IPO Observation | Low Profit Margins, Is New Asia Cable Blaming Southern Power Grid?
Recently, New Asia Optical Fiber Cable Co., Ltd. (hereinafter referred to as "New Asia") disclosed its response to the Shanghai Stock Exchange's review center opinions on its initial public offering (IPO). The review center mainly focused on New Asia's profit margin issues.
New Asia is a professional company specializing in the research, development, production, and sales of optical fiber cables, electrical equipment, and overhead transmission lines. Its main products include power transmission lines, electric equipment cables, and aerial transmission lines. As of now, New Asia has experienced two rounds of questioning. However, regarding its low profit margin issue compared to industry peers, New Asia has failed to provide a satisfactory explanation.
New Asia's low profit margins not only directly affect the company's profitability but also negatively impact its competitive position in the industry. Meanwhile, maintaining stable performance after listing and preventing a significant decline in performance are crucial topics.
1. Profit margin significantly lower than industry peers, raising questions
According to the prospectus, New Asia's main business profit margins for 2020-2022 and June 30, 2023 were 14.53%, 9.28%, 9.88%, and 12.29%, respectively. The main product profit margins all showed a downward trend, with power transmission lines and aerial transmission lines having significant differences from industry peers.
Specifically, New Asia's main products include four categories. As of June 30, 2023, the profit margins for power transmission lines, electrical equipment cables, and aerial transmission lines were 5,504.27 million yuan, 5,015.26 million yuan, and 7,103.41 million yuan, respectively, accounting for 31.26%, 28.48%, and 40.34% of the total.
2. New Asia Cable's profit margins lower than industry peers due to product structure differences and customer structure differences
According to the responses, New Asia's main business profit margins were affected by the company's focus on the middle-low voltage power transmission line market, which has a significant difference from industry peers in terms of product structure and customer structure.
New Asia's response indicates that the company is focusing on the middle-low voltage power transmission line market, which has a significant difference from industry peers in terms of product structure and customer structure.