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After waiting in line for an IPO on the Science and Technology Innovation Board for more than a year, Sikan Technology (Hangzhou) Co., Ltd. (hereinafter referred to as "Sikan Technology") recently updated and submitted relevant financial information to the Shanghai Stock Exchange and responded to the second round of regulatory inquiries. The Shanghai Stock Exchange's official website shows that the Shanghai Stock Exchange's Listing Review Committee will review Sikan Technology's initial public offering on August 2.

Lanfu Finance noted that the latest amount of funds that Sikan Technology plans to raise is 569 million yuan, which is about 33% less than the initial amount of 851 million yuan. The company's revenue growth has slowed down in recent years, and the industry competition it faces has continued to increase. The company's former largest customer has become a competitor, and Sikan Technology needs to deal with many challenges one by one.

Revenue growth slowed down and competitive pressure increased sharply

According to the prospectus, ScanTech is a provider of comprehensive 3D visual digital solutions, mainly engaged in the research, development, production and sales of 3D visual digital products and systems. The company's products are mainly aimed at target markets such as large-sized and complex-shaped objects, portable and efficient on-site measurement, and comprehensive and efficient 3D modeling.

The official website of the Shanghai Stock Exchange shows that Sikan Technology first submitted its prospectus on June 16, 2023, more than a year ago. On September 30, 2023, the Shanghai Stock Exchange terminated Sikan Technology's listing review because the financial information recorded in the listing application documents had expired.

In December 2023 and June 2024, Scan Technology updated and submitted relevant information, and responded to the second round of review inquiry letters from the Shanghai Stock Exchange in July.

According to the prospectus, from 2021 to 2023, ScanTech achieved revenue of 161 million yuan, 206 million yuan, and 272 million yuan, up 76.01%, 27.92%, and 31.88% year-on-year, respectively. Although revenue is still growing, the growth rate has slowed down significantly. During the same period, the company achieved net profits attributable to its parent of 68 million yuan, 78 million yuan, and 114 million yuan, respectively.

Sikan Technology admitted that although the company's revenue and net profit grew rapidly, compared with listed companies in the same industry, the company's operating income scale was relatively small and its ability to resist risks was relatively weak.

From 2021 to 2023, the gross profit margins of Sikan Technology were 77.01%, 76.4% and 78.38% respectively, while the average gross profit margins of comparable companies in the industry (from 2020 to 2022) were around 53%. The regulatory authorities also questioned the rationality of its high gross profit margin in the inquiry letter. Sikan Technology only stated in its reply letter that there were differences in the company's revenue structure and product structure.

In its prospectus, Sikan Technology also pointed out that the company's profitability and main business gross profit margin are affected by many factors, including product technology competitiveness, product sales structure, sub-industry development stage, market competition pattern, market supply and demand, and market sales strategy.

Especially in terms of market competition, ScanTech faces great pressure. On the one hand, international industrial measurement giants such as ZEISS and HEXAGON have entered the field of 3D visual digitization through internal cultivation and development, mergers and acquisitions of domestic and foreign targets, and participated in the competition in domestic and foreign markets; on the other hand, domestic companies such as Wuhan Zhongguan and Xianlin 3D also have a deep layout in the field of 3D visual digitization. In addition, as the pioneer of handheld 3D scanning equipment and a leading overseas company, Xingchuang Company is still actively deploying related products and improving its market sales network. It can be seen that ScanTech's domestic and foreign competitors have formed certain differentiated competitive advantages in their respective technical fields.

With the rapid development of the industry, as well as the accelerated layout of relevant market segments by existing or potential competitors at home and abroad, there may be certain pressure on the market development and sales of Scan Technology. If the company cannot cope with it with its own differentiated competitive advantages in the future, or the market development is not as expected, it may cause the sales price and gross profit margin of the company's products to be under great pressure, which will in turn have a significant adverse impact on the company's business scale, profitability and income stability.

It should be noted that while the gross profit margin is higher than that of its peers, the R&D investment of Sikan Technology is slightly inferior to that of its peers. The prospectus shows that the R&D expense rate of Sikan Technology from 2021 to 2023 will be 14.48%, 17.82%, and 17.78% respectively. The R&D expense rate of Xianlin 3D in the same industry has been stable at more than 25% in recent years, and the average R&D expense rate of other comparable companies in recent years is 18.31%, 19.68%, and 20.25% respectively. Sikan Technology is "stingy" in R&D investment compared to its peers, and it is currently unknown how it can gain a competitive advantage.

Backstabbed by the largest customer

In addition to having to bear greater competitive pressure, Sikan Technology is also facing the loss of major customers.

From 2021 to 2023, the revenue amount of Scan Technology from its top five customers was RMB 23.1548 million, RMB 35.0597 million and RMB 29.2770 million, respectively, accounting for 14.38%, 17.02% and 10.78% of the operating income, respectively. The customer concentration is relatively low.

In 2023, the sales proportion of ScanTech to its top five customers decreased, mainly due to the expiration of the ODM cooperation agreement with its original major customer Zeiss Colmer, which led to a decline in sales in 2023.

It is understood that Carl Zeiss Gaum is renamed after Carl Zeiss Group acquired Germany's Gaum Co., Ltd. As a German company that is the world's leading optical manufacturing and optoelectronic equipment company, Carl Zeiss Group is accelerating its layout in the field of non-contact 3D scanning products through independent research and development, mergers and acquisitions, or ODM cooperation, while taking advantage of the advantages of multinational companies.

The prospectus shows that from 2020 to 2022, the revenue share of the top five customers of ScanTech was 14.84%, 14.38% and 17.02% respectively, among which Zeiss Camus has always been the company's largest customer, accounting for 6.49%, 8.15% and 7.54% of the revenue respectively. However, Zeiss Camus did not renew the contract after the expiration of the agreement in November 2022, and even started the research and development of handheld 3D laser scanner products by itself, and launched the self-developed T-SCANhawk2 handheld 3D laser scanner in the first half of 2023. Obviously, Zeiss Camus and ScanTech have formed a certain competitive relationship.

Although Sikan Technology stated that the company has more competitive advantages and related competition will not have a significant adverse impact on the company's business growth, the former largest customer instantly became the company's competitor. To a certain extent, this reflects that Sikan Technology's product competition threshold is not high enough and is highly substitutable.

The amount of funds raised has shrunk by more than 30%

In the prospectus submitted in June last year, ScanTech planned to raise 851 million yuan, of which 197 million yuan would be used for the capacity expansion of 3D visual digital products and automated inspection systems; 343 million yuan would be used for the construction of R&D centers and headquarters buildings; 111 million yuan would be used for the construction of marketing and service network bases; and 200 million yuan would be used to supplement working capital.

However, in the latest draft submitted by Sikan Technology, Sikan Technology has made significant adjustments to the fundraising projects and the amount of funds raised. Among them, the "R&D center and headquarters building construction project" was adjusted to the "R&D center base construction project", and the amount of funds to be raised was adjusted from 343 million yuan to 285 million yuan; the "marketing and service network base construction project" was adjusted to be solved by the company's own funds and no longer as a fundraising project; in the original supplementary working capital project, the capital demand for daily business operations was adjusted to be solved by own funds, and the planned fundraising amount was also adjusted from 200 million yuan to 87.2 million yuan.

Overall, in the one year since ScanTech applied for listing, the total amount of funds it planned to raise has shrunk from 851 million yuan to 569 million yuan, a decrease of nearly one-third.

The significant changes in the fundraising projects and the amount of funds raised may mainly come from the regulatory authorities' concern about the rationality of Sikan Technology's fundraising. First of all, Sikan Technology's capacity utilization rate still has a lot of room for improvement. In 2023, the capacity utilization rates of the company's portable 3D scanners, color 3D scanners and other product lines were all around 80%, which did not reach full utilization.

Secondly, ScanTech may not be short of money at the moment. The company used its own funds to purchase a number of commercial properties in 2022 and carried out renovations. In the past two years, the company's monetary funds were 291 million yuan and 288 million yuan, respectively, mainly bank deposits. In addition, at the end of 2023, the company's liabilities amounted to 87.7965 million yuan, of which 80.9490 million yuan was current liabilities. The current ratio in recent years has also far exceeded the safety value, showing that the company is not short of money.

What is the purpose behind choosing to go public for financing when the company is not short of money? Lanfu Finance will continue to follow up.