The total amount of dividends is equivalent to the net income in 2021.

Investor Network Zhang Wei

Currently, China has become the world's largest semiconductor market, but due to overseas blockades, self-controllable technology has become an urgent issue for the domestic semiconductor industry. The domestic substitution of semiconductor equipment and precision components is accelerating. At the same time, the government has introduced relevant policies to encourage some qualified companies in the semiconductor industry chain to go public, using capital strength to grow and strengthen, and achieve complete localization of the semiconductor industry as soon as possible.

On August 16, Jiangsu Pioneer Precision Technology Co., Ltd., a manufacturer of semiconductor equipment components (referred to as 'Pioneer Precision Technology'), successfully passed the initial public offering (IPO) review on the Shanghai Stock Exchange STAR Market. On the same day, Naura Technology Group (301611.SZ) was listed on the GEM of the Shenzhen Stock Exchange. Prior to the listing of Naura Technology Group, only Fulcrum Precision (688409.SH) in the same industry landed on the STAR Market in October 2022.

On August 23, Pioneer Precision Technology submitted its registration. Whether Pioneer Precision Technology can become the third A-share listed company in the semiconductor equipment component industry remains to be seen.

Holding two major leading customers.

It is understood that semiconductor equipment refers to the production equipment used to manufacture various semiconductor products. As an important component of semiconductor equipment, the quality, performance, and accuracy of precision components directly determine the reliability and stability of semiconductor equipment.

Chart 1: The position of Pioneer Precision Technology's products in the semiconductor industry chain

Pioneer Precision stated that the company is an expert in manufacturing key components for domestic semiconductor etching equipment and thin film deposition equipment, especially in the field of etching equipment with technical difficulty second only to lithography equipment. The company is one of the few domestic suppliers that have mass produced and supplied key components for 7nm and below domestic etching equipment, directly competing with international manufacturers.

The revenue composition shows that from 2021 to 2023 and the first three months of this year, the revenue from Pioneer Precision's products used in etching equipment and thin film deposition equipment accounted for 82%, 89%, 77% and 82% of its total revenue, respectively. Other revenue comes from the medical and photovoltaic sectors.

Pioneer Precision also mentioned that the semiconductor equipment component market has many different sub-categories, each with different technical requirements and difficulties. Since its establishment, the company has grown together with domestic semiconductor equipment industry leaders, giving it a first-mover advantage. The unique nature of the industry has deep ties Pioneer Precision has with major customers.

The customer list shows that since 2021, Advanced Micro-Fabrication Equipment Inc. China (688012.SH) and Naura Technology Group (002371.SZ) have consistently been Pioneer Precision's top two customers, with their revenue accounting for over 50% of Pioneer Precision's revenue in each period, reaching a peak of 68% in 2022.

Publicly available information shows that Advanced Micro-Fabrication Equipment Inc. China was the first company in China to develop a domestic electric dielectric etching machine and is a leading enterprise in the integrated circuit equipment industry. Naura Technology Group is currently the largest semiconductor equipment company in China, with products including plasma etching equipment, physical vapor deposition equipment, chemical vapor deposition equipment, and more.

It is worth mentioning that Advanced Micro-Fabrication Equipment Inc. China is also a shareholder of Pioneer Precision. In December 2021, during Pioneer Precision's third equity transfer, Advanced Micro-Fabrication Equipment Inc. China invested 10 million yuan to acquire a 0.59% stake. Prior to this IPO, Advanced Micro-Fabrication Equipment Inc. China held a 1.93% stake in Pioneer Precision, making it the ninth largest shareholder.

The company's performance has experienced fluctuations in the past.

Although supported by these two major customers, Pioneer Precision's performance has also experienced fluctuations in the past few years.

Financial data shows that from 2020 to 2023, Pioneer Micro Technology achieved revenues of 0.202 billion yuan, 0.424 billion yuan, 0.47 billion yuan, and 5.58 billion yuan, and the net income attributable to the parent company for each period was -38.4493 million yuan, 0.105 billion yuan, 0.105 billion yuan, and 0.80 billion yuan. In 2021, Pioneer Micro Technology achieved a turnaround from loss to profit.

However, in 2023, Pioneer Micro Technology experienced 'increased revenue but not increased profit'. Despite an increase of nearly 100 million yuan in revenue compared to 2022, the net income attributable to the parent company decreased by 25 million yuan.

Regarding the performance changes, in the response to the second round of inquiry, Pioneer Micro Technology stated that the fluctuations in the company's performance in the first half of 2023 were affected by cyclical fluctuations in the industry. From the second half of 2023, the downstream market warmed up, and the company's performance improved. Pioneer Micro Technology believes that there are no risks related to a small market space or insufficient growth potential in the company's operations.

In the latest prospectus (draft registration), Pioneer Micro Technology disclosed the financial data for the first half of 2024, with operating income of 0.548 billion yuan, a year-on-year increase of 147%; and net income attributable to the parent company of 0.112 billion yuan, a year-on-year increase of 314%.

Regarding the significant growth in performance in the first half of the year, Pioneer Micro Technology stated that since the second half of 2023, with the continuous advancement of the downstream semiconductor equipment market into an upward cycle and the ongoing process of localization, the company's operating income and net profit levels have increased significantly in the first half of 2024.

Among companies in the same industry, Fuchuang Precision had revenues and net profits of 1.506 billion yuan and 122 million yuan in the first half of the year, an increase of 82% and 27% respectively. Kema Technology had revenues of 0.385 billion yuan and net profit of 0.139 billion yuan, showing year-on-year increases of 64% and 309% respectively. Based on the situation in the first half of the year, the entire semiconductor equipment parts industry has already recovered.

At the same time, Pioneer Micro Technology also disclosed the forecast for the full-year 2024 performance, with an expected operating income of 1 billion yuan to 1.1 billion yuan, representing a year-on-year growth of 79% to 97%; and an expected non-net profit of 0.19 billion yuan to 0.2 billion yuan, representing a year-on-year growth of 138% to 151%.

Pioneer Micro Technology stated that the sharp increase in full-year 2024 performance mainly comes from the sustained growth of core products in the semiconductor field. However, Pioneer Micro Technology also mentioned that the 2024 financial data is the company's preliminary estimate and has not been audited or reviewed by accountants, and does not constitute a profit forecast or a performance commitment by the company.

The company distributed over 100 million yuan in dividends before the IPO.

According to the prospectus, Pioneer Technologies plans to raise 0.587 billion yuan in this IPO, of which 94.9494 million yuan will be used to supplement working capital, attracting attention. During the IPO, Pioneer Technologies distributed dividends multiple times.

According to the prospectus, in 2020, Pioneer Technologies incurred a loss of 38.4493 million yuan and distributed dividends of 0.3051 million yuan. In 2021, Pioneer Technologies made a profit of 0.105 billion yuan and distributed dividends of 82.675 million yuan, accounting for 79% of the net income for that year. In 2022, Pioneer Technologies made a profit of 0.105 billion yuan and distributed dividends of 25 million yuan, accounting for 24% of the net income for that year. Statistics show that Pioneer Technologies distributed a total of 0.108 billion yuan in dividends before the IPO, approximately equivalent to the net income for 2021.

According to the equity relationship, Pioneer Technologies' founder You Li and his family collectively hold approximately 35% of the company's shares through direct and indirect means. Based on this calculation, You Li and his family will receive nearly 40 million yuan in dividends. The purpose of the dividends mentioned by Pioneer Technologies is to be used by relevant shareholders to contribute investment funds to the company.

In the first round of inquiries, when asked about the necessity and rationality of large cash dividends during the IPO and raising funds for "replenishing liquidity", Pioneer Technologies replied that the expansion of business scale has led to a continuous increase in the company's need for working capital. The use of part of the raised funds to supplement working capital can effectively meet the continuous R&D investment and expansion needs of the company's business scale, providing a financial guarantee for the company's ongoing operation and development.

Since the beginning of this year, regulators have strengthened the management of "simultaneous dividend distribution and fundraising for replenishing working capital". On April 30th, the Shanghai Stock Exchange and Shenzhen Stock Exchange proposed to implement a negative list-style management for issues such as reputation, excessive pre-IPO dividend distribution, etc. As a result, some IPO companies withdrew voluntarily.

Tightening regulations also have some impact on Pioneer Technologies' fundraising needs. The prospectus for June 2023 shows that Pioneer Technologies plans to raise 0.208 billion yuan to supplement working capital, which was later adjusted to 94.9494 million yuan. However, Pioneer Technologies is also "not short of money". Financial data shows that as of the end of March this year, Pioneer Technologies had cash and cash equivalents of 0.279 billion yuan and a net cash flow from operating activities of 10.97 million yuan during the same period. (Produced by Sina Finance)