TAIKEI Enters IPO with Questions Raised on R&D Projects, Technological Innovation Again Under Scrutiny
This article is authorized by "China Business"
Author: Zheng Yongkang
Editor: Zhang Jiaying
Qingdao Taikei Special Tire Co., Ltd. (hereinafter referred to as "Taikei") is engaged in the design, research and development, sales, and services of mining and construction tires. On July 25th, Taikei's IPO was successfully held, with the underwriters being China Merchants Securities and Zhongxing Hua.
Prior to this, Taikei announced on May 30th that it would reduce its fundraising target to CNY 3.9 billion from CNY 7.7 billion, reducing the scale of its capital-raising by nearly half.
R&D Projects' Results Raise Questions
Taikei's fixed assets mainly consist of molds and tools, with molds primarily used for tire research and development, and tools mainly used for experimental testing. As the company itself has no self-production process, molds are stored at a processing factory, and tools are stored at a cooperative experimental verification institution and the company.
In the second round of questioning, the exchange queried Taikei on its division of labor in the R&D process and whether it relies on processing factories.
Taikei replied that the company adopts a scenario-based R&D mode, with the main stages including product design, trial production, and field testing. Among these stages, Taikei is responsible for the core product design stage, while processing factories and other third-party organizations execute prototype testing, specific machine testing, and test tire testing. Processing factories are entrusted to perform test tire testing, with test customers only responsible for installing and providing feedback on test data. Taikei will pay test fees to clients, which will be counted as R&D expenses.
In addition to test fees, R&D expenses also include staff salaries, depreciation and amortization, travel expenses, consulting and technical service fees, share payments, etc. The company's R&D investment for the reporting period (2021-2024) was CNY 2,423.42 million, CNY 3,201.70 million, CNY 4,187.78 million, and CNY 4,812.37 million, accounting for 1.63%, 1.78%, 2.06%, and 2.10% of the company's total revenue, respectively.
On May 24th, 2024, Taikei was listed on the National Small and Medium-sized Enterprise Share Transfer System. According to its publicly disclosed transfer plan (reporting period: 2021-2023) shows that Taikei focuses on self-research and development, with cooperative research and development as a supplement.
《China Business》 compared Taikei's publicly disclosed transfer plan with the prospectus submitted for IPO and found that some of its self-research and development projects raised questions. Specifically, five R&D projects completed in 2023 had total R&D investment of CNY 49.09 million less than the total amount spent in the previous three quarters.
(Photos taken from the prospectus)
Technological Innovation Again Under Scrutiny
It is worth noting that Taikei's situation with its processing factories has also been continuously focused on by the exchange.
In the first round of questioning, Taikei pointed out that the company establishes a "main auxiliary standby" system for processing factories, builds technical barriers, and emphasizes local service advantages, so there is no risk of being replaced by processing factories. In actual operations, because Taikei is the direct customer of processing factories, the two parties are not competitors. However, compared to processing factories, the company has a higher product comprehensive cost situation.
Without production capabilities, Taikei's main resources are concentrated on R&D design, sales services. Public data shows that Taikei ranked third in China's brand ranking for engineering radial tires in 2023, with a global market share of 2.95%, ranking eighth globally.
In terms of R&D, as previously known, Taikei's R&D expenses have been increasing year by year, but the R&D expense ratio is still lower than the industry average. This IPO, Taikei also plans to use part of the funds raised to enhance its R&D capabilities.
During this IPO, the exchange's listing committee also again focused on Taikei's technological innovation issues, requiring Taikei to explain how it compares with companies in the same industry in terms of technological advancement and core competitiveness. We will continue to pay attention to its specific explanations regarding R&D and technology.
Since Taikei has no self-production capabilities, adopts a processing factory mode to achieve product production, and the processing factories are also part of the rubber manufacturing industry, making Taikei a competitor to the upstream processing factories. According to Taikei's prospectus, the upstream processing factory is a subsidiary of Guangzhou Tire Co., Ltd.
This article was first published on WeChat Public Number: China Business. The opinions expressed in this article are those of the author and do not represent the position of Hexun.com. Investors should use their own judgment when acting based on this information.