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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

The school-run enterprise Shandong Shanda Electric Power Technology Co., Ltd. (hereinafter referred to as "Shanda Electric Power") is striving for an A-share IPO.

Shandong Power has not yet completed the inquiry since it submitted its listing application materials in June 2023. On August 9, the Shenzhen Stock Exchange sent a third round of review inquiry letter to Shandong Power.

Shandong University Power, backed by Shandong University, has a capital platform under Shandong University holding about 40% of its shares. Six of the company's nine directors are from Shandong University.

Shandong Power is mainly engaged in two major business segments: intelligent grid monitoring and new energy. After two years of stagnation, the company's net profit attributable to parent company shareholders (hereinafter referred to as "net profit") grew rapidly in 2023, but the company expects that the growth rate of net profit in the first half of this year will slow down.

In this IPO, Shandong Electric Power plans to raise 500 million yuan, of which 90 million yuan will be used to supplement working capital. However, in the past three years, the company has distributed a total of about 110 million yuan in cash dividends.

What is somewhat surprising is that three months before Shandong Power submitted its listing application to the Shenzhen Stock Exchange, two shareholders cashed out more than 10 million yuan through an agreement transfer.

6 of the 9 directors are from Shandong University

Shandong University Electric Power is a company that grew up relying on Shandong University.

According to the prospectus, Shandong Power's predecessor, Electric Power Co., Ltd., was established on April 6, 2001 with a registered capital of 6 million yuan, with Huatian Technology contributing 2.7 million yuan, the Electrical Research Institute contributing 2.1 million yuan, Liang Jun contributing 480,000 yuan, Zhang Bo contributing 360,000 yuan and Ding Lei contributing 360,000 yuan.

At that time, Huatian Technology was a subsidiary of Shandong Shanda Technology Group, which was a wholly-owned subsidiary of Shandong University (transferred to Shandong University's wholly-owned subsidiary, Shandong University Industry Group, in April 2002). The Electrical Research Institute was a wholly-owned enterprise of Shandong University.

In 2017, after the company completed its equity reform, Shandong Industrial Group became a direct shareholder of Shandong Power with a shareholding ratio of 40.50%, and is also the company's controlling shareholder.

As of August 9 this year, the date when the latest version of the prospectus was signed, Shandong Capital (formerly Shandong Industrial Group) became the controlling shareholder of Shandong Power, with a shareholding ratio of 40.148%.

Shanda Power has a complex relationship of proxy holding of shares. After equity transfer and capital increase in April 2017, the company cleared and restored the proxy holding.

In April 2017, the company made its fourth equity transfer, and Liang Jun, Zhang Bo and Ding Lei restored the company's capital contribution held on behalf of the hidden shareholders through equity transfer. In the same month, five hidden shareholders, including Li Yubing and Han Xueshan, changed the capital contribution originally registered in the names of Liang Jun, Zhang Bo and Ding Lei to be held by shareholders or relatives they are familiar with.

Shandong University Power explained the reason for holding shares on behalf of others as follows: in 2017, Han Xueshan and Liu Yutian were still department-level or above leading cadres of Shandong University, and Zhao Jianguo retired as a department-level or above leading cadre in 2015 and it had been less than three years until 2017. Based on the consideration of simplifying the reporting of personal investment matters, the above three people respectively entrusted relatives and familiar shareholders to hold the company's shares on their behalf.

It was not until 2023 that the restoration of Shandong Power's equity holding was completed.

Currently, Shanda Electric Power has 9 directors, of which 6 are from Shandong University. For example, the company's chairman Zhang Bo is a professor at Shandong University. In addition, independent directors Cao Qinghua and Zhang Xinhui graduated from the School of Accounting of Shandong University of Finance and Economics and Shandong University of Technology respectively. Only director Sun Shouxia does not have a university background.

In addition, Liang Jun, chief scientist of Shandong University Power, has served as associate professor, professor, and doctoral supervisor at Shandong University of Technology (now Shandong University). Zhao Chuangang, director of the company's R&D center, also graduated from Shandong University.

The growth rate of performance has slowed down significantly

The growth rate of Shandong Power's performance has slowed down.

Shandong Power is a high-tech enterprise dedicated to the research and development and industrialization of intelligent product technologies related to power systems. After more than 20 years of development, the company has formed two major business segments: power grid intelligent monitoring and new energy. It has extended from production and manufacturing to overall solutions such as software development, system integration, construction and installation, and operation and maintenance management. It has formed a relatively complete industrial layout with product research and development as the forerunner, equipment manufacturing as the main line, and throughout system integration, engineering construction, and post-operation and maintenance services.

Shanda Power said that the company is one of the earliest companies to enter the power grid monitoring industry. Relying on years of accumulated technical reserves and industry experience, it has formed a relatively mature and complete independent intellectual property rights and core technology system, and the overall performance of some core technologies has reached the international advanced level. The company's products cover all aspects of the power system and have a complete range of products. It is one of the few companies in China with a relatively rich power grid intelligent monitoring product line.

In recent years, overall, Shanda Power's operating performance has been growing. In 2020, the company's operating income and net profit were 394 million yuan and 81.2423 million yuan, respectively. From 2021 to 2023, the company's operating income was 436 million yuan, 478 million yuan, and 549 million yuan, respectively, a year-on-year increase of 10.49%, 9.76%, and 14.80%; the net profit was 76.1762 million yuan, 76.9868 million yuan, and 103 million yuan, with a year-on-year change of -6.24%, 1.06%, and 33.53%. In 2023, the company's operating income and net profit growth rate accelerated.

However, this year, during the critical period of IPO, the company's performance growth has slowed down. In the first quarter, the company's operating income was 99.1257 million yuan, a year-on-year increase of 11.35%; net profit was 14.9389 million yuan, a year-on-year increase of 4.49%; net profit after deducting non-recurring gains and losses (hereinafter referred to as "net profit after deducting non-recurring gains and losses") was 12.7228 million yuan, a year-on-year decrease of 8.38%. The company estimates that in the first half of this year, operating income will be 240 million yuan to 260 million yuan, a year-on-year increase of 7.85% to 16.84%; net profit will be 39 million yuan to 41 million yuan, a year-on-year increase of 6.92% to 12.40%; net profit after deducting non-recurring gains and losses will be 36.784 million yuan to 38.784 million yuan, a year-on-year increase of 1.74% to 7.27%. Even at the upper limit of the growth rate, it is still a significant slowdown compared to 2023.

Shanda Power has a high customer concentration. The company's main customers include State Grid and its subsidiaries, China Southern Power Grid, Inner Mongolia Electric Power Group, China Huadian Group, etc. From 2021 to 2023, the company's sales revenue to the top five customers accounted for 83.27%, 84.39% and 82.96% respectively, all exceeding 80%.

What has attracted much attention is that in March 2023, three months before Shanda Power submitted its listing application to the Shenzhen Stock Exchange, Ningbo Quanyun and its shareholders Ding Lei, Miao Huaiping, Wang Zhong, Liang Jun and Li Xintang, and new shareholders Qi Shuguang, Wang Jian and Du Tao signed the "Share Transfer Agreement" respectively, agreeing to transfer their 1.496 million shares of the company to the above eight natural person shareholders. The price of this share transfer is 7 yuan per share, and the total transfer price is 10.472 million yuan.

The above-mentioned equity transfer was due to the withdrawal of silent shareholders Han Xueshan and Liu Yutian. Ningbo Quanyun transferred the corresponding shares of the company held by the two to eight natural person shareholders including Ding Lei.

This means that Han Xueshan and Liu Yutian cashed out more than 10 million yuan before the IPO. Why did they give up the IPO feast and sell off their holdings to cash out?

R&D expense rate is the lowest among peers

Relying on Shandong University, Shandong University Power has formed a complete system of independent intellectual property rights and core technologies. The overall performance of some of its core technologies has reached the international advanced level. However, in terms of R&D expense rate, it ranks at the bottom among comparable companies in the same industry.

From 2021 to 2023, Shandong Power's R&D expenses were RMB 37.9824 million, RMB 31.4295 million, and RMB 37.5796 million, respectively, and R&D expense rates were 8.72%, 6.57%, and 6.84%.

During the same period, the average R&D expense rates of comparable companies in the same industry were 11.73%, 12.86% and 13.17% respectively, and Shandong Power's was significantly lower.

Comparable companies in the same industry, such as Kehui Holdings, Xintong Electronics, Zhiyang Innovation, and Zhongyuan Holdings, all had significantly higher R&D expense rates than Shandong Power in the past three years. In other words, Shandong Power's R&D expense rate is at the bottom.

Compared with itself, the R&D rate of Shandong Power is on a downward trend. In 2017 and 2018, the company's R&D expenses were 31.9512 million yuan and 33.9767 million yuan respectively, with R&D rates of 13.40% and 11.83% respectively.

Regarding the fact that the R&D expense rate is lower than the average level of comparable companies in the industry, Shandong Power explained that it is mainly due to the differences in the company's development stage and financial strength.

In this IPO, Shanda Power plans to raise about 500 million yuan to be used for power grid fault analysis and distribution network intelligent equipment production projects, R&D center projects, new energy vehicle intelligent charging pile production projects, distributed power generation, grid and storage system R&D and industrialization projects, and working capital replenishment projects. Among them, the working capital replenishment project requires 90 million yuan of funds raised.

Shanda Power's operation of using raised funds to supplement working capital has been questioned. During the IPO reporting period, the company continued to pay dividends.

Previously, from 2021 to 2023, Shandong Power distributed cash dividends of 30.54 million yuan, 48.864 million yuan, and 30.54 million yuan, respectively, with a total dividend of approximately 110 million yuan in three years; the dividend ratios were 40.09%, 63.47%, and 29.71%, respectively.

Judging from the data, if no cash dividends were paid in the past three years, the company would not need to use fundraising to supplement its working capital.

In fact, Shandong Power has sufficient funds. As of the end of 2023, the company's monetary funds are 316 million yuan, and the corresponding interest-bearing liabilities are almost zero. Therefore, the market questions the necessity of the company to use raised funds to supplement working capital.

Regarding the high dividends before listing, Shandong University Power said in the first round of inquiries that the company is a school-run enterprise of Shandong University, and corporate dividends are an important way to protect the interests of shareholders and realize the preservation and appreciation of state-owned assets. The company has been paying cash dividends consistently since its establishment. In addition, the company is in good operating condition and has the conditions to implement cash dividends.

In this regard, some people said that cash dividends are understandable and worth promoting, but they must be moderate and reasonable and must fully consider future funding needs.