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Because of Evergrande Real Estate, PricewaterhouseCoopers, one of the world's four largest accounting firms, quickly lost many big orders. However, there are still listed companies that continue to cooperate with PricewaterhouseCoopers.

Among the A-share listed companies in 2023, 107 have cooperated with PwC, with audit fees reaching 869 million yuan.

When reading the inquiry letter from the exchange, Mr. Xingkong was surprised to find that a considerable number of major clients cooperating with PwC had received regulatory letters from the exchange.

You might say that these regulatory letters are a lot, but they aren’t really that many; but you can’t say that they are a few either.

In particular, companies may have doubts: Are they being regulated because of the PwC audit?

For PwC, this is a difficult knot to crack:

If you serve enterprises well and are lenient when conducting audits, you will be supervised by the exchange; if you conduct strict audits according to regulatory requirements and exaggerate the financial data of the audited enterprises, you may be terminated by the enterprises.

Obviously, under this situation, PwC will receive fewer and fewer orders.

There are recent rumors that PwC will lay off 50% of its financial services audit staff in China and is considering laying off about 20% of its employees in other audit teams and non-audit business lines. If this is true, it is a helpless move.

Some parent friends asked Mr. Xingkong whether it is not a good idea to study finance now.

In fact, the total number of layoffs at PwC is only more than 2,000, which has little impact on employment in the entire industry. Finance has always been a bad job, but for liberal arts students, when there are no particularly good options, finance is a decent alternative.

As a major client of PwC, Longi Green Energy received an annual report regulatory letter.

1. Longi Green Energy suffered losses

LONGi Green Energy released its half-year performance forecast. According to preliminary estimates by the financial department, the net loss attributable to shareholders of the listed company in the first half of 2024 is expected to be between 4.80 billion yuan and 5.50 billion yuan, which will be a loss compared with the same period last year. The net loss attributable to shareholders of the listed company after deducting non-recurring gains and losses in the first half of 2024 is expected to be between 4.839 billion yuan and 5.539 billion yuan.

Regarding the reasons for the loss, the company stated:

The company increased its investment in products and services for the photovoltaic terminal market, achieving year-on-year growth in component sales. However, due to the overall mismatch between supply and demand in the photovoltaic industry and the sharp drop in market prices of major products in all links, compared with the same period last year, the company's sales volume did not increase during the reporting period, and its investment income from equity-holding silicon material companies decreased. It is estimated that an inventory impairment provision of 4.5 billion to 4.8 billion yuan will be made, putting pressure on short-term profits.

However, the company's 2023 annual report already showed a decline in net profit.

Data source: Tonghuashun iFind

In 2023, the company achieved total operating revenue of 129.498 billion yuan, a year-on-year increase of 0.39%; net profit attributable to shareholders of the parent was 10.751 billion yuan, a year-on-year decrease of 27.41%; non-net profit was 10.834 billion yuan, a year-on-year decrease of 24.84%.

In a letter to shareholders, Zhong Baoshen, chairman of LONGi Green Energy, stated that in 2023, the rapid release of production capacity in the photovoltaic industry, the imbalance of supply and demand structure, and the rapid iteration of new technologies have led to a sharp drop in prices in the industrial chain, the learning cost of HPBC new product replacements, and the decline in efficiency caused by rapid organizational expansion. These have posed severe challenges to the company's development.

Many people are now pessimistic about the photovoltaic industry, but I am actually still very optimistic.

Photovoltaic energy has now become the best substitute for fossil energy. For China, whose dependence on crude oil is over 70%, nothing is more suitable than photovoltaic energy.

However, when investing on a large scale in the construction of photovoltaic facilities, it will inevitably be combined with the current economic development, and a phased, spiral slowdown is a very normal operation.

2. SSE’s Focus

In the regulatory letter from the Shanghai Stock Exchange, a total of 8 questions were raised regarding the 2023 annual report, which is very representative.

The original text is 33 pages long, and Mr. Xingkong used Kimi to make a brief summary, which is very accurate.

1. Monetary funds: The company's annual report disclosed that the balance of monetary funds at the end of the period was 57.001 billion yuan, accounting for 34.76% of total assets, of which 2.579 billion yuan was restricted funds and 1.616 billion yuan was deposited overseas. During the reporting period, the company's entrusted financial management amounted to 8 billion yuan, with a maximum daily balance of 2 billion yuan, far below the authorized maximum daily balance limit of 20 billion yuan. The company plans to continue to increase the entrusted financial management quota by 10 billion yuan in 2024.

2. Loans and bonds: During the reporting period, the company received cash of RMB5.01 billion from loans. At the end of the period, there were no short-term loans, the ending balance of long-term loans was RMB6.707 billion, and the ending balance of bonds payable was RMB6.804 billion.

3. Interest income and expenses: interest income for this period was RMB 1.521 billion, and interest expenses were RMB 516 million. The regulatory authorities required the company to disclose additional information on the reasons and rationality for retaining large amounts of monetary funds and the fact that the actual amount of entrusted wealth management was far less than the authorized amount, the main considerations for continued financing, and the reasons and rationality for continuing to increase the wealth management amount in 2024.

4. Overseas deposits of monetary funds: Regulators require companies to disclose the business background, storage location, usage arrangements and control measures taken for overseas deposits of monetary funds.

5. Cash constraints: Regulators require companies to disclose the specific circumstances of cash constraints, the rationality of margin levels, and other potential restrictive arrangements.

6. Inventory: The annual report disclosed that the company's inventory balance at the end of the period was RMB 21.54 billion, and a large amount of inventory impairment provision of RMB 5.294 billion was made. The regulatory agency required the company to explain the reasons and rationality of the inventory growth, and the basis and accuracy of the inventory impairment provision.

7. Fixed assets and construction in progress: The company's fixed assets balance at the end of the period increased by 47.37% year-on-year, and the balance of construction in progress at the end of the period increased by 16.97% year-on-year. The regulatory authorities required the company to explain the reasons and rationality for the significant year-on-year increase in cash payments for the purchase and construction of fixed assets, intangible assets and other long-term assets.

8. Related-party transactions: The contract value of related-party transactions for the purchase of equipment and other goods and services from Dalian Liancheng CNC Machinery Co., Ltd. and its subsidiaries increased significantly. The regulatory authorities required the company to explain the fairness of the transactions and settlement arrangements.

9. Accounts receivable: The company's accounts receivable balance at the end of the period was RMB 11.29 billion, a year-on-year increase of 17.46%, significantly higher than the growth rate of operating income. The regulatory agency required the company to explain the reasons for the increase in accounts receivable and whether the provision for bad debts was sufficient.

In general, the Shanghai Stock Exchange focuses on the situation of funds and interest-bearing liabilities. In particular, if there is suspicion of high deposits and loans, the Shanghai Stock Exchange will definitely ask the firm to explain each case in detail.

Why is the Shanghai Stock Exchange so concerned about the deposit and loan situation of Longi Green Energy?

Because a large amount of the company's funds are in overseas accounts, and the interest rate of the US dollar is much higher than that of the RMB, it is possible to use domestic loans for business operations and earn interest on foreign deposits.

However, Longi Green Energy listed in detail the deposits of its overseas subsidiaries, reaching 1.6 billion yuan, and claimed that these deposits were reasonable needs for daily operating operations.

3. Major Customers

When explaining that the increase in accounts receivable balance exceeded the increase in operating income, the company released its top five customers in 2022 and 2023.

This is a pleasant surprise. Generally speaking, listed companies will only announce the names of their top five customers and suppliers at the time of IPO. After listing, they will be replaced with "Customer One". This makes it difficult to determine the company's customer identity.

In the reply to the regulatory letter, the company’s customer list showed that the State Energy Group is a long-term major customer of the company.

The reason why the balance of accounts receivable increased so much is that the revenue structure has changed significantly. Among them, the sales revenue of components and batteries increased by 14.351 billion yuan compared with last year, and the sales revenue of silicon wafers and silicon rods decreased by 13.679 billion yuan compared with last year. Different products correspond to different types of customers. The customers of components and batteries are mainly end customers such as large energy and power companies, and the collection cycle is relatively slow.