According to Gelonghui, recently, the Shenzhen Stock Exchange terminated the audit of the listing and IPO of Jiangxi Copper Foil Technology Co., Ltd. (hereinafter referred to as "Jiangxi Copper Foil") on the Growth Enterprise Market because Jiangxi Copper Foil withdrew its application for the first public offering of shares and listing.

It is worth noting that Jiangxi Copper Foil passed the Listing Committee meeting on June 15, 2023, but still withdrew the IPO application, resulting in the termination of its IPO on the Growth Enterprise Market.

Jiangxi Copper Foil mainly engages in the research and development, production, and sales of various high-performance electrolytic copper foils, which are important materials for lithium-ion batteries, copper-clad laminates, and printed circuit board manufacturing. The company's products are widely used in new energy vehicle power batteries, energy storage equipment, printed circuit boards, and other fields.

In terms of equity structure, as of the signing date of the prospectus, Jiangxi Copper holds 70.19% of the company's shares.

According to the prospectus, the company originally planned to raise RMB 2 billion. Of this, RMB 1.5 billion was used for the fourth phase of the 20,000-ton/year electrolytic copper foil renovation and expansion project of Jiangxi Copper Yez Copper Foil Co., Ltd.; RMB 500 million was used for supplementary working capital.

It is worth mentioning that the new "Nine Articles" makes it clear that rushing to distribute dividends before going public and other situations will be included in the negative list for issuance and listing. The standard for "rush to distribute dividends in a "clearance-style" manner" is that the cumulative dividend amount for the reporting period exceeds 80% of the net profit for the same period; or the cumulative dividend amount exceeds RMB 300 million, and the ratio of liquidity and debt repayment in the funds raised is higher than 20% and the cumulative dividend amount accounts for more than 50% of the net profit of the same period.

Massive dividends before listing

From the revenue structure, electronic circuit copper foil income is an important source of income for Jiangxi Copper Foil. In 2020, 2021, and 2022, electronic circuit copper foils accounted for 100.00%, 90.57%, and 61.89% of the company's main business income, respectively.

The main business income of the company is classified by product type, from the prospectus

In terms of financial data, the operating income of Jiangxi Copper Foil was approximately RMB 1.06 billion, RMB 1.797 billion, and RMB 2.41 billion in 2020, 2021, and 2022, respectively; the net profit attributable to the parent company for the same period was approximately RMB 120 million, RMB 222 million, and RMB 147 million, respectively. Although the company's revenue is showing a growth trend, the net profit attributable to the parent company in 2022 still showed a year-on-year decline.

It is worth noting that in 2022, Jiangxi Copper Foil distributed dividends of approximately RMB 199 million, exceeding the net profit attributable to the parent company for the same period.

The company's main financial indicators come from the prospectus.

In 2020, 2021, and 2022, the main business gross margin of the company was 16.39%, 17.13%, and 10.73%, respectively, showing an upward trend followed by a downward trend.

Jiangxi Copper Foil stated in the prospectus that the company's gross profit margin in 2020 was slightly higher than the industry average, but the difference was small; the company's gross profit margin in 2021 and 2022 was lower than the average level of comparable companies in the same industry, mainly due to the lower initial production capacity utilization rate and product quality rate of the new lithium-electric copper foil production line of Copper Foil Factory 2.

Comparison of the company's main business gross margin with comparable companies from the prospectus

In terms of research and development expenses, the company's research and development expenses were approximately RMB 23.503 million, RMB 29.4503 million, and RMB 33.0135 million in 2020, 2021, and 2022, respectively, accounting for approximately 2.22%, 1.64%, and 1.37% of the current operating income.

Comparison of the company's research and development expense rate with comparable companies from the prospectus

Jiangxi Copper Foil stated in the prospectus that the company's research and development expenses as a percentage of operating income in 2020, 2021, and 2022 were slightly lower than the industry average.

High concentration of customers

In 2020, 2021, and 2022, the related transactions of Jiangxi Copper Foil mainly involved purchasing raw materials such as cathode copper and copper wire from Jiangxi Copper and its affiliated parties, purchasing electricity, land, and equipment, and the proportion of related purchases to total purchases was 44.27%, 50.30%, and 50.98%, respectively, which was relatively high.

Regarding this, Jiangxi Copper Foil stated that cathode copper is a bulk commodity, and the market price is transparent and the market supply is sufficient. The price of purchasing cathode copper or copper wire from Jiangxi Copper and its affiliated parties is determined based on the publicly quoted market price. From purchasing electricity from related parties, it is because of the overall power supply plan of Jiangxi Copper Nam Cheong High-tech Industrial Park. The electricity price refers to the publicly published price of the power grid. The amount of purchasing land from related parties is determined based on the evaluation report; the company follows effective corporate governance systems and relevant approval authorities to comply with internal decision-making procedures.

However, if the aforementioned internal control system fails to operate effectively in the future, related procurement may have an adverse impact on the company's operation.

In 2020, 2021, and 2022, the sales amounts of Jiangxi Copper Foil to the top 5 customers accounted for 68.96%, 60.99%, and 64.37% of its revenue respectively.

Jiangxi Copper Foil stated that sales to the top five customers are relatively stable, mainly because its downstream customers mainly consist of copper clad laminate and printed circuit board customers, as well as new energy lithium battery customers. The company's major downstream customers, including Shengyi Technology, Nanya New Material Technology, Suntak Technology, Ripple Energy, BYD, and Honeycomb Energy, are all well-known enterprises in the industry and have good repayment performance in 2020, 2021 and 2022.

However, if the main customers terminate cooperation with the company for reasons such as market strategy, raw material supply, and product technology, and the company cannot timely expand new customers, it will have an adverse impact on its operation.

According to the prospectus, in recent years, with the improvement of the electrolytic copper foil industry, more and more enterprises have invested in the production of electronic circuit copper foil and lithium electric copper foil production lines and joined the field of electrolytic copper foil production. This has driven the rapid expansion of electrolytic copper foil production capacity and rapid increase in total market supply, and it is expected that future market competition will further intensify.

If the downstream market, especially the new energy vehicle market, grows less than expected, or other industry participants accelerate production expansion, which leads to changes in the supply and demand market, it may cause a decline in the copper foil industry's prosperity. If the company cannot maintain its technological and brand advantages, it will face the risk of declining industry status and profitability.

Epilogue

The termination of Jiangxi Copper Foil's IPO has attracted the attention of various investors. Judging from the company's core financial data, its revenue has steadily increased from 2020 to 2022, but its net income attributable to the parent company has fluctuated, and its gross profit margin has also fluctuated. What is more notable is that the company's dividend amount in 2022 exceeded its net income attributable to the parent company that year, and the planned fundraising of up to RMB 500 million for supplementing working capital has also sparked market controversies.