Is Science and Technology Innovation Board blocked from listing? This article interprets the key points and latest development of Geely Automobile inquiry.

On March 23, Yang Xueliang, vice president of Zhejiang Geely Holdings Group (hereinafter referred to as Geely Holdings), responded to the media report that Geely Motors was blocked in returning to Kechuang due to high-tech positioning problems. "there is no further information to provide, according to the listing process information disclosure norms, everything is subject to regulatory approval."

On June 17, 2020, Geely officially announced its plan to "issue RMB shares and list on Science and Technology Innovation Board". According to the official website of the Shanghai Stock Exchange on September 28 of the same year, the listing Committee of the Shanghai Stock Exchange has agreed to Geely's initial public offering request. Because of this, Geely Automobile may become the first vehicle company to land on Kechuang board.

At present, Dongfeng Motor, one of the traditional car companies, and Weima Automobile, Evergrande Automobile, Zero running Automobile, Nahu Automobile, and Huazhong Automobile, among the new forces of car building, have all announced or are rumored to have plans to list in Science and Technology Innovation Board.

"compared with the main board market, Science and Technology Innovation Board registration system, the valuation is relatively high, which has become the main reason for the new and old car companies to compete for the Kechuang board." An investor who spoke on condition of anonymity told Science and Technology Innovation Board Daily.

Looking back at Geely, it has been nearly a year since its official announcement that it will be listed in Science and Technology Innovation Board. In this process, what will the focus of the inquiry focus on?

Key question 1: whether it meets the listing standard of "Science and Technology Innovation Board"

As Geely Automobile this whole car enterprise belongs to the manufacturing industry, in the view of many people in the industry, there is a certain distance from the "science and technology" attribute emphasized by Science and Technology Innovation Board.

Geely Motor was listed on the Hong Kong stock market as early as 2005.

In April 2020, the China Securities Regulatory Commission issued a notice on the relevant arrangements for the listing of innovative pilot red-chip enterprises in China, which brought quite favorable policy conditions for Geely, which has the status of red-chip enterprises, to return to the A-share market.

According to the announcement, the market value of red-chip enterprises listed abroad can be adjusted to meet one of two standards: first, the market value of the enterprise is not less than 200 billion yuan; second, the market value of the enterprise is more than 20 billion yuan, and it has independent research and development and international leading technology. strong scientific and technological innovation ability, in the same industry competition in a relatively dominant position.

In terms of market capitalization, as of the day before Geely submitted its listing declaration, that is, August 27th, 2020, the average market capitalization of the first 120 trading days, calculated according to the exchange rate midpoint announced by the people's Bank of China on that day, was 114.04 billion yuan, more than 20 billion yuan. In the reply letter, Geely also listed some independent research and development, international leading technology, and explained from the number of patents, R & D team, sales channels and other aspects.

As for the most controversial "whole vehicle enterprise or there is a certain distance from the attribute of science and technology", Geely replied in its inquiry letter that under the reform trend of the "new four modernizations" of the automobile industry (electric, intelligent, networked, and shared), the automobile industry will move from "hardware-defined cars" to "software-defined cars", which means it will become an important scientific and technological innovation front for the integration of cutting-edge technologies in many fields. As a result, the automobile manufacturing industry has become a high-tech industry in line with the national strategy.

Key question 2: whether the funds are under pressure under the transformation of science and technology

In recent years, Geely's gross profit margin and net profit have declined, which has become one of the main inquiries in the inquiry letter.

In terms of main business, from 2017 to the first half of 2020, Geely's gross profit margin was 19.71%, 18.77%, 15.80% and 15.68% respectively; in terms of car sales, Geely's gross profit margin in the same period was 19.46%, 18.32%, 14.74% and 13.79%, respectively.

In response, Geely explained in its inquiry letter that the change in the gross profit margin of the main business is mainly affected by fluctuations in the automobile sales business, while the decrease in the overall gross profit margin is due to the increase in the proportion of manufacturing expenses in the cost of automobile sales business year by year.

Specifically, first, Geely Motor has acquired a number of factories in recent years, and the depreciation amount of related fixed assets has increased; second, a number of brand-new models and modified models have been launched every year, and the investment in related machinery and equipment has also increased, thus increasing the amount of depreciation accordingly.

Geely's declining gross profit margin may reflect the capital problems faced by traditional car companies in the transformation.

Previously, Geely said publicly that "opening up domestic A-share capital market financing channels is conducive to further diversifying financing methods, optimizing capital structure, and effectively enhancing the company's financial strength." supplement the company's future layout of the 'new four modernizations' and other strategic development funds. "

At present, according to Geely's prospectus, 20 billion yuan will be raised through the IPO plan, which will be used for projects related to the company's main business and supplementary liquidity after deducting issuance expenses. Of this amount, 8 billion yuan is used for product research and development of new models, 3 billion yuan for forward-looking technology research and development, 3 billion yuan for industrial acquisition and 6 billion yuan for supplementary working capital.

Key question 3: whether there is competition in the same industry

Today, Geely's main business includes R & D, production and sales of passenger cars and core components. Among them, passenger car products include Geely and Geometry two major brands. In addition, the main business controlled by Geely Holdings, its controlling shareholder, is related to the research and development, production and sales of passenger cars of Volvo, Lecker, Lutes and Star Automotive brands.

In this regard, Geely Automobile in the inquiry letter, from the historical evolution, main assets, personnel, intellectual property rights and core technology, sales channels, facing different markets, said, "there is no peer competition between Geely and Volvo, Lutes, Polar Motor, Proton Automobile and so on."

At the same time, Geely acknowledges that there is a competitive relationship between Geely and the Lecker brand.

Specifically, it is because the Geely brand and the Lock brand's main sales network layout, price range, target consumer groups are relatively close. However, Geely replied in an inquiry letter that "the relevant situation will not have a significant adverse impact on the business development of the issuer."

In addition, Geely said that if the successful acquisition of Volvo, Lectra investment will become a subsidiary of Geely, the related industry competition risk will be eliminated.

This year, the latest progress has been made in this move.

On February 24th, Geely announced that Volvo and Geely had reached a merger. However, although Ji used the word "merge", it was a "close but not merged" action. The two sides did not merge into a global automobile group, but to cooperate and explore in the field of the new four modernizations on the basis of maintaining the existing independent company structure.

According to the announcement, the best merger plan of the two sides is that the two sides will cooperate in powertrain, electrification, autopilot and operational cooperation on the basis of maintaining their existing independent company structure. In addition, the two sides will expand the scope and scale of joint procurement and achieve strategic coordination in areas such as overseas sales channels and after-sales networks.

Key question 4: can you adapt to and lead the field of new energy vehicles?

From the perspective of the field, Science and Technology Innovation Board will focus on supporting the new generation of high-tech industries and strategic emerging industries such as information technology, high-end equipment, new materials, new energy, energy conservation and environmental protection, as well as biomedicine.

"if the whole vehicle enterprise wants to sprint the Kechuang board, its market performance in the field of new energy vehicles will become the key." The above-mentioned investors analyzed to the reporter of Science and Technology Innovation Board Daily.

In terms of products, a reporter from Science and Technology Innovation Board Daily found that in Geely's existing product matrix, energy-saving and new energy models are dominant.

According to the prospectus, Geely's new energy and electrified models include pure electric, plug-in hybrid, gas-electric hybrid and 48V micro-hybrid models. In 2017, 2018, 2019 and January to June 2020, issuers sold 25000 new energy and electrified models (including the Lock brand) of 25000, 67000, 113000 and 29000, respectively.

Geely Automobile is selling representative models of new energy and representative competitive models. Source: official website of Shanghai Stock Exchange

Among them, in 2019, Geely and Geometry brands have a total of 14 models on sale, of which 13 are energy-efficient and new energy models. In 2019, Geely sold 69600 new energy passenger cars, ranking fourth in the industry, second to BYD, BAIC New Energy and SAIC passenger cars, according to the car Federation.

However, Geely also has some disadvantages in the field of new energy vehicles: first, the new energy vehicle companies represented by BYD have independent research and development, production and manufacturing capabilities of electric cells; second, many new power car manufacturing enterprises have certain advantages in software, marketing and service experience.

Under multiple pressures, as Geely Automobile said in its inquiry letter: "traditional car companies are actively transforming, should be prepared from the perspective of the industrial chain, and strive to grasp the opportunities and challenges brought about by the electrified and intelligent change of the industry."