Author | wooden fish

Process Editor | Rookie

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With the help of accounting estimates, accounting policies and sales, it is necessary to increase the amount of blood while spending money on acquisitions.AssetsTo thicken profits. Especially in the darkest period of 2015-2017, it can be said that every effort has been made to thicken performance and ease the pressure on cash flow.

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Fengyunjun once saw such a sentence in an academic article: the index of "the number of micromotors per household" can be used to measure the modernization of family living standards.

Micro motor, also known as small motor, is an electromechanical component that realizes the functions of electromechanical signal calculation, amplification, execution or electromechanical energy conversion, just like human joint muscles and nerve endings.

It is an indispensable part of home appliances, computers, cars and other modern equipment, and each device may use more than one micro motor.

The company that Fengyun is going to introduce to you todayWolong electric drive (600580.SH)It also started with micro motors.

At present, however, Wolong shares have a more than that label. Some people call him the "leader" of the motor drive industry, while others call him the "giant" of the global industrial motor industry.

However, in the eyes of Fengyunjun, who is only willing to accept open and objective data, there is a different Wolong electric drive.

First, start the Buy Buy Mode after listing

1. Rely on mergers and acquisitions to expand business

Wolong Electric Drive was founded in 1998 and listed on the Shanghai Stock Exchange in 2002. The actual controller is Chen Jian, Boss Chen.

Wolong electric drive was once one of the main manufacturers of differential motor industry in China, mainly used in household appliances, cars and motorcycles, industrial drive and control motors, electric vehicles and other fields.

After the listing, Wolong Electric Drive opened the buy-and-buy expansion mode, and the term "micro-special motor" is not enough to describe Wolong Electric Drive, which can also be seen from the changes in the description of the main business.

Since 2002, the main business of Wolong electric drive has expanded from differential motors to all kinds of motors, network energy, transformers, batteries, photovoltaic power stations, and even trade business.

In this regard, Feng Yunjun also made a simple summary.

It can be seen that Wolong driver has launched mergers and acquisitions almost every year since 2002, especially during the period from 2011 to 2018; among them, the record 2015, has acquired three companies.

After continuous buying and buying, Wolong electric drive's goodwill is also growing: 1.377 billion yuan by the end of 2019, accounting for 6.99% of total assets and 18.56% of net assets.

2. Complete the motor business

As can be seen from the above table, in the first few years, the business involved in Wolong electric drive mergers and acquisitions is not particularly concentrated, batteries, transformers, motors and so on are involved.

From about 2013, Wolong Motor gradually defined the development direction of motor, and focused on the target in this field.

From the income composition in 2019, it can be seen that Wolong electric drive's business income mainly comes from motor and control device business, and the revenue scale of 10.699 billion yuan accounts for nearly 90% of the total income.

Yes, through epitaxial mergers and acquisitions, Wolong Electric Drive's motor business not only continues to grow in revenue, but also continues to expand its product range. Since 2015, Wolong electric drive's motor and control device business has gradually formed three parts: high-voltage motor and drive, low-voltage motor and drive, micro-special motor and control.

Among them, high-voltage motors are mainly used in petrochemical, coal, metallurgy, electric power, especially, military industry, nuclear power and other fields; low-voltage motors and drivers are mainly used in compressors, water pumps, fans, industrial robots, papermaking machines and new energy vehicles; micro motors and control products are mainly used in household appliances industry.

In short, it is almost complete with the entire motor business.

Second, continuous mergers and acquisitions bring about the growth of performance scale.

In fact, Fengyunjun is not completely opposed to the merger and acquisition.

Because when a company develops to a certain scale, M & An is indeed an effective way to rapidly expand its scale and enhance its competitiveness.

Of course, the premise of all this is to run the main business well.

What is the situation of Wolong electric drive?

First of all, driven by epitaxial mergers and acquisitions, the performance is really growing well.

Since its listing in 2002, Wolong Electric Drive's operating income has maintained a state of growth in most years. In 2019, Wolong electric drive achieved an operating income of 12.416 billion yuan, an increase of 12.10% over the same period last year, an increase of nearly 60 times compared with 208 million yuan in 2002.

The growth of net profit is not bad. In 2019, Wolong electric drive achieved a net profit of 1.008 billion yuan, an increase of 46.53 percent over the same period last year, more than 30 times that of 30.8688 million yuan in 2002.

However, a careful old man may find that the net profit performance of Wolong electric drive is not as good as income.

In 2011, for example, net profit was almost cut off until it recovered after the acquisition of Qingjiang Electric and Wolong in 2013.

For example, during the period from 2015 to 2016, Wolong Electric Drive's net profit experienced two consecutive years of decline, but this period is the peak of corporate mergers and acquisitions, does not seem to have a significant effect on performance.

This aroused Fengyunjun's vigilance.

Sure enough, I found a lot of interesting things.

Third, 2013: that is highPremiumLoad into the assets of the company

In 2013, the main factor driving the growth of net profit was Wolong Investment: the net profit was 235 million yuan, accounting for 57.34% of the net profit of listed companies that year.

As can be seen from the name, Wolong Investment and listed companies belong to the same control of the enterprise, the actual controller is Boss Chen.

The consideration for Wolong electric drive to buy Wolong investment is 2.089 billion yuan, 15% of which is paid in cash, 313 million yuan, and the rest is paid by shares.

Wolong Investment's net worth as of the end of 2012 was only 1.03 billion yuan, and the value-added rate of this M & An evaluation was as high as 102.79%.

In fact, Wolong Investment is a company set up to acquire shares in Austrian ATB driven technology. After its establishment, it has no other business except holding ATB shares.

It is said that ATB is related to ABB,SiemensOne of the top three motor brands has more than 130 years of experience in the motor drive industry.

Wolong invested in the acquisition of ATB in July 2011, with a consideration of 101 million euros, or about 928 million yuan at the average exchange rate of 9.2385 euros against the yuan that month.

In other words, the assets acquired by Boss Chen for 900 million yuan doubled in value in just two years and injected into listed companies without confirming any goodwill.

The return on this investment is indeed high.

The deal is really a bargain.

IV. 2015: while increasing blood, while borrowing money to buy

An even more interesting thing is that in 2015, net profit fell 8.69% from a year earlier.

1. Borrow money to buy assets

In 2015, Wolong Electric Drive acquired Nanyang explosion-proof, OLI and SIR companies by paying cash, spending 1.68 billion yuan, 406 million yuan and 126 million yuan respectively, totaling 2.212 billion yuan.

Since the total assets, operating income and net assets of Nanyang explosion-proof have not reached 50% of Wolong Electric's audited consolidated statements in the most recent fiscal year, it does not constitute a significant asset restructuring.

However, in reply to an inquiry letter, Fengyunjun found that of the 1.68 billion yuan spent by Wolong Electric Drive to buy Nanyang explosion-proof, 840 million yuan came from bank loans.

As a matter of fact, the acquisition of assets by borrowing is just a matter of being willing to fight one by one, and there is nothing to say.

However, if you contact the following thing again, Fengyunjun can't help talking about it.

2. Fixed increase and supplementary liquidity

Slightly advanced to December 22, 2014, Wolong Electric Drive announced plans to raise funds in a private offering to acquire an European motor and control company.

(announcement of listed companies, December 22, 2014)

Later, the use of the funds raised was changed to acquisition assets, plus repayment of bank loans and replenishment of liquidity.

(announcement of listed companies, December 29, 2014)

Later, the scale of the fund-raising was reduced to 1.6 billion yuan, and there were only two uses left: repaying bank loans and replenishing liquidity.

At this time, in connection with the context, we can draw the following conclusion: Wolong Electric Drive first raises funds to repay loans and replenish working capital, and then uses cash and loans for epitaxial mergers and acquisitions.

Tut-tut, this before and after the plan, it is really wonderful.

In connection with the changes in performance in 2015, Fengyunjun seems to see the impatience of Wolong electric drive, eager to save the already declining net profit.

In this way, it seems that we can evade the audit and maximize the control and time.

However, Wolong Electric Drive acquired three companies in a row within a year, but also failed to save the decline in performance that year.

V. 2016: using accounting estimates and accounting policies to increase profits

In 2016, Wolong Electric Drive achieved a net profit of 288 million yuan, down 33.75% from the same period last year.

However, Fengyunjun found that this-33.75% net profit growth rate is also listed companies spent a lot of thought and made a lot of efforts.

1. Change the proportion of provision for bad debts

In 2016, Wolong Electric Drive changed the provision for bad debts of accounts receivable, adjusting the proportion of 1-2-year-old accounts from 20% to 10% for 3-4 years old from 80% to 50%.

As for the reasons for the change, it is more or less the same, except that the product structure has changed, in order to reflect the company's financial situation and operating results more objectively and truly, combined with the characteristics of payback in recent years, normal credit period, write-off of historical bad debts, and so on.

Therefore, Fengyunjun is more concerned about the results of the change than the reason for the change.

Through the change in accounting estimates, Wolong Electric Drive's net profit increased by 44.625 million yuan in 2016.

Compared with the net profit of 288 million yuan in that year, this increase really will not have a qualitative change to the profit.

2. Change accounting policy

However, how can the "efforts" of listed companies be so small?

At the end of 2016, an office building built by Wolong Electric Drive was completed and accepted, which was confirmed as investment real estate and measured at fair value.

In fact, whether the investment real estate is measured in cost mode or fair value model, as long as it conforms to the provisions of accounting standards.

The key point is that the increase in fair value resulting from this change in accounting policy has increased the net profit of the year by 175 million yuan, accounting for 68.96% of the net profit of the current period.

Coupled with the increase of 44.625 million yuan in net profit by the changes in accounting estimates for that year, these two changes alone contributed 219 million yuan to the net profit in that year, accounting for 76.04 percent of the net profit in that year.

By the way, Wolong Electric Drive also acquired Rongxin Transmission, Rongxin Control and Rongxin Hi-Tech in 2016, contributing a total net profit of 28.5182 million yuan in that year.

I have to say, it's really scary for listed companies to work hard.

VI. 2017: sell subsidiaries to reverse losses

By 2017, the 18 martial arts skills used by listed companies to drive profits have been almost exhausted, and they have finally found the most direct and ultimate way to sell assets.

In 2017, Wolong electric drive generated a total investment income of 749 million yuan from long-term equity investment, while the total net profit for that year was only 671 million yuan.

In other words, without the sale of assets, Wolong Electric Drive is likely to lose money in 2017.

This year, Wolong Electric Drive spun off Yinchuan Wolong (Yinchuan Transformer), Wolong Transformer, Yantai Transformer (Yantai Dongyuan) Beijing Huatai, and Nanyang explosion-proof subsidiary Shanghai Nifu. Among them, the first four are transformer-related targets.

Therefore, listed companies have also found a very reasonable reason to divest non-core assets and pay more attention to the field of motor and control.

As can be seen from the above table, Wolong Electric made a big profit by selling Wolong in Yinchuan, realizing an investment income of 679 million yuan.

Fengyunjun also found that the purchase consideration of Yantai Transformer and Beijing Huatai was 167 million yuan and 41 million yuan respectively, but after many years of operation, the divestiture consideration was only 12 million yuan and 8 million yuan, resulting in a loss of a lot of money.

In fact, these small moves of Wolong electric drive are not without trace, only need to compare the net profit and deduct the non-return net profit.

It can be seen that, different from the previous and previous years, the deduction of non-return net profit of Wolong electric drive accounted for less than 3% of the net profit during the period from 2016 to 2017.

In other words, more than 2% of the net profit comes from non-recurring gains and losses.

VII. The rebound in product prices drives profitability

The good news is that the listed companies, which are about to run out of talents, are finally waiting for new opportunities.

Since 2018, the demand for equipment manufacturing has begun to grow, benefiting from the recovery of downstream oil and gas, coal, refining and chemical, steel, mining, shipbuilding and other industries, leading to an increase in product sales and prices of listed companies.

In particular, it focuses on the performance improvement of low-voltage motor and high-voltage motor.

Among them, the revenue growth of low-voltage motors is the most obvious, with operating income increasing by 20.27% and 16.25% respectively from 2018 to 2019 compared with the same period last year, while the profit of high-voltage motors increased most obviously during the period from 2018 to 2019. Gross profit margin increased by 8.44% and 1.27% respectively.

(data source: Zhiyan Consulting)

On the average sales price of high-voltage motor industry, we can also realize the improvement of gross profit margin of high-voltage motor of listed companies. After two consecutive years of sharp decline from 2016 to 2017, high-voltage motors finally began to pick up significantly in 2018.

The improvement of the gross profit margin of the products also led to the improvement of the overall gross profit margin of Wolong electric drive; in 2018 and 2019, the gross profit margin increased by 4.66% and 0.85% respectively compared with the same period last year.

VIII. Sequelae of M & An in financial analysis

Next, do a simple financial analysis.

1. The period expenses drive down the profit

Fengyunjun found that compared with the increase in gross profit margin, the growth trend of net interest rate has obviously moderated a lot, which is mainly due to the drag of fees during the period.

During the period 2009-2019, the expense rate of Wolong electric drive increased significantly; the expense rate in 2019 was 19.91%, almost double that of a decade ago.

Among the period expenses, the increase of management expenses is the most obvious. From the annual reports of listed companies, most of the explanations found by Fengyunjun are caused by mergers and acquisitions.

In other words, this is probably the hangover of frequent mergers and acquisitions. After all, it is not an easy thing to integrate so many companies.

2. the ability of hematopoiesis needs to be improved.

In addition, the cash recovery capacity of Wolong electric drive is not very ideal.

During the period 2009-2019, the cash-to-cash ratio was only slightly higher than 1.00 in 2013. Even ignoring the impact of value-added tax, Wolong Electric Drive still has a lot of annual sales revenue can not be converted into real cash flow.

When there is no money for what is sold, it is naturally included in the accounts receivable.

During the period from 2009 to 2019, accounts receivable of Wolong electric drive did grow well, with a compound growth rate of 22.64%, which was slightly higher than the compound growth rate of 18.72% of operating income.

Not surprisingly, the turnover of accounts receivable of Wolong electric drive declined significantly during the period 2009-2019.

Also falling is inventory turnover. As a result, there is such a guess that listed companies have acquired many companies in cash, and their hematopoietic capacity is not high, so there must be a lot of pressure to repay debts.

Congratulations, the ability to rush to answer is getting better and better.

3. Great pressure to repay debts

The asset-liability ratio of Wolong Electric Drive increased significantly from 2009 to 2019, reaching 62.34 per cent at the end of 2019.

In addition, the short-term debt service pressure of Wolong electric drive is not small, the current ratio up to the end of 2019,Quick ratioThey were 1.20 and 0.87 respectively.

By the end of June 2020, Wolong Electric Drive needs to repay short-term interest liabilities of 3.89 billion yuan, but its monetary funds are only 2.496 billion yuan, which can not fully cover short-term interest liabilities.

Moreover, by the end of September 2020, the EBIT interest coverage ratio of Wolong electric drive is only 4.39, which is not optimistic.

九、Share out dividendsThe fund-raising ratio is only 0.23

Finally, let's take a look at the dividends of listed companies.

Wolong Electric Drive has been listed for 18 years since 2002, and has raised a total of 4.905 billion yuan five times, including its initial public offering.

In these 18 years, although the listed companies pay dividends every year, but the amount is not high, the total is only 1.144 billion yuan, the dividend ratio is only 0.23, ranking 1643 among all A shares.

Such a ranking really does not match its current position in the industry.

Summary

Since its listing in 2002, Wolong Electric Drive has grown from an inconspicuous micro-special motor factory to the leader of the whole motor industry, with operating income increasing by 60 times and net profit by 30 times. The products cover almost all areas of the motor industry.

Behind this report card, it mainly depends on non-stop mergers and acquisitions, many of which are famous in the industry. However, M & A not only promotes the continuous growth of Wolong electric drive performance and the continuous enrichment of products, but also brings a lot of problems, such as the rapid growth of management expenses and the continuous improvement of the level of assets and liabilities.

And acquisitions can not achieve the target of performance growth in some years. Especially in the darkest period of 2015-2017, Wolong Electric Drive has gone to great lengths to thicken profits and ease its own cash flow pressure.

In 2015, it spent money on mergers and acquisitions while raising money; in 2016, it thickened profits by relying on accounting estimates and accounting policy changes; and in 2017, it embarked on the road of selling assets to reverse losses.

In fact, Wolong electric drive itself also has many problems, cash hematopoietic capacity is one of the largest, but also the most urgent.

Well, the above is the capital market veteran nearly 20 years of A-share career. It is commendable that the actual controller has been stable and has not changed since the listing.

Disclaimer:This report (article) is based on the public company attributes of listed companies and the information publicly disclosed by listed companies in accordance with their legal obligations (including, but not limited to, interim announcements, periodic reports, official interactive platforms, etc.) as the core basis; market capitalization Fengyun strives to be objective and impartial in the contents and opinions contained in the report (article), but does not guarantee its accuracy, completeness, timeliness, etc. The information or opinions expressed in this report (article) do not constitute any investment advice, and the market capitalization assumes no responsibility for any action taken as a result of the use of this report.

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