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How far can the “big tree” of China Gold Jewelry hit the IPO?


2020-07-13 17:10:01Beijing News reporter: Zhang Zeyan Editor: Zhao Ze
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How far can the “big tree” of China Gold Jewelry hit the IPO?

2020-07-13 17:10:01Beijing News reporter: Zhang Zeyan

China National Gold Group is the controlling shareholder of China Gold Jewellery. China National Gold Group, its controlling CICC Gold and its concerted parties, Gold Technology, together hold 51.19% of the shares of China Gold Jewellery.

As the holding subsidiary of China National Gold Group, the second batch of mixed reform pilot companies, China National Gold & Jewellery Co., Ltd. (referred to as “China Gold Jewellery”) is taking the most critical step in reform. Recently, the website of the China Securities Regulatory Commission disclosed the prospectus of China Gold Jewelry. Backed by the major shareholder China National Gold Group, China Gold Jewelry is getting closer and closer to A shares.

However, it is precisely because the back of the tree is good to enjoy the cool, Zhongjin Jewelry also exposed some problems. With only 25 R&D personnel, accounts receivable and franchise model, will the hidden risks be a “stumbling block” for CICC Jewelry to hit A shares?

Mixed reform impacts IPO

Public information shows that China Gold Jewelry is a large domestic enterprise specializing in the research and development, design, production, sales and brand operation of “China Gold” brand gold jewelry products. It is the only platform for China National Gold Group’s gold jewelry retail sector. According to the prospectus, China National Gold Group is the controlling shareholder of China Gold Jewellery, and China National Gold Group, its controlling CICC Gold and its concerted parties, Gold Technology, together hold 51.19% of the shares of China Gold Jewellery.

CICC Jewelry is the second batch of pilot enterprises for mixed-ownership reform of central enterprises identified by the National Development and Reform Commission. It has formulated a pilot program for mixed-ownership reform to introduce investors with multiple ownership systems. In 2017, CICC Jewelry introduced CITIC Securities Investment, Suqian Hanbang and other strategic investors and industrial investors, and established an employee shareholding platform to increase capital and shares, financing 2.25 billion yuan.

Specifically, CITIC Securities holds 6.98% of Zhongjin Jewelry, and Suqian Hanbang holds 5.01% of Zhongjin Jewelry. According to an enterprise search, Suqian Hanbang is 100% controlled by Shanghai Shengdayuan, and the actual controllers of the two are Jingdong Group.

According to a previous report by China News Agency, after the capital increase and share expansion, the total shareholding ratio of the three types of new entrants reached 41% (of which, strategic investors hold 24.52% of the shares; industrial investors hold 9.81% of the shares; 150 A key employee holds 6% equity). The shareholding ratio of China National Gold Group Co., Ltd. and those acting in concert was reduced from 85% to 51%.

In 2018, CICC Jewelry completed the shareholding system reform, then completed the listing counseling and submitted the listing application.

Today, China Gold Jewellery has moved towards the third step of reform.

The prospectus shows that CICC Jewellery intends to raise 1.246 billion yuan this time, of which 816 million yuan will be used for the construction of regional flagship stores, 96,052,700 yuan will be used for the information platform upgrade construction project, and 36,659,400 yuan will be used for the R&D and design center project. 200 million yuan will be used to supplement working capital.

From 2017 to 2019, the cash flow of CICC Jewellery was fluctuating. During the above reporting period, the company’s cash flows from operating activities were 426 million yuan, -24.853 million yuan, and 505 million yuan, and the cash flows from investment activities were -68.5889 million yuan, -56,521,100 yuan and -47,053.6 million yuan. , The net cash flows from raising activities were 1.927 billion yuan, -70.507 million yuan and -102 million yuan, and the ending cash and cash equivalent balances were 2.775 billion yuan, 2.623 billion yuan and 2.98 billion yuan respectively.

Hidden risks in accounts receivable

Although born with a “gold spoon”, Zhongjin Jewelry is also facing a common problem in the jewelry industry-accounts receivable are increasing year by year.

The prospectus shows that from 2017 to 2019, CICC Jewellery achieved revenues of 28.248 billion yuan, 40.911 billion yuan and 38.274 billion yuan respectively. During the same period, the company’s net profit gradually increased, reaching 301 million yuan, 369 million yuan and 450 million yuan respectively.

Also from 2017 to 2019, the company’s accounts receivable were 367 million yuan, 1.096 billion yuan, and 965 million yuan, with growth rates of -47.22%, 198.29%, and -11.93%, respectively, accounting for the proportion of total assets. They are 5.70%, 14.81% and 11.45%, accounting for 1.30%, 2.68% and 2.52% of operating income respectively.

The Beijing News Shell Finance reporter noted that the accounts receivable of China Gold Jewellery increased significantly in 2018. In this regard, the company stated that it was mainly due to the growth of the company’s business scale in 2018, and part of the accounts receivable that realized income was still within the credit period but not settled, and at the end of 2018, CITIC Guoan Investment Co., Ltd. and Beijing Gold Exchange Co., Ltd. The unpaid futures payments totaled 355 million yuan. As of the end of June 2019, the company has fully recovered the accounts receivable from CITIC Guoan Investment Co., Ltd. and Beijing Gold Exchange Center Co., Ltd. In 2019, the company’s accounts receivable decreased compared with 2018.

In 2019, the accounts receivable of CICC Jewelry still reached 965 million yuan. The top five were China Post Group Corporation, Jiangsu Zhongjin Gold Ornament Investment Co., Ltd., Beijing Caishikou Department Store Co., Ltd., and Sichuan Yuandai Trading Co., Ltd. Company and Xingguang Jewelry Group Co., Ltd.

CICC Jewellery’s bad debt provision of accounts receivable in 2019 was 123 million yuan, which was a significant increase from the 2018 bad debt provision of 64.78 million yuan. In this regard, China Gold Jewellery said that it was mainly due to a single provision of 71,297,600 yuan for bad debts. The company’s customers, Starlight Jewelry Group Co., Ltd. and Hefei Junge Trading Co., Ltd., were temporarily unable to repay the company’s payment due to their liquidity problems. The balances of accounts receivable related to these two companies were 28,624,500 yuan and 26,867,500 respectively. CICC Jewellery has made full provision for bad debts for the above accounts receivable and has filed related lawsuits.

In 2018, CICC Jewelry successfully “lightning protection”. That year, the company’s accounts receivable increased by 198.29% year-on-year. According to reports, the top five customers were CITIC Guoan Investment Co., Ltd., Beijing Gold Exchange Center Co., Ltd., Zhejiang Zhongjin Gold Jewelry Sales Co., Ltd., China Post Corporation and Yiwu Golden Ant Jewelry Co., Ltd.

Among them, the controlling shareholder of CITIC Guoan Investment, CITIC Guoan Group, was previously in a debt crisis, but as of the signing date of the prospectus, all the accounts receivable of CITIC Guoan and Beijing Gold Trading Center in 2018 have been recovered, and CICC Jewellery and the two No more transactions occurred.

It is worth noting that China Gold Jewellery stated that since January 2020, the pneumonia epidemic caused by the new coronavirus has spread throughout the country and the world, and the retail industry has been greatly affected by the new coronavirus epidemic. The epidemic has adversely affected the operation of the company’s downstream customers. In extreme cases, it will affect the downstream customers’ payment to the issuer, and even lead to bad debt losses for CICC Jewelry, which may cause the company’s listing year’s operating profit to drop by more than 50% year-on-year or even The situation of loss.

Franchise stores are growing rapidly and management becomes more difficult

In the prospectus, CICC Jewelry disclosed that from 2017 to 2019, the number of CICC Jewelry franchise stores were 1,805, 2,119, and 2,852 respectively, and the franchise business revenues were 8.504 billion yuan, 14.371 billion yuan and 18.715 billion yuan respectively. Yuan, which accounted for 30.18%, 35.16% and 49.02% of China Gold Jewelry’s revenue in each period.

The franchise model of CICC Jewelry is that the company signs a “brand franchise contract” with franchisees, authorizes franchisees to open franchise stores in specified areas in accordance with the company’s unified business and management system, and franchisees have the ownership and right to profit from the franchise stores , Franchisees implement independent accounting by themselves.

In the prospectus, CICC Jewelry admitted that the increase in the number of franchise stores and the further expansion of the scale will increase the difficulty of the company’s management, especially in the internal control aspects of the company’s procurement and sales, inventory management, personnel management, and financial regulations. High demands.

The common business model of the jewelry industry is a combination of direct sales and franchising. Industry insiders told reporters that the advantage of direct sales is channel control, but with heavy assets and large investment, it is suitable for companies with sufficient funds and franchise stores are more flexible. Under the franchise model, the company can fully and effectively utilize the geographical advantages of franchisees to accelerate the efficiency of brand expansion, but there are also very big hidden dangers.

The last jewelry company that relied on the “join” model to counterattack and tried to land in the A-share market was Saturday Fu. According to the prospectus disclosed by Saturday Fortune, from 2016 to the first half of 2019, the franchise model revenue was 474 million yuan, 807 million yuan, 1.323 billion yuan, and 753 million yuan, accounting for 90.69% and 86.45% of the main business revenue, respectively. , 82.18% and 80.50%. As of June 30, 2019, Saturday Fortune had 3,050 franchise stores and 20 self-operated stores; the net increase in the number of stores in each period during the reporting period was 182, 489, 529, and 269, respectively. Saturday Fu admitted in the prospectus that under the franchise model, the company needs to maintain a high inventory level and style reserves to meet the purchase needs of franchisees.

There are only 25 R&D personnel, and the transformation is long

The main products of CICC Jewelry include gold products and K gold jewelry products. During the reporting period, the main business income of CICC Jewelry mainly came from the sales of gold products. From 2017 to 2019, the company’s sales of gold products accounted for an average of 98.72% of total operating income.

During the above reporting period, gold product revenue was 27.486 billion yuan, 40.641 billion yuan and 37.869 billion yuan, accounting for 97.55%, 99.43%, and 99.19% respectively; K gold jewelry products accounted for 1.67% and 0.33% respectively And 0.54%.

In terms of gross profit margin, from 2017 to 2019, the gross profit margins of gold products were 5.58%, 2.87% and 5.34%, while the gross profit margins of K gold jewelry products were 27.74%, 27.87% and 27.49%.

With the increasingly fierce competition in the industry, gold and jewellery companies are accelerating their transformation from “manufacturing” to “creative”, gradually deviating from the original low-value-added profit model that relies on entrusted processing, and by cultivating their own brands and building sales channels, The business extends from the original manufacturing and processing to the downstream light asset side such as brand operation, channel management, design R&D and supply chain integration, and more participates in the competition in the gold jewelry retail market.

CICC Jewelry is also trying to transform. However, in 2017, 2018 and 2019, the research and development expenses of CICC Jewelry were 3.5224 million yuan, 3.4645 million yuan and 8.5274 million yuan, which accounted for a relatively low proportion of current operating income. As of December 31, 2019, the company has only 25 R&D and designers, and 9 with master’s degree or above.

Beijing News Shell Finance reporter Zhang Zeyan edited Zhao Ze to proofread Li Ming

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