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After more than a year, Shanghai Yutian Guanjia Technology Co., Ltd. (hereinafter referred to as "Yutian Guanjia") finally completed the inquiry and will go to the meeting for review on August 23.

As a domestic automotive sunroof supplier, Yutian Guanjia's top five customers are too concentrated, and its R&D investment is obviously insufficient. Many problems may hinder the company's sustainable development. In addition, before the IPO, the family of the company's actual controller distributed large dividends to enrich themselves, and senior executives and core personnel changed frequently, which also had an adverse impact on the company's stability.

The top five customers are too concentrated

Public information shows that Yutian Guanjia is an automotive sports parts manufacturer with car sunroofs as its main products. It integrates the design, research and development, and production of car sunroofs, and can provide professional and systematic complete solutions for various types of car sunroofs and other automotive sports parts.

According to reports, Yutian Guanjia mainly serves well-known domestic and foreign automobile manufacturers established in China, as well as some overseas vehicle manufacturers. Its main customers include Changan Automobile, FAW Group, Geely Automobile, GAC Group, SAIC Volkswagen, Great Wall Motors and other well-known domestic vehicle manufacturers.

However, Yutian Guanjia's main customers are too concentrated. From 2021 to 2023, the top five customers accounted for more than 70% of the company's main business income, and the customer concentration is relatively high.

If the trend of sustained growth in automobile sales in recent years cannot be continued in the future due to the impact of cyclical fluctuations in the macro-economy and the automobile industry, customers may reduce demand for the company's products, which will in turn have a significant adverse impact on Yutian Guanjia's performance.

In addition, Yutian Guanjia also faces the risk of increasing industry competition. In recent years, as my country has gradually become the world's largest automobile consumer and automobile producer, the domestic auto parts industry has developed rapidly, and outstanding companies in the industry have continued to expand and strengthen, leading to increasing industry competition, and the needs and preferences of downstream vehicle manufacturers and consumers are also changing rapidly and continuously improving.

R&D investment is obviously insufficient

In the prospectus, Yutian Guanjia repeatedly emphasized that the company is an excellent first-tier supplier of automotive parts. Since Webasto invented the first folding roof in 1932, the domestic and foreign automotive sunroof market has been monopolized by foreign giants. Since then, Yutian Guanjia has gradually broken the monopoly of foreign capital in the domestic sunroof market through hard work.

In 2023, Yutian Guanjia has become the second largest supplier in China's automotive sunroof market, with annual sales of 2.311 million units, but its market share is only 16%. Although the company has been striving to catch up with industry giant Webasto in recent years, the gap between the two is still large.

Faced with powerful competitors such as Webasto, if Yutian Guanjia cannot continue to maintain its core technology leadership, product updates and iterations, and service quality optimization in the competition, thereby further strengthening its core competitiveness and increasing its market share, then the company's future performance may not be guaranteed.

In terms of research and development, Yutian Guanjia's research and development investment is obviously insufficient, which may pose a hidden danger to the company's sustainable development. From 2021 to 2023, the company's research and development expenses were 66.9256 million yuan, 62.2507 million yuan, and 68.4558 million yuan, respectively. The proportion of research and development expenses to operating income was 3.95%, 3.08%, and 2.75%, respectively, showing a downward trend year by year.

In addition, Yutian Guanjia's R&D expense ratio is significantly lower than the average level of comparable companies in the industry. During the same period, the average R&D expense ratios of the industry were 3.90%, 4.97%, and 4.69%, respectively. Yutian Guanjia's R&D expense ratio is at the bottom, and among the comparable companies listed in the industry, it ranks only ahead of Jifeng Shares.

Judging from the data, Yutian Guanjia's R&D expenses have always accounted for less than 5%, and in 2023 it was even less than 3%. Such R&D investment cannot even compete with comparable domestic companies in the same industry, so how can it compete with foreign automotive sunroof leaders?

Many times involved in copyright disputes

It is worth noting that Yutian Guanjia has been involved in lawsuits for patent infringement many times, the most controversial of which is the patent dispute with industry leader Webasto.

In July 2020, the Shanghai Intellectual Property Court made a civil judgment, ordering Yutian Guanjia to immediately stop infringing the invention patent right entitled "Shielding device for motor vehicles" and compensate Webasto Roof Heating System (Shanghai) Co., Ltd. for economic losses and reasonable expenses totaling 600,000 yuan. It is understood that Yutian Guanjia has paid the above compensation.

In the same month, the Shanghai Intellectual Property Court ordered Yutian Guanjia to stop using the invention patent for "roller shutter devices for vehicles" and to compensate Webasto for economic losses and reasonable expenses of 600,000 yuan.

However, in response to the inquiry, Yutian Guanjia stated that during the appeal period, the patent rights involved had been declared invalid by the State Intellectual Property Office in accordance with the law, and the patent rights involved were in an unstable state. In fact, Webasto has already lost the case. At present, Yutian Guanjia has applied for a utility model "a sunshade pull plate card connection structure" as a related alternative patent or technology through independent research and development.

In addition to the intellectual property dispute with Webasto, in October 2022, Yutian Guanjia also had a dispute with Dassault Systemes Simulia over the unauthorized use of its ABAQUS series computer software. In April 2023, Yutian Guanjia reached a settlement with the other party, stopped the infringement, and purchased the genuine software. In December of the same year, Yutian Guanjia paid the relevant purchase amount.

Large dividends to the family of the actual controller before the IPO

Currently, Yutian Guanjia is mainly controlled by the Wu family. Wu Jun, Wu Hongyang and Wu Yuyang (the latter two are Wu Jun's daughters) control 82.70% of the company's shares directly and indirectly. In addition, Wu Jun's spouse Li Xiaoming holds a 5% stake in the company's controlling shareholder Shanghai Yusu; Wu Jun's brother Wu Peng holds 3.83% of the company's shares. Both of them are acting in concert with the actual controller.

In 2020 and 2021, Yutian Guanjia distributed cash dividends of 10 million yuan and 50 million yuan respectively. The corresponding equity structure at that time was that Shanghai Yusu held 70% of the shares, Wu Jun held 25.45% of the shares, and Wu Peng held 4.55% of the shares. Therefore, the 60 million yuan all fell into the pockets of the actual controller's family.

Lanfu Finance Network noted that Yutian Guanjia's senior management has changed frequently in recent years. During the reporting period, the company's directors, supervisors, senior management and other core technical personnel have all changed.

It is understood that there have been changes in a total of 15 former directors and senior managers of Yutian Guanjia, mainly due to the addition of directors/senior managers to improve the corporate governance structure when the company was transformed into a joint-stock company, internal job transfers within the company, and the resignation of some individuals for personal reasons.

For example, former director and general manager Jia Weili resigned from the company due to considerations of his personal future development and career planning; former deputy general manager Yang Yan resigned for personal reasons; and Wu Hongyang, one of the actual controllers, resigned as the company's secretary.

In addition, Yutian Guanjia's current core technical personnel are Wu Zhaohui, Qiu Xinsheng, and Qi Zhou, among whom Qiu Xinsheng joined the company in May 2021. The former core technical personnel Chen Qiang resigned in November 2021. Before his resignation, he was mainly responsible for the verification and approval of skylight products and other related work in the R&D center.

From 2020 to 2022, Yutian Guanjia changed its financial director three times, namely Cai Yuqin, Wu Zhaohui and Han Deyin.

In summary, Yutian Guanjia has many problems in its own operation, and its R&D investment is significantly lower than the industry average, which means that the company lacks the motivation for future development. Before the IPO, the family of the actual controller of the company also distributed large dividends to enrich themselves. Once the company goes public, I wonder what other small moves it will make next?