Lanke Environmental Protection Withdrew The IPO Supervision Of Kechuang Board After Being Inspected By Xinpi And Inquired About Financial Matters

On February 24, according to the website of Shanghai Stock Exchange, the audit status of three science and technology innovation board application enterprises, including Lanke environmental protection, Dewey Huatai and Guoguang information, was updated to "terminated", and all of them were active cancellation orders. The 21st century economic report reporter noted that the three cancelled companies were all in the previous IPO credit quality spot check list of the Securities Industry Association.

From the case study, among the three companies that cancelled the order, LANCO environmental protection has made the fastest progress in the audit. Its IPO on the science and technology innovation board was accepted on October 9, 2020, and showed "inquired" on November 5. Since then, it has responded to two rounds of audit inquiry letters. Dewei Huatai and Guoguang information have not yet issued a reply letter.

After two rounds of reply, why did LANCO finally press the stop button on its way to the market?

On the 24th, the director and Secretary Office of Lanke environmental protection exclusively responded to the reporter of 21st century economic report that "the withdrawal of IPO application is mainly for the consideration of the company's development. It is a strategic adjustment. It is only withdrawn temporarily, and the IPO target will not be abandoned later."

In addition, the concern of the outside world is that Lanke environmental protection was included in the list of previous IPO quality spot checks of the Securities Industry Association. Is the withdrawal application related to the random inspection of the trust paper?

The doubts surrounding the termination of LANCO's IPO need to be solved.

Suspected lack of scientific innovation

The full name of Lanke environmental protection Co., Ltd. is Shanghai Lanke Petrochemical Environmental Protection Technology Co., Ltd. although the name contains the word "petrochemical", it is not a chemical enterprise, but mainly provides environmental treatment and green process integration scheme for customers in petrochemical and coal chemical industries, which belongs to the industry of China Securities Regulatory Commission (CSRC), and is an ecological protection and environmental governance industry. In terms of service field, the environmental treatment products of LANCO environmental protection are mainly concentrated in the field of water treatment and gas treatment, and gradually extended to the field of solid waste treatment in recent years.

Compared with its peers, the revenue scale of Lanke environmental protection is relatively small and the net profit level is low. In 2019, the company realized the operating revenue of 287 million yuan and the net profit of 26.7041 million yuan. Among the 10 A-share companies listed, 3D engineering, the smallest in scale, also achieved 630 million yuan in revenue and 79.32 million yuan in net profit.

In the case of its own small scale, Lanke environmental protection's IPO fund-raising scale is not large, and plans to raise 342 million yuan for "upgrading construction project of headquarters building and R & D technology center", "construction project of engineering digital design service center" and "supplementary working capital project".

However, it is worth noting that the biggest use of blueco's fund-raising for environmental protection is "replenishment". Among them, 143 million yuan and 49 million yuan were used for the first two projects, and the remaining 150 million yuan was used to supplement working capital.

21st century economic report reporter noted that the company was listed on the new third board in July 2017, raising 64.5 million yuan, which was also mainly used to supplement working capital.

When talking about the necessity of "make-up flow", LANCO Environmental Protection said that the construction cost of complete set system and EPC project is large, and the company needs to pay cash in advance in the main links, so a large amount of financial support is needed in the process of project implementation. At the same time, with the stricter environmental protection policy, the company's business scale will be further expanded in the future, which requires a large amount of working capital support.

What is really questioned by the outside world is the scientific innovation of Lanke environmental protection.

As for the identification of scientific and technological innovation attribute, Lanke environmental protection believes that it meets the three indicators of scientific and technological innovation attribute evaluation standard. According to the prospectus, the company's accumulated R & D investment in the past three years accounted for 7.15% of the total operating revenue in the past three years, which was higher than 5%. The company has a total of 10 invention patents, and 8 invention patents formed the main business income during the reporting period. The compound growth rate of the company's operating revenue in recent three years is 37.27%, more than 20%.

However, from a further point of view, the R & D cost of blue tech is not high. From 2017 to 2019, the R & D expenses were 9.2351 million yuan, 16.9127 million yuan and 21.1791 million yuan, respectively. In terms of the composition of R & D expenses, employee compensation and travel expenses accounted for a relatively high proportion of R & D expenses, while material investment was not high. In the first half of 2020, the salary of employees is 9.0181 million yuan, the input of materials is 6628 million yuan, and the travel expenses are 458500 yuan.

In terms of patents, the company obtained 10 invention patents from 2010 to 2017, and no new patents have been applied since then. In terms of reserves, according to qixinbao data, as of now, there are 39 patents in the application process of blue tech environmental protection, while 77 patents of poten environment, which is listed on the main board, are under application.

Some investment bank personage pointed out to the reporter, "the science and technology innovation board is mainly based on the science and technology innovation attribute. The Securities Regulatory Commission proposed to improve the evaluation standard of the science and technology innovation attribute. The identification of the scientific and technological innovation attribute of the enterprises seeking the listing of the science and technology innovation board in the future may be tightened. Some companies with poor quality will retreat when they are examined to a certain stage."

Have been focused on financial matters

From the perspective of the listed companies withdrawing their IPO applications this year, there are many problems, such as the lack of core competitiveness, the authenticity of financial data, the lack of sustainable operation ability and so on, and some enterprises are even referred to as "declaration with disease".

Lanke environmental protection is no exception. In addition to the doubt about the scientific and technological innovation attribute, the reporter found that in the second round of review of blue technology environmental protection by Shanghai Stock Exchange, the company's financial matters were mainly inquired, involving six major issues, including major customers, suppliers, revenue recognition, operating costs, gross profit margin and inventory.

According to the disclosure, from 2017 to 2019 and the first half of 2020, the proportion of sales revenue of the top five customers of Lanke environmental protection accounted for 91.29%, 83.02%, 87.24% and 74.18% respectively, with a high concentration. In the reply to the first round of inquiry, the company did not explain the amount and proportion of revenue of the top five customers of the company's branch business as required, whether it was consistent with the business characteristics of the industry, and the Shanghai Stock Exchange asked the company to further explain the customer concentration.

In this regard, the company frankly said that due to the small scale of revenue, compared with the same industry, there are differences in the proportion of revenue of the top five customers. The high concentration is due to the high concentration of the industry and the large contract amount of the single project of environmental governance investment project.

In terms of inventory, as there is no production link of Lanke environmental protection, the goods in stock at the end of the period are the materials and equipment that have arrived but not received in the EPC project. According to disclosure, the proportion of the company's unfinished project cost and contract performance cost in inventory increased from 11.79% in 2017 to 48.53% in 2018. Materials and equipment are included in the cost of uncompleted projects (contract performance cost) or goods in stock after the arrival acceptance, and the inventory is carried forward when the revenue is recognized. There are no raw materials and products in transit. The Shanghai stock exchange requires the company to explain the rationality of the above situation.

A professional accountant said to reporters, "the reason why we pay attention to inventory is that in the field of financial fraud, inventory is also a high incidence area of cases. If in a certain period of time, the proportion of inventory fluctuates abnormally, we should study the reasons."

As for the reasons for the increase in inventory, LANCO environmental protection explained that it was mainly due to the increase in the cost of unfinished projects at the end of 2018, while the number of completed and unsettled assets formed by inventory goods and construction contracts decreased at the end of 2018.

Under the above-mentioned doubts, combined with the fact that the company is listed in the IPO quality spot check list of the Securities Industry Association, it is inevitable for the outside world to associate the withdrawal of the listing application with the former.

In this regard, the response of the blue environmental protection director and secretary office is intriguing, saying that "the company has a positive treatment in the face of the spot check, and the withdrawal of the application has nothing to do with it."