the compliance and transparency of its operating activities.
