7 times penalized for violations! The IPO voting of waterproof leading enterprises has been suspended!

Global Coatings Network News: The official website of the China Securities Regulatory Commission recently disclosed that the IPO of Rain in Water Protection Technology Group Co.
, Ltd.
(hereinafter referred to as "Rain in the Rain" and "the Company") will be suspended from voting
。 The reporter noted that the waterproofing-related business engaged in by Yuzhongqing is closely related to the development of the real estate industry, affected by factors such as overcapacity and intensified competition in the waterproofing industry, during the reporting period of Yuzhongqing (2018-2020 and January-September 2021, the same below) accounts receivable swelled sharply, accounting for the proportion of revenue, while its accounts receivable turnover rate and inventory turnover rate continued to decline, the company's proud direct sales model was accompanied by a large number of lawsuits, and the continued profitability of Yuzhongqing encountered many challenges
。

Corporate lawsuits surge

According to the prospectus, Yuzhongqing is mainly engaged in the research and development, production and sales of building waterproof materials, and provides waterproof engineering construction services
.
The company's main products are waterproof membrane and waterproof coating series products, which can provide customers with "one-stop" building waterproof solutions
.
As a waterproof enterprise founded in the northwest, Rain has established production and R&D bases in Xi'an, Shaanxi, Lanzhou, Jiangsu, Shouguang, Weinan, Shaanxi and other places, and the sales and service network has covered most of
the country.

During the reporting period, the total assets at the end of the rain period were RMB1,031 million, RMB1,369 million, RMB1,780 million and RMB2,295 million, and the ownership equity attributable to the parent company was RMB635 million, RMB806 million, RMB1.
148 billion and RMB1.
579 billion
, respectively.
During the reporting period, the company's operating income was 1.
098 billion yuan, 1.
277 billion yuan, 1.
598 billion yuan and 1.
216 billion yuan respectively, and the net profit attributable to the owners of the parent company was 93 million yuan, 171 million yuan, 224 million yuan and 129 million yuan
respectively.
The company's operating income mainly comes from the sales revenue of waterproof materials, accounting for more than 90%, of which the sales revenue of waterproofing membranes accounts for more than 80%
of each period.
During the reporting period, the company's comprehensive gross profit margin was 36.
65%, 42.
03%, 43.
38% and 37.
40%
respectively.
The average comprehensive gross profit margin of comparable industries was 34.
25%, 36.
12%, 39.
06% and 30.
75%.

It can be seen that the comprehensive gross profit margin of rain is higher than the average
of listed companies in the same industry.
In this regard, Yu Zhongqing explained that the company's product sales are mainly direct sales, direct sales accounted for 90% during the reporting period, the gross profit margin of product direct sales is generally higher than the gross profit margin of distribution, and the gross profit margin of direct sales during the reporting period is about 15% higher than that of distribution; The proportion of distribution sales revenue in the same industry, comparable Oriental Yuhong, Karen shares and Keshun shares, was higher than that of the company during the reporting period, and the proportion of direct sales was relatively high, resulting in a higher
gross profit margin in the rain.
In addition, comparable companies in the same industry account for a relatively large
proportion of waterproof construction revenue.

However, while the direct sales model has brought high gross profits to the rain, it has also been accompanied by a large number of lawsuits
.
The products of rain are mainly used in real estate development, infrastructure construction, house repair and secondary decoration and other markets, and in addition to large and medium-sized customers, there are also a large number of small projects, self-built houses and other scattered needs
in the downstream market.
The purchase volume of these small customers is often only hundreds of thousands of yuan, and litigation is frequent for various reasons
.

The reporter searched for "waterproofing in the rain" through the China Judgment Documents Network and found a total of 369 legal documents, including 245 civil cases and 123 enforcement cases; Grassroots courts heard 330 cases
.
Since 2018, a total of 329 judgment documents have been involved in the rain, including 100 in 2020
.
Most of the lawsuits filed in the rain are mostly contract disputes, that is, disputes over waterproof materials, with dozens of subject amounts of hundreds of
thousands.

According to the Tianyan investigation, there were a total of 385 legal proceedings in the rain, involving an amount of 20.
6049 million yuan
.
Among them, there were 358 contract disputes, as well as bill recourse and construction project contract disputes
.
There were 160 cases in which Yu Zhongqing was the plaintiff, and 96 cases were applied for enforcement
.
It can be seen that the value of each legal action is not high
.

"Direct sales have no middlemen, and the profits are indeed higher, but the rain directly faces the final consumer customers, especially some small customers, which will inevitably lead to an increase
in the number of disputes.
" From a financial point of view, this will affect the accounts receivable and bad debt provision
in the rain.
Mr.
Hu, a senior accountant, said
frankly.

The proportion of accounts receivable continues to rise

In fact, the amount and proportion of accounts receivable in the rain have continued to grow
.

According to the prospectus, during the reporting period, the book value of the accounts receivable in the rain was 492 million yuan, 659 million yuan, 957 million yuan and 1.
055 billion yuan, accounting for 44.
82%, 51.
59%, 59.
89% and 86.
80% of the operating income in the same period, accounting for a relatively high proportion; The bad debt provisions accrued in the due period were 54.
8902 million yuan, 73.
8514 million yuan, 105.
0586 million yuan and 127.
8338 million yuan respectively
.

In the future, with the further expansion of the company's operating scale, the amount of accounts receivable may continue to increase, and if the macroeconomic environment and customer operating conditions change, resulting in the company's accounts receivable cannot be collected in time and bad debt losses are formed, the company's operating results may be adversely affected
.

From the perspective of accounts receivable turnover, the turnover rate of accounts receivable in the rain during the reporting period was 2.
24 times/year, 2.
00 times/year, 1.
78 times/year and 1.
08 times/year, respectively, which were low and showed a downward trend, and the gap was gradually widening
.

It is worth noting that during the reporting period, the net cash flow generated by the operating activities in the rain was 55.
9224 million yuan, 42.
2916 million yuan, 67.
0998 million yuan and -254 million yuan, respectively, showing a large outflow
in the latest period.

Compared with the net profit in the same period, the net cash flow from operating activities in the rain was lower than the net profit in the
same period.

In this regard, Yu Zhongqing said, "Due to the company's increase in reserves of raw materials
.
" However, during the reporting period, the total raw material procurement of Yuzhongqing and its subsidiaries was 678 million yuan, 769 million yuan, 765 million yuan and 799 million yuan, respectively, which did not change
significantly.

According to the prospectus, during the reporting period, the monetary funds of Yuzhongqing were 25.
1989 million yuan, 65.
2227 million yuan, 101 million yuan and 105 million yuan, short-term borrowings were 152 million yuan, 210 million yuan, 205 million yuan and 160 million yuan, non-current liabilities due within one year were 16.
6662 million yuan, 47.
4354 million yuan, 63.
4577 million yuan and 69.
865 million yuan, and short-term debts totaled 169 million yuan, 257 million yuan, 263 million yuan, 230 million yuan, and the funding gap in the same period was 144 million yuan, 195 million yuan, 162 million yuan and 125 million
yuan respectively.

It can be seen that there has been a funding gap
in the past four years.
In order to alleviate the financial pressure, Yuzhongqing has repeatedly carried out mortgages, and its long-term borrowings are mortgages and guaranteed loan principal and its unmatured interest payable totaling 152 million yuan
.

Seven violations were punished during the reporting period

According to the prospectus and Tianyancha information, Yuzhengqing and its subsidiaries were punished
by local regulatory authorities seven times during the reporting period due to environmental protection issues and production safety issues.

On October 5, 2018, the Environmental Protection Branch of the Greater Xi'an (Xianyang) Cultural and Sports Function Zone of the Xianyang Environmental Protection Bureau decided to order rectification and impose an administrative penalty
of 20,000 yuan on the Shaanxi rain situation that "there is an organic waste gas overflow problem at the outlet of the organic waste gas suction fan in the oiling section".

On October 29, 2018, the Jinghe New Town Work Safety Supervision and Administration Bureau of Xixian New District, Shaanxi Province issued that the emergency rescue plan for production safety accidents of Clear Sky Technology has not been revised, reviewed or recorded; "Failure to see the account of hidden dangers in production safety" violated the relevant provisions of item 6 of Article 18 of the "Work Safety Law", and it was decided to give an order to make corrections within a time limit and impose an administrative penalty
of 20,000 yuan.

On December 3, 2018, the Environmental Protection Branch of the Greater Xi'an (Xianyang) Cultural and Sports Functional Zone of Xianyang Environmental Protection Bureau decided to give immediate rectification and impose an administrative penalty
of 30,000 yuan on the Shaanxi Yuzhongqing "dust from the modified asphalt process in the coil workshop was not collected as required".

On May 17, 2019, the Environmental Protection Bureau of Jinghe New Town, Xixian New District, Shaanxi Province, decided to impose an administrative penalty
of 16,000 yuan on Clear Sky Technology for violating Article 25 of the Environmental Impact Assessment Law for "two asphalt storage tanks and three underground asphalt storage ponds without environmental impact assessment procedures".

On June 11, 2020, the Greater Xi'an (Xianyang) Cultural and Sports Function Branch of Xianyang Ecological and Environmental Bureau decided to impose an administrative penalty
of 10,000 yuan on the Shaanxi rain situation that "the modified membrane is being put on the sand, and the dust control measures are not in place when unloading the sand", which violated the provisions of the third paragraph of Article 117 of the Air Pollution Prevention and Control Law.

On March 29, 2021, the Shouguang Emergency Management Bureau decided to impose an administrative penalty
of RMB 37,000 on Shandong Yuzhongqing for violating the provisions of Article 25.
4 and Article 25.
1 of the Work Safety Law for "failing to establish safety production education and training files, and failing to truthfully record the time, content, participants and assessment results of safety production education and training".

On September 3, 2021, the Weifang Municipal Ecology and Environment Bureau imposed a fine
of 65,000 yuan on the fugitive emissions of some exhaust gas fugitive emissions in the oiling and coating process of Shandong Yuzhongqing self-adhesive waterproofing membrane production line.

In response to the above penalties, Yuzhongqing and its subsidiaries have completed rectification and paid fines
.