IPO Observation: Huge Dividend Payments and High Accounts Receivable, Dourou Technology Seeks to Strengthen Its Debt Repayment Ability through Listing

With the continuous increase in urban population, the improvement of traffic and living environment has become a pressing issue. The rapid development of urban rail transportation and construction industry has brought about noise pollution and vibration problems, affecting various aspects of people's lives. As a result, reducing noise and controlling vibration pollution have become increasingly important issues.

As the problems have become more prominent, the demand for noise reduction and vibration control in the market is expected to grow, presenting opportunities for companies in this industry to develop.

In recent days, Dourou Technology Co., Ltd. (hereinafter referred to as "Dourou Technology"), which is currently listed on the main board of a deep exchange, has released its second-round review responses, including questions about its operating income and accounts receivable.

Dourou Technology plans to issue no more than 30,235,300 shares in this IPO, raising approximately RMB 11.9 billion. The funds will be used for key technology research and development projects related to noise reduction and vibration control, as well as the construction of intelligent manufacturing facilities.

Huge Dividend Payments: Are They Used to Repay Loans to Related Parties?

According to data, Dourou Technology was established on February 1, 2008. The company is primarily engaged in the research and development, production, sales, and maintenance of various industrial equipment and solutions.

The actual controller of Dourou Technology is Mr. Sheng Wenzhong, who holds a total of 22.2951% of the shares directly or indirectly through his subsidiary company, Jiangsu Zhuanhua Industrial Group Co., Ltd. (hereinafter referred to as "Jiangsu Zhuanhua").

Mr. Sheng Wenzhong's wife, Cai Ming, and his son, Sheng Guojie, are also actual controllers of the company. They together hold a total of 87.5667% of the shares.

In terms of financial performance, Dourou Technology achieved operating income of RMB 5.43 billion, RMB 5.55 billion, and RMB 5.32 billion in 2020, 2021, and 2022, respectively. The company also reported a net profit of RMB 1.55 billion, RMB 1.55 billion, and RMB 1.48 billion in the same period.

It is worth noting that Dourou Technology's cash flow from operating activities has been negative in the past three years, with RMB -5.03 billion, RMB -9.35 billion, and RMB -2.45 billion in 2020, 2021, and 2022, respectively.

However, Dourou Technology has consistently paid out huge dividends, with cash dividends of RMB 3 billion, RMB 1.4 billion, and a total of RMB 4.4 billion in the past three years. The main recipients of these dividends were related parties controlled by Mr. Sheng Wenzhong.

The Shanghai Stock Exchange has required Dourou Technology to explain the background and reasons for its dividend payments in its IPO application.

High Accounts Receivable: A Concern for Debt Repayment Ability?

Dourou Technology's accounts receivable have been increasing steadily, with a total of RMB 3.07 billion, RMB 4.93 billion, and RMB 5.59 billion in 2020, 2021, and 2022, respectively. The accounts receivable turnover ratio was 1.63 times, 1.39 times, and 1.01 times in the same period.

Dourou Technology has pointed out that its accounts receivable are mainly due to long payment periods from its customers, which are primarily state-owned enterprises and construction companies. The company believes that it can continue to maintain a stable debt repayment ability after listing.