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more than a year after passing the review, on september 23, baotou yingsite rare magnetic new materials co., ltd. (hereinafter referred to as "yingsite") submitted its gem ipo registration. beijing business daily reporters noticed that in each period of the reporting period, the sales amount of yingsite's products ultimately used in apple accounted for more than 60% of the main business income, and the company's business was heavily dependent on apple. at the same time, the company's waste revenue increased significantly in 2022, and the company's second largest customer for waste sales business that year was established at the end of 2021. in the following year, it had a large transaction with yingsite, and the authenticity of yingsite's waste sales business was questioned by the shenzhen stock exchange. in addition, the source of the capital contribution of yingsite's third largest shareholder and whether there is any shareholding by proxy also triggered continuous questioning by the shenzhen stock exchange.

screenshot from the shenzhen stock exchange official website

significant reliance on apple

according to the official website of the shenzhen stock exchange, insite's gem ipo was accepted on september 20, 2022, entered the inquiry stage on october 21 of the same year, was submitted to the board and approved on august 17, 2023, and submitted for registration on september 23, 2024.

it is understood that insite is a high-tech enterprise mainly engaged in the research and development, production and sales of rare earth permanent magnet material application devices. the company plans to raise about 606 million yuan in this listing on the growth enterprise market.

beijing business daily reporters noticed that from 2021 to 2023 and the first quarter of 2024, the sales amount of instant's products ultimately used in apple was approximately rmb 417 million, rmb 718 million, rmb 628 million and rmb 159 million, respectively, accounting for 64.51%, 73.61%, 71.01% and 71.5% of the main business income, respectively. the company's business is heavily dependent on apple, and related situations have also received special attention from the shenzhen stock exchange.

financial commentator zhang xuefeng pointed out that there are many risks associated with ipo companies’ high reliance on a single or a few major customers. for example, the company’s revenue source may be single and the risk may be concentrated. once the major customer is lost, the company’s revenue will drop significantly. at the same time, major customers may reduce orders or terminate cooperation due to market strategy adjustments, changes in business needs or other reasons, which may bring significant uncertainty to the company.

regarding the relevant situation, instant stated that because apple's qualified supplier certification process is relatively complicated, the time cost and labor cost invested are high. after the cooperative relationship is established, apple will not easily change suppliers. the company's technology and r&d capabilities can ensure the sustainability and stability of business cooperation with apple. at the same time, while continuing to develop other well-known customers in the consumer electronics field, the company continues to expand into other downstream application fields such as automobiles and industrial motors. in 2021 and 2022, the company's sales revenue to non-apple industry chain customers will grow by 80.08% and 12.12% respectively, maintaining a year-on-year growth trend. with the company's rough production line put into production in april 2023, it is expected that the company's revenue from non-consumer electronics industry customers will also achieve a significant increase. the company's measures to reduce its dependence on a single customer are effective, and the company's significant dependence on apple does not constitute a significant adverse impact.

authenticity of scrap sales business questioned

the performance of ipo companies has always been a focus of regulatory attention.

financial data shows that from 2021 to 2023 and the first quarter of 2024, instant achieved operating income of approximately rmb 670 million, rmb 1.134 billion, rmb 952 million and rmb 236 million, respectively, and the corresponding attributable net profits were approximately rmb 128 million, rmb 199 million, rmb 138 million and rmb 19.6064 million, respectively.

it is worth noting that the prospectus shows that from 2020 to 2023 and the first quarter of 2024, insite's waste sales revenue was approximately rmb 9.0919 million, rmb 16.8141 million, rmb 68.6034 million, rmb 57.5391 million, and rmb 12.2823 million, respectively.

it is not difficult to see that insite's waste revenue increased significantly in 2022, and then fell slightly. at the same time, according to information disclosed by the company, jiangxi zhongxixin recycling resources co., ltd. (hereinafter referred to as "jiangxi zhongxixin") is the company's second largest customer for waste sales in 2022, with sales of 16.5433 million yuan. public information shows that the company was established at the end of 2021 with a paid-in registered capital of 900,000 yuan. the company is far away from insite and had a large transaction with insite the year after its establishment. the authenticity of insite's waste sales business was questioned by the shenzhen stock exchange.

fu jian, director of henan zejin law firm, pointed out that when an ipo company's non-core business income shows a significant increase, this may indicate that the company is seeking to diversify its sources of income. however, the authenticity and sustainability of the non-core business growth are also crucial. if the non-core business growth is mainly driven by accidental or one-off factors, then such growth may be difficult to sustain.

in response to related issues, instek stated that in 2022, the company's scrap sales revenue increased by more than three times compared with 2021, mainly due to the increase in the amount of scrap sales. on the one hand, the company recovered a total of 141.82 tons of magnetic mud waste from outsourced processors in 2022, resulting in a substantial increase in the sales of magnetic mud waste. on the other hand, the company's material skin production increased, and the amount of scrap waste entering the warehouse increased significantly; at the same time, due to the continued rise in the price of praseodymium and neodymium metals in 2021, the value of scrap also increased accordingly. at the end of 2021, some scrap waste was stored and concentrated on sale at the beginning of 2022 when the price was higher.

regarding jiangxi zhongxixin, insite said that the company often inquires about prices from waste recyclers in other places. in 2021 and 2022, among the top five customers for waste sales, except bayannaoer yinhai new materials co., ltd., which is close to the company, the rest are customers outside the inner mongolia autonomous region. jiangxi zhongxixin was introduced by the company's supplier. it is located in ganzhou city, jiangxi province, where rare earth resources are concentrated. the company first sold waste to it in july 2022. since its establishment in november 2021, jiangxi zhongxixin has rapidly expanded its business scale, with annual operating income of approximately 350 million yuan in 2022. the company only accounted for about 5% of its purchases in 2022. it is reasonable that jiangxi zhongxixin is far away from the company and has large transactions with the company in the year after its establishment.

the third largest shareholder's source of funds was questioned

beijing business daily reporters noticed that the shenzhen stock exchange had repeatedly questioned the source of capital contribution of wang shichang, the third largest shareholder of insite, and whether his shares were held on behalf of others.

the prospectus shows that the actual controllers of yingsite are zhou baoping and fei weimin, that is, the two are the company's joint controllers, and zhou baoping, fei weimin and wang shichang signed the "concerted action agreement" on october 20, 2019.

according to the information, wang shichang was born in june 1990 and holds a master's degree. in june 2011, when insite limited (the predecessor of insite) was established, wang shichang was the second largest shareholder of the company, with a capital contribution ratio of 28.3%; as of now, wang shichang is the third largest shareholder of the company, directly holding 12.15% of the company's shares, and from june 2016 to date, wang shichang has served as a director of insite.

regarding the source of wang shichang's investment funds and the authenticity of the shares, insite mentioned in its reply that when fei weimin started his business in shenzhen, he met wang shichang's father wang qiang. wang qiang was optimistic about the development of the rare earth magnet industry and decided to invest in the establishment of insite limited with the funds accumulated by the family and the family's investment income. since wang shichang is wang qiang's only child and an adult, for the sake of family property distribution, wang shichang holds the shares of insite limited. the company shares held by wang shichang are real holdings, and there is no situation where they are held on behalf of other entities.

it is worth mentioning that wang shichang's father, wang qiang, once worked at the nanshan district bureau of the shenzhen state taxation bureau, but he has not held any other positions since his retirement in february 2014. the shenzhen stock exchange further asked insite to explain whether there are other relationships or interest arrangements between wang qiang and the company or its actual controller.

yingsite stated that, apart from being the father and daughter of wang shichang, there is no other relationship between wang qiang and the company and its actual controller, directors, supervisors, and senior managers, major customers or suppliers. from 2019 to 2022, in addition to the financial transactions between wang qiang and wang shichang and other relatives, there were large-scale financial transactions of more than 50,000 yuan between wang qiang and the company's actual controller fei weimin and his spouse zhang hua, all of which had real transaction backgrounds and reasonable reasons, and there was no situation of benefit transfer through such financial transactions. in addition, during the reporting period, there was no other large-scale financial transactions between wang qiang and the company and its actual controller, directors, supervisors and senior management, the company's major customers and suppliers, shareholders holding more than 5% of the shares of such customers and suppliers, directors, supervisors and senior management.

regarding the relevant issues, a beijing business daily reporter sent an interview letter to instant, but no reply was received as of press time.

beijing business daily reporter ma huanhuan and ran lili