IPO Observation: After Over 20 Months, Green Technology Finally Submits Registration Application: Half-Year Bad Debt Preparation Surpasses Last Year's Full-Year Total, Multiple Overseas Subsidiaries Show Negative Equity

From IPO application approval to recent registration submission, Shenzhen Green Technology Co., Ltd. (referred to as Green Technology) has taken over 20 months to complete the process. Although Green Technology has submitted its registration application, the underlying risks remain a concern, such as the significant increase in accounts receivable and bad debt preparation, which exceeded last year's full-year total; meanwhile, its overseas subsidiaries have shown negative equity.

Accounts Receivable Increased Significantly

Half-Year Bad Debt Preparation Exceeded Last Year's Full-Year Total

According to Green Technology's latest prospectus, the company mainly engages in the research and development, design, production, and sales of 3C consumer electronics products, aiming to provide comprehensive digital solutions for users. The main product categories include transmission, audio-video, charging, mobile peripherals, and storage.

The past three years have seen Green Technology's revenue increase by 18.42% annually, with sales amounts reaching RMB273.778 million (approximately RMB27.38 billion), RMB344.634 million (approximately RMB34.46 billion), and RMB383.932 million (approximately RMB38.39 billion) respectively.

However, the growth in revenue has been accompanied by an increase in accounts receivable. As of the end of each reporting period, Green Technology's net accounts receivable was RMB3.332 million, RMB3.073 million, RMB6.241 million, and RMB6.772 million, respectively, with each period's accounts receivable net ratio accounting for 1.22%, 0.89%, 1.63%, and 3.19% of total revenue.

The prospectus shows that as of the end of each reporting period, Green Technology's top five customers accounted for 75.47%, 82.23%, 81.90%, and 70.54% of its accounts receivable. The company's accounts receivable concentration is relatively high, with main counterparties including Amazon, JD.com, etc.

Worth noting is that the company has provisioned bad debt preparation for each period, amounting to RMB177.34 million, RMB161.79 million, RMB328.54 million, and RMB358.67 million respectively. As can be seen, under the backdrop of significant increase in accounts receivable, the bad debt preparation for the half-year period has exceeded last year's full-year total.

Furthermore, the prospectus shows that Green Technology's credit loss and asset impairment losses mainly arise from bad debt losses and inventory write-downs, with each period's bad debt loss amounting to RMB-158.04 million, RMB-49.49 million, RMB-470.21 million, and RMB-8.90 million respectively.

At the same time, it is worth noting that Green Technology's accounts receivable turnover ratio has presented a downward trend. Specifically, it recorded 112.66 times, 102.19 times, 78.31 times, and 30.96 times respectively.

Sales Account for Over 70% of Revenue

Inventory Turnover Ratio Downward Trend

According to the prospectus, Green Technology's online sales revenue accounted for over 70% of its main business revenue, with online sales revenue ratio reaching 82.35%, 78.14%, 75.98%, and 74.04% respectively.

Given its reliance on online sales, especially for overseas markets, Green Technology needs to prepare certain inventory levels in advance. This has led to a relatively large inventory scale.

The prospectus shows that to respond quickly to market demands and ensure sufficient product supply and timely logistics, Green Technology needs to prepare a certain amount of inventory. As the sales scale expands, the company's inventory scale also presents an upward trend.

Risks exist due to the potential impact on inventory realization and financial performance if the company fails to accurately estimate procurement quantities or faces declines in competitiveness and market changes.

Subsidiary Performance Diversified

Multiple Overseas Subsidiaries Show Negative Equity

In view of Green Technology's sales markets, both at home and abroad, the company has set up subsidiaries in various regions.

As of the latest prospectus (registration draft) signing date, Green Technology had 9 first-level subsidiaries (7 fully owned subsidiaries and 2 controlled subsidiaries) and 5 second-level subsidiaries. The first-level subsidiaries include: Green Technology Control, Green Technology Import & Export, Green Technology Industry, Dongguan Green Technology, Green Digital Technology, US Green Technology, Hong Kong Green Technology, Haiyuan Zhili Technology, and Zhejiang Zhise Technology; the second-level subsidiaries are controlled by Hong Kong Green Technology, US Green Technology, and Japan Green Technology.

However, the operating performance of these subsidiaries is quite diversified. For instance, Shenzhen Green Smart Factory Co., Ltd. has achieved a profit exceeding RMB2 million, while Shenzhen Green Industry Co., Ltd. has been in operation for over 3 years but has yet to conduct actual business operations.

Furthermore, as of the end of 2023 half-year period, several overseas second-level subsidiaries have shown negative equity, including Germany Green Technology (Ugreen Group GmbH) and Japan Green Technology (株式会社ユーグリーン?ジャパン).