Six Questions About AOKANG Listing

Zhejiang AOKANG shoe Limited by Share Ltd will go through the main board of Shanghai Stock Exchange in September 23rd. It plans to issue no more than 81 million shares and raise 1 billion 22 million yuan. It is also the second time that AOKANG sponsors, Guoxin Securities, joined hands with the related party Hongling Venture Capital Commission. But with the public's attention, the six largest listed companies are listed. Question Gradually surfaced...

　　 Question 1: Gross profit margin Industry at the end of leather costs are surprisingly low.

AOKANG shares is a company engaged in leather shoes and leather products production, research and development, sales, product prices ranging from 200 yuan to 3000 yuan.

According to the data released by China industry and Enterprise Information Center (CIIIC), AOKANG was the second largest brand of leather shoes in the world after 2010, with a market share of 5.79%.

Although the company is the leader of the industry, the gross profit rate of its products is very low. Prospectus shows that from 2008 to 2010, the gross profit margin of AOKANG shares was 24.96%, 29.07% and 32.61% respectively. According to the gross margin data of shoe companies offered in AOKANG's prospectus, in 2010, the gross margins of BELLE International (footwear), Daphne international, surplus group and XinDa group were 67.98%, 57.38%, 57.43% and 60.63% respectively, and the gross margin of AOKANG shares was much lower than that of them.

Compared with domestic listed companies, the gross profit margin in 2008 to 2010 was 44.87%, 47% and 47.38% in 2008. Gross profit margin in 2010 was 14.7 percentage points higher than that of AOKANG.

AOKANG said its sales channels were mainly Distributor Some of the profits need to be sold to dealers, so the gross profit margin is low. And the same industry listed companies mostly use direct mode, so the gross profit rate is higher.

On the other hand, in the context of the high price of leather, the cost of leather as the upper reaches of leather shoes is AOKANG shoe industry The prospectus shows a strange decline year by year. The main raw material for leather industry this year has risen from about 10 yuan a square foot last year to 15~16 yuan this year, and some sheepskin prices have risen to around 28 yuan per square foot, and prices have nearly doubled. It is doubtful how AOKANG shoe industry will keep raw leather prices unchanged or even lower in the last 4 years or so.

　 Question two: doubts about the qualification of high-tech enterprises

AOKANG shares with low gross margins are still a high-tech company enjoying a preferential tax rate of 15%.

AOKANG shares were recognized by high-tech enterprises in 2010, with a tax rate of 15% and a preferential period of 3 years. WIND data show that in 36 clothing and footwear listed companies, only 15% enterprises can enjoy 15% tax rates in 2010. Considering that there are many new material enterprises such as yeco Technology (002036, closing price 16.77 yuan) in these enterprises, if these enterprises are excluded, there will be few traditional clothing and footwear high-tech enterprises. {page_break}

Saturday is not a high-tech enterprise with higher profitability. Its corporate income tax rate is 25%. In addition, the reporter looked at the income tax situation of shoe companies such as BELLE international and Daphne international, which were listed in Hongkong, China. They also did not enjoy the preferential tax rate of 15% of high-tech enterprises.

So why is AOKANG able to become a rare high-tech enterprise in the industry? Reporter survey found that AOKANG shares high-tech enterprises. Qualifications There is doubt.

The management measures for the identification of new and high technology enterprises stipulate that the high and new technology enterprises must satisfy six conditions at the same time. First of all, the product (service) of high-tech enterprises belongs to the scope specified in the "high tech field supported by the state". The reporter noted that the field of high-tech supported by the state will be divided into eight categories: electronic information technology, biological and new medicine technology, aerospace technology, new material technology, high tech service industry, new energy and energy saving technology, resources and environmental technology, and high and new technology transformation of traditional industries. One of the eight subdivision areas is checked. None of them can be linked to AOKANG shoes.

Secondly, the third conditions stipulate that high tech enterprises must have "scientific and technical personnel with a college degree or above, accounting for more than 30% of the total number of employees in the enterprise," of which the R & D personnel account for more than 10% of the total number of employees in that year. The prospectus of AOKANG shares shows that as of June 30, 2011, the number of R & D personnel, namely technical personnel, was 242, accounting for 3.21% of the total number of companies, which is far from the 10% required by the high-tech enterprises; and in terms of academic qualifications, the number of people with bachelor's degree or above in AOKANG shares is only 250, accounting for 3.32%. It is noteworthy that the company did not disclose the number of "specialist" or above, but disclosed the number of "specialist" or "below" education.

The prospectus of AOKANG shares stated that the proportion of R & D expenses in operating revenue from 2008 to the first half of 2011 was 0.16%, 0.79%, 1.05% and 0.88% respectively. Since the operating income of AOKANG shares has exceeded 1 billion yuan since 2008, the proportion of R & D expenses should be no less than 3% according to the recognition rules of high-tech enterprises. Obviously, the company is not in conformity with the above provisions.

The six conditions stipulated in the management of high and new technology enterprises need to meet the requirements of applying for high and new enterprises at the same time. However, there are at least three serious discrepancies in AOKANG's stock. How did the enterprise get the recognition of the high-tech enterprise?

In view of the fact that the actual situation of the company is not consistent with the qualification of high-tech enterprises, the reporter called AOKANG shares. The staff of the company's securities affairs department said that both the secretaries and the agents were on a business trip. For the reporter's questions, the staff said he would do detailed records and ask Dongfang.

　　 Question three: or face the recovery of income tax

In April 22, 2009, the State Administration of Taxation issued the notice on the implementation of the preferential tax incentives for new and high technology enterprises. It pointed out: "enterprises that have not obtained the qualification of high and new technology enterprises or have obtained the qualification of new and high technology enterprises, but do not conform to the enterprise income tax law and the implementing regulations and the relevant conditions of this notice shall not enjoy preferential treatment of high and new technology enterprises.

This makes the "high-tech enterprises" that are not up to standard face the performance risk of income tax recovery.

In the first half of 2011 and 2010, the corporate income tax of AOKANG shares at 15% was 64 million 562 thousand yuan and 110 million 4 thousand and 700 yuan respectively. According to the tax rate of 25%, it should be 107 million 603 thousand and 300 yuan and 183 million 341 thousand and 200 yuan respectively. Based on this calculation, AOKANG shares can earn less than 43 million 41 thousand and 300 yuan and 73 million 336 thousand and 500 yuan in income tax due to the qualification of high-tech enterprises.

According to the notifications of the State Administration of Taxation, if enterprises are not entitled to preferential treatment, enterprises should pay 10% of the total profit of the year. According to this calculation, if AOKANG shares are recovered, the first half of 2011 and 2010 will have to pay 28 million 347 thousand yuan and 37 million 155 thousand yuan respectively, which are 13.14% and 13.27% of the current net profit respectively. {page_break}

　 Question four: Limited business capacity of Direct stores

The prospectus shows that if successful listing, AOKANG shoe industry will invest in the main part of the fund-raising fund for the construction of Direct stores, and the capacity utilization rate of the listed companies will be 83.47%, 83.55%, 75.77% and 84.40% respectively in the first three years. The company will open 348 outlets in the one or two and three tier cities in the future, with a total investment of 876 million yuan.

But judging from past performance, AOKANG shoes industry is not strong enough to control direct stores, so that the company's revenues are increasingly relying on distributors.

The data show that the revenue contributed by the distributor to AOKANG shoe industry is on a rising trend. The proportion of distributors in the three years of the above 66.88% years is 66.88%, 65.85%, 58.33% and 36.85%, respectively. As a result, the proportion of direct channel revenue of AOKANG footwear industry is 21.44%, 20.17%, 21.75%, 28.67%.

Now that the past 4 years have proved that dealer channels are more conducive to performance support, how will AOKANG shoes industry guarantee the performance of Direct stores in the future?

　　 Question five: self produced leather shoes remain unchanged for several years

AOKANG shoes industry is very popular in the prospectus for its own leather shoes, and thinks that it contributes a lot to the profitability of the company.

The unit cost of self-produced products in the first three years is 82.07 yuan / 85.72, 85.72 yuan / double, 89.04 yuan / double and 92.48 yuan / double, respectively. The unit cost of self-produced products is on the decline. The main reason is that the company's production scale continues to expand, making the single cost of the company's own products decreasing. Over the same period, the unit cost of outsourced products is 101.11 yuan / double, 93.28 yuan / double, 102.26 yuan / double and 137.52 yuan / double respectively.

Therefore, the gross profit margin of self produced products in the first three years is 40.14%, 37.47%, 33.17% and 25.50% respectively, while the gross margin of outsourced products is 33.34%, 28.47%, 24.47% and 23.36% respectively.

But in the past 4 years, the number of AOKANG's own leather shoes has basically remained unchanged. The annual output of AOKANG shoe industry is 7 million 489 thousand and 500 pairs, 6 million 894 thousand and 800 pairs and 7 million 813 thousand and 100 pairs in 2008~2010, and has never been over 8 million pairs. The utilization rate of its own capacity is 83.47%, 83.55%, 75.77% and 84.40% in three years, and has never been saturated.

　　 Question six: finance is weaker than interbank companies.

The growth rate of AOKANG's shares declined in 2010. In 2009, business revenue increased by 54.51% compared with 2008. In 2010, it increased by only 32.64% compared with 2009. In terms of net profit, 2009 increased by 363.04% compared with 2008, while 2010 increased by only 39.75% compared with that in 2008.

In terms of profitability, from 2008 to 2010, the gross margin of AOKANG footwear industry was 24.96%, 29.07% and 32.61% respectively, which is much lower than that of Listed Companies in the same industry. It is understood that among the other 5 listed companies in the same industry, the lowest gross profit margins in the past three years are 44.87%, 47% and 47.38% respectively, with the highest score of 64.88%, 65.42% and 67.98%.

In terms of solvency, AOKANG shares' liquidity ratio and quick ratio were significantly lower than those of Listed Companies in the same industry. In 2010, the asset liability ratio was 46.58%, which was also significantly higher than that of the same industry listed companies. The turnover rate of accounts receivable in 2010 was 4.12, which was also significantly lower than that of listed companies except Saturday (002291.SZ).