The Shanghai Stock Exchange's official website on June 11th showed that, due to Shenzhen Shangshui Intelligent Co., Ltd. (referred to as Shangshui Intelligent) and its sponsor (Minsheng Securities Co., Ltd.) withdrawing their application for listing and issuing on the science and technology innovation board, the Shanghai Stock Exchange terminated its review of the listing and issuing for the science and technology innovation board in accordance with relevant regulations.

Shangshui Intelligent is a high-tech enterprise specialized in the research and development, design, production, and sales of intelligent systems for the dispersion and grinding of micro-nano materials. Its IPO application for the science and technology innovation board was accepted on June 30, 2023. After only one round of review and inquiry, the company and its sponsor actively withdrew the application materials.

The company's main product is the micro-nano material intelligent processing system based on the non-standard lithium battery pulp system application equipment. It can be widely used in the intelligent production of power batteries, energy storage batteries, 3C batteries, and other products in various fields. It also has well-known lithium battery production enterprise customers such as Contemporary Amperex Technology, BYD, Zhongchuangxinhang, Ruipulanjun, and Eve Energy Co., Ltd.

The company is involved in multiple patent disputes.

In June 2023, Guangdong Machinery Engineering Society issued an authentication opinion stating that the overall technology of the project 'Circulating High-efficiency Pulp-making Machine, Vertical Medium Grinding Machine and Supporting Equipment for New Energy Battery' developed independently by the company reached the international advanced level. Among them, the circulating high-efficiency pulp-making machine based on solid-liquid mixing and dispersing is the first of its kind in the new energy battery industry.

Although Shangshui Intelligent provided evidence for 'reaching international advanced level' and 'being the first in the industry' in the first-round review and inquiry reply, implying the company's advanced innovation attributes, it still has multiple intellectual property disputes and has triggered inquiries from the Shanghai Stock Exchange. If the relevant patents are found to be invalid or commercial secrets are leaked, it will affect the stability of the company's customers and market expansion.

According to the prospectus, Shangshui Intelligent and its comparable company Honggong Technology have three pending lawsuits, involving disputes over infringement of trade secrets, infringement of the right of utility model patent, and infringement of the right of invention patent. As the plaintiff, Shangshui Intelligent is claiming more than 60 million yuan in compensation from Honggong Technology.

Honggong Technology is one of Shangshui Intelligent's competitors. In 2022, Honggong Technology's revenue was 2.178 billion yuan, and net profit was 297 million yuan. In May 2023, Honggong Technology's Growth Enterprise Market IPO application passed. In response to Shangshui Intelligent's lawsuit, Honggong Technology launched a counterattack and filed a request for invalidation of the three patents owned by Shangshui Intelligent.

Shangshui Intelligent also stated that as of the date of the reply, the patent technology involved in the above-mentioned intellectual property disputes is mainly used in the company's early circulating high-efficiency pulp-making system. 'Due to the weak dispersing ability of early products, the company's continuous innovation, subsequent products do not use the above-mentioned patented technology. Therefore, the above-mentioned patented technology did not generate revenue during the reporting period, and even if the patent is declared invalid, it will not affect the company's order backlog, existing customers and other aspects.'

Revenue depends more on the top five customers.

For this IPO, Shangshui Intelligent originally planned to raise 1.002 billion yuan. Among them, 506 million yuan is used for the construction project of the high-precision intelligent equipment South China headquarters manufacturing base, 296 million yuan is used for the research and development center construction project, and 200 million yuan is used for the supplement of working capital.

The prospectus shows that Shangshui Intelligent's revenue for 2020-2022 was 109 million yuan, 152 million yuan, and 397 million yuan, respectively; net profit attributable to the parent company was 8.9 million yuan, 16 million yuan, and 100 million yuan, respectively; and the non-net profit attributable to the parent company were 5.8 million yuan, 12 million yuan and 88 million yuan, respectively. During the same period, the sales amounts to the top five customers were 97 million yuan, 128 million yuan, and 363 million yuan, respectively, accounting for 88.31%, 84.49%, and 91.48% of the current revenue. The company's business depends more on its top five customers.

During the above period, the company's sales revenue from BYD and its subsidiaries totalled 35 million yuan, 86 million yuan, and 194 million yuan, respectively, and the sales ratios of BYD and its subsidiaries were 31.73%, 56.48%, and 49.04%, respectively, which is relatively high, mainly due to the high market concentration of downstream lithium-ion battery products.

The Science and Technology Innovation Board Daily reporter noticed that, in addition to close cooperation in the business field, BYD is also the fourth largest shareholder of Shangshui Intelligent. In September 2022, BYD became a shareholder of Shangshui Intelligent through equity transfer; in the same year, BYD further strengthened Shangshui Intelligent by increasing capital and expanding shares. According to the prospectus, BYD holds 7.69% of Shangshui Intelligent's shares.

Li Qian, secretary of the board of directors of BYD, serves as a director of Shangshui Intelligent, constituting a related party of the company; BYD employee follow-up platform Chuangqi Kaiying holds 0.07% of the shares and BYD holds a total of 7.76%. On March 28, 2023, BYD also announced that it plans to purchase lithium-ion equipment worth no more than 1.133 billion yuan from Shangshui Intelligent.

Several executives left during the reporting period

From 2020 to 2022, it is a financial reporting period for Shangshui Intelligent's IPO application. However, during this period, two founders and several former executives of the company left. Several new executives joined the company in 2022, and the company's internal control and management are in doubt.

According to the application materials, in 2012, Jin Xudong, Yan Yongjun, and Zhang Shubo initiated the establishment of Shangshui Intelligent. On September 27, 2020, historical shareholders of Shangshui Intelligent Yan Yongjun, Zhang Shubo, AVIC Fund (as the transferor), and Zhuzhou Jushidai, Wu Juan, Li Qunhua, and Jin Xudong (as the transferee) signed the "Equity Transfer Agreement." Through the above equity transfer, the other two founders of Shangshui Intelligent, Yan Yongjun and Zhang Shubo, withdrew from the company in October 2020, because they were bullish on the company's development.

According to the prospectus, on August 9, 2022, Shangshui Intelligent held a shareholders' meeting and passed a resolution to allow shareholder Wu Juan to transfer her equity in Shangshui Limited. Wu Juan, the former director and general manager of Shangshui Intelligent, once held more than 5% of the company's shares and left during the reporting period. Other executives who left during the same period include the CFO Chen Danhong.

Except for the actual controller Jin Dongxu, Zeng Dandan (spouse of Jin Xudong and constitute concerted action relationship with Jin Xudong), and Shi Qiao, all other new members of the company's board of directors and supervisory board joined in 2022.