Deep Textile A (000045): Cash Flow Is Lower Than Investment Required For Two Consecutive Years.

Shenzhen textile A released its 2019 annual report. During the reporting period, the company achieved operating income of 2 billion 158 million yuan, up 69.62% from the same period last year, and realized a net profit of 19 million 679 thousand and 900 yuan attributable to shareholders of listed companies, up 185.64% from the same period last year. The company plans not to distribute cash dividends, do not send bonus shares, or increase capital stock by provident fund.

Business activities cannot cover investment demand.

During the reporting period, business activities can not cover the demand for investment funds and the financing channels are tight.

In 2019, the net cash flow generated by Shenzhen textile A business activities was 383 million yuan, up 183.20% compared to the same period last year. The net cash flow from investment activities was -9.44 billion yuan, up by -654.85% compared with the same period last year, and the net cash flow generated by raising activities was -3.04 billion yuan, up by -215.56%.

Combined with data, the net cash flow of business activities and the net cash flow of investment activities amounted to -5.61 billion, and the cash flow of fund-raising activities was negative.

The 2019 semi annual eagle eye warning showed that business activities could not cover investment demand and financing channels were tight.

The company continued to lose more profits for two years.

From 2017 to 2019, the net cash flow generated by the company's business activities was -2851.87 million yuan, -4.60 billion yuan, and 383 million yuan, up 48.40%, -1514.71% and 183.20% respectively. The net profit was 73 million 661 thousand and 700 yuan, -6230.27 yuan and -1852.67 million yuan, up 184.41%, -184.58% and 70.26% respectively, and the gross profit margins were 11.92%, 10.23%, 8.56%, respectively. The speed is 103.91%, -14.24% and -16.31%. And according to the 2019 annual report eagle eye warning shows that its gross profit margin sales continued to decline significantly and lower than the industry average.

After further calculation, the net cash ratio of the last three phases is -0.4, 7.4 and -20.7 respectively. The net present ratio fluctuates greatly, and the quality of earnings needs to be strengthened.

The main business income of Shenzhen textile company mainly includes sales revenue of Polaroid, textile sales, rental income and trade income.

Operating income increased substantially over the same period last year, mainly due to the commissioning of the TFT-LCD two phase 6 line in the second half of 2018. The capacity was released in the current year, and sales increased year-on-year. Net profit attributable to shareholders of listed companies increased substantially compared with the same period last year, mainly due to the increase in non recurring gains and losses, with an effect of 78 million 913 thousand and 700 yuan, mainly on illiquid assets. Production and disposal income, investment and financial revenue and government subsidy income, of which the company transferred 50% of the equity interest in the property company to achieve a net profit after tax of 41 million 611 thousand and 400 yuan; the price of Polaroid products has been running low after the sharp decline in 2018, and the main product order structure adjustment has not reached the pre scheduled period, and the TN/STN product has been greatly reduced by the shrinkage of the terminal products market, and the price has been greatly reduced. The rise in the purchasing cost and the increase in exchange losses caused by the depreciation of the currency exchange rate offset the contribution of the increase in sales to net profit.

In addition, it is worth mentioning that the balance of the final inventory depreciation reserve of Shenzhen textile company is 125 million yuan. As the inventory depreciation and its changes have a greater impact on the financial statements, in the process of determining the net realizable value of inventories, the major judgment and estimation of management involves the preparation of the inventory depreciation allowance as a key audit item.