RI RI Shun Gem IPO Accepted, Revenue Highly Dependent On Large Shareholders

Haier's supply chain logistics company, RI RI Shun, plans to go to A-share market. If successful, Haier is expected to welcome another listed company.

According to the application draft submitted by RI RI Shun to Shenzhen Stock Exchange growth enterprise board, it plans to raise 2.771 billion yuan to lay out five projects, including intelligent logistics center, intelligent storage equipment, digital and intelligent logistics information system.

Riri Shun said that according to the revenue in 2020, the company is the third largest end-to-end supply chain management service provider in China, has become China's leading provider of supply chain management solutions and scene logistics services, and is also one of the few enterprises in the market with end-to-end supply chain management capabilities covering manufacturing, online and offline circulation channels to end-user scenario services.

However, July 2019 is still the riririshun of A-share listed company Haier Zhijia and a Hong Kong listed company Haier electric appliance group. After independence, it quickly submitted the listing application. How much weight does it have in the logistics industry which is already the Red Sea competition tide?

The 21st century economic reporter found that Riri Shun, who was born in a "powerful family", has been growing year after year. However, it seems that the business situation behind it is facing many development constraints.

Backed by Alibaba and Haier

The predecessor of ririshun was Qingdao Haier Logistics Storage and Transportation Co funded by Haier Group and Haier International Trade in January 2000. From August 2010 to July 2019, it was once a subsidiary of Haier Zhijia and Haier electric appliance group within the scope of consolidated statements. Haier electric appliance group is an enterprise within the scope of Haier Zhijia's consolidated statements. That is to say, ririshun also belongs to the internal logistics sector of Haier in 2019.

Between 2012 and 2017, ririshun Shanghai, an indirect holding subsidiary of Haier Zhijia, increased its capital twice, and introduced Taobao holdings, an external investor, in the second capital increase. Ririshun has become a logistics company supported by Haier and Ali.

In August 2018, in order to clarify the main business orientation of Haier Zhijia home appliances, Haier Zhijia separated riririshun from its consolidated statement scope. In July 2020, ririshun company was turned into a joint-stock company, starting the listing process.

According to the prospectus, the top five shareholders of RI Shun are RI RI Shun Shanghai, partner century, Taobao holdings, broad street investments and Beijing Meiya, with shareholding ratios of 56.4%, 16.68%, 12.37%, 4.04% and 3.08%, respectively.

As of the end of the reporting period, ririshun Shanghai held 333 million shares of the company, accounting for 56.4% of the total shares of the company before the issuance. It is the controlling shareholder. Haier Group indirectly controls ririshun Shanghai and is the actual controller of the company. Alibaba controls 29.06% of RI RI Shun's shares through partner century and Taobao holdings.

After being supported by Haier series and Ali series, RI RI Shun's performance improved rapidly during the reporting period from 2018 to 2020, with revenue of 9.587 billion yuan, 10.346 billion yuan and 14.036 billion yuan respectively, and the net profit attributable to the parent was 225 million yuan, 273 million yuan and 422 million yuan respectively.

It is worth noting that RI RI Shun's performance growth does not come from external market competition, and the company's revenue relies heavily on the related party transactions within the two major affiliated shareholders.

During the reporting period, the company's revenue from Haier customers was 3.688 billion yuan, 4.349 billion yuan and 4.650 billion yuan, accounting for 38.48%, 42.03% and 33.13% respectively, and the gross profit contribution accounted for 29.77%, 44.99% and 41.48% respectively; The revenue from Ali company was 1.953 billion yuan, 2.113 billion yuan and 2.218 billion yuan, accounting for 20.37%, 20.42% and 15.80% respectively, and the gross profit contribution accounted for 21.03%, 22.57% and 21.36% respectively.

In other words, more than half of nisun's revenue and profits rely on related party transactions with two major shareholders.

In response to this, ririshun said in response to the 21st century economic report that the company will continue to cooperate with ALI and Haier within a reasonable range, but will continue to develop social business in the future, ensure the growth of social business, and reduce the dependence on cooperation with related companies.

Compared with comparable companies in the same industry, RI RI Shun's profitability, accounts receivable turnover rate and other financial indicators are lower.

During the reporting period, the average gross profit rates of comparable companies were 11.88%, 10.58% and 10.88% respectively, while that of RI RI Shun was only 7.98%, 8.88% and 8.38%, respectively; On the turnover rate of accounts receivable, the average of comparable companies in the industry is 12.86 times, 11.45 times and 10.70 times respectively, while that of companies is only 5.01 times, 4.51 times and 4.57 times respectively.

Independence in doubt

What's more surprising is that ririshun signed exclusive joint venture terms when accepting capital increase from external investors, and the company's operational independence is also full of doubts.

According to the general articles of association of listed companies, the controlling shareholders of the company have decisive rights to the company's management, such as capital increase, repurchase and dividend. However, Haier is the controlling shareholder of the listed company, but its many rights are restricted by many parties.

In June 2018, ririshun and its shareholders jointly signed the joint venture contract, which set up special rights of shareholders such as capital increase restriction and preemptive right, equity transfer restriction, preemptive right, CO sale right, anti dilution protection, decision-making right of initial qualified public offering, board appointment right, dividend right, repurchase right and other special rights for relevant shareholders of the company.

According to the agreement, the capital increase of RI RI Shun needs not only the approval of the board of directors, but also the prior written consent of Ali. Taobao holdings, partner century, ririshun Shanghai and all investors have the right to give priority to subscription according to the proportion of capital contribution.

Without the prior written consent of Ali, Haier electric appliance group, RI RI Shun Shanghai and RI RI RI Shun employee stock holding platforms shall not directly or indirectly sell, give, assign, transfer, trust, mortgage, pledge or otherwise dispose of the equity of any company or any right, ownership or interest related to the equity to any non affiliated third party.

Without the prior written consent of Ali, any investor of the company shall not transfer its equity of riririshun to the agreed competitor of Ali. Similar to this, there are dozens of special provisions for shareholders.

According to Riri Shun, in July 2020, the above-mentioned joint venture contract will be terminated from the date of share reform after the "sponsor agreement" is signed between the shareholders. However, according to the supplementary agreement signed by the company and relevant shareholders in July 2020, which also agreed on the restoration of special rights of shareholders after the company was changed into a joint-stock company, and the listing of counter gambling companies was still the core.

If Nishun's listing application is terminated, withdrawn, invalid or rejected, the special rights enjoyed by shareholders of the company will be restored. In addition, it is difficult for the outside to know whether there are hidden binding clauses in ririshun's capital increase, transfer and dividend.

However, according to its prospectus, during the reporting period, in addition to regular related party transactions with Haier series and Ali series shareholders, the company also carried out financial services with related parties, conducted trademark transfer with related parties and Transferred Equity of subsidiaries to related parties through external loans from related parties.

RI RI Shun's revenue, credit, asset transfer and other major business matters, all appear the figure of major shareholders related parties, the company claims to have the independence of finance, operation and management, which inevitably makes the market doubt.

Advantages and disadvantages of asset light operation mode

According to the company, by the end of 2020, ririri Shun's operation mode has connected 916 warehouses, more than 100000 vehicles and more than 6000 outlets close to end consumers. It has gathered high-quality logistics basic resources including warehouse distribution, transportation vehicles, service outlets and service engineers. It can provide end-user delivery and loading services for 2840 districts and counties across the country, with a coverage rate of 99%.

However, RI RI Shun's warehousing resources are mainly obtained by leasing, and the transportation resources and network service resources are mainly obtained through purchasing the services of third-party motorcades, drivers and outlets. This mode enables the company to operate with low debt, but also makes the storage resources, transportation resources and network services of the company full of dispersion and uncertainty.

Nisun said that if the above resources can not be renewed or continue to cooperate, the company may not be able to provide normal services to customers. At the same time, the quality of services purchased from a third party may not meet the standard.

According to the preliminary statistics of 21st century economic report, ririshun has caused 151 risks due to the disputes of sales contract, transportation contract, guarantee contract and storage contract. Among them, 55 court opening notices have been sued, 26 court announcements have been filed against others or companies, and transportation contract disputes, transportation contract disputes, guarantee contract disputes and storage contract disputes caused by its investment subsidiaries, etc There are more than 539 peripheral risks such as housing lease contract disputes, business contract disputes and labor disputes.

As of the signing date of the offering, due to the problems of operation and service, there are still 10 major pending litigation and arbitration cases involving the amount of more than 5 million yuan that have not been closed or completed. The leasing operation and the third-party procurement under the asset light mode have brought great business risks to riririshun. It is uncertain whether the company can achieve stable operation relying on the existing model.

At the end of the report period, the company had 73 domestic and 2 overseas controlled subsidiaries. Under the asset light mode, RI RI Shun expanded rapidly. The companies under the rapid layout caused many problems.

The company's business expansion through extensive acquisition has brought great loss to the company's goodwill. In July 2018, RI RI Shun acquired Guizhou Peiji logistics, forming a goodwill of 190 million yuan. In 2018 and 2019, the company continuously made provision for impairment of goodwill of 59.5638 million yuan and 69.6739 million yuan. In 2020, the company made an impairment provision of 29.0795 million yuan for the goodwill formed by the acquisition of Shanghai Guangde logistics before the reporting period.

By the end of 2020, the company's book goodwill amount still has 253 million yuan. In the future, if the operating performance of related subsidiaries is affected by economic situation, industrial policy, market competition, business development and other factors, the company may face the risk of goodwill impairment.