LED industry newcomer Dehao Runda recently invested 640 million yuan to invest in Weimei Shengjing, and its chairman Wang Donglei successfully became the chairman of the latter in NVC Lighting. This is highly hoped by the market and believes that Dehao Runda’s performance this year is very high. With imagination, DHL Runda's share price soared.

However, after investigations, the reporter found that the company’s capital chain has been extremely tense after dialing the fog of Dehao Runda’s dazzling performance, and is now relying on huge debts. More seriously, Dehao Runda is also suspected of fictitious huge profits, with a scale of up to 1 billion yuan.

Suspected of inflating profits by up to 1 billion

Guangdong Dehao Runda Electric Co., Ltd. (hereinafter referred to as Dehao Runda) was listed in 2004 and its main business is the production and sales of small household electrical appliances. In 2009, Dehao Runda began to enter the LED industry. At present, the company's business scope is the pattern of small household appliances and LED dual main business.

Since entering the LED industry in 2009, Dehao Runda has taken Sanan Optoelectronics as its main strategic competitor, closely following Sanan Optoelectronics in terms of LED chip production scale, layout and mode selection. In conjunction with one of Dehao Runda's main businesses (LED chips and packaging), Tongfang shares are also co-located. These three companies are in the upstream segment of the LED industry.

Since 2009, Dehao Runda entered the LED industry. In order to be accurate, Netease Finance selected the financial data of the last three years (2010-2012, the same below) after entering the industry.

After counting the data of Dehao Runda Financial Report for 2010-2012, it was found that Dehao Runda achieved a net profit of 750 million yuan in three years. The net cash flow from operating activities totaled 363 million yuan, and the latter accounted for 48.40 of net profit. %.

DeHao Runda’s annual report for the past three years stated that “the business scope of the current year has not changed significantly compared with the previous year.”

In other words, since 2010, Dehao Runda has remained unchanged, and no business has changed. Therefore, according to accounting principles, the net cash flow generated by its operating activities should be greater than or slightly equal to the net profit, even if there is a positive difference, it should not be too disparate.

Yuan Ji, a certified public accountant (non-practicing member) of Zhongxi Certified Public Accountants, told reporters that “part of the operating costs, business taxes and surcharges, management fees and sales expenses for deducting operating income are partly for one-time investment. Long-term assets are allocated to the cost year after year, and the cash flow at the initial stage of investment is included in the cash flow generated by the investment activity. The cost of the deductible operating expenses is not related to the cash flow generated by the operating activities."

Therefore, the above-mentioned expenses will be reduced to the current profit and loss on a yearly basis, although the net profit will be reduced, but the net cash flow from operating activities will not be reduced.

The financial data of Dehao Runda in the past three years shows that the net cash flow generated by the company's operating activities is estimated to be 697 million yuan in total assets such as asset impairment, depreciation and amortization, disposal of long-term assets and financial expenses, plus net profit. The sum of that is 1.447 billion yuan.

In other words, if Dehao Runda's net profit of 750 million yuan is true, its operating cash flow should be 1.447 billion yuan. However, the company's recent three-year financial report showed a total net operating cash flow of only 363 million yuan, a huge difference from 1.447 billion yuan, the difference of up to 1.084 billion yuan.

Yang Mo, a certified public accountant of Shanghai Certified Public Accountants, believes that in the absence of major changes in the scope of business and strategy, Dehao Runda’s financial report shows a net profit of 750 million yuan in the last three years, and has not achieved a net inflow of gold flow, estimated There is a significant abnormality in the difference between the operating net cash flow and the announced operating net cash flow, which is suspected of fictitious profits.

Excluding the net truth of government subsidies

On the surface, Dehao Runda’s “net profit attributable to shareholders of listed companies” in the past three years (hereinafter, unless otherwise stated, referred to as net profit) exceeded 150 million yuan, which is a good situation.

In the past three years, Dehao Runda achieved net profit of 196 million yuan, 392 million yuan and 162 million yuan respectively, up 202.91%, 100.44% and -58.71% respectively.

Since profitability is so strong, why is the net cash flow of operations so poor and suspected of fictitious profits? What is the quality of the company's net profit?

After reviewing the earnings report of Dehao Runda for several years, the reporter found that its packaged profit data is too dependent on non-recurring gains and losses, and more than 80% of net profit comes from government subsidies.

It is the generosity of the government that maintains the golden body of Dehao Runda’s net profit without loss. But in fact, if there is no government subsidy for this income, the company has already suffered losses in two fiscal years within three years.

How much real money did the government give to the company? From the financial report, in 2010-2012, Dehao Runda received 270 million yuan, 311 million yuan and 224 million yuan from the government. In the past three years, Dehao Runda has received a total of 805 million yuan in subsidies. During this period, the company's net profit was only 750 million yuan, which shows how important government subsidies are to the company.

Therefore, if there is no government assistance, Dehao Runda's net profit is negative in 2010 and 2012, that is, loss. According to the financial report, after deducting non-recurring gains and losses (mainly government subsidies), Dehao Runda’s net profit in the last three years has become -1.364 million yuan, 132 million yuan and 2.6006 million yuan, up by -102.69% year-on-year. 10.22% and -119.67%.

At the same time, the difference between non-operating income and expenses of Dehao Runda in 2010-2012 accounted for 112.16%, 67.75% and 97.99% respectively.

In this way, the main way for Dehao Runda to maintain net profit is to obtain government subsidies. In addition, its brilliant profit data also benefits from fictional net profit, so where is this partially inflated net profit hidden?

Yang Mo believes that the suspected fictitious net profit will respond to the abnormally growing assets. According to the data released by the financial report, the growth of inventory is abnormal under the situation that Dehao Runda’s 2012 revenue declines. In addition to being hidden in inventory, it is also likely to be hidden in illiquid assets.

According to the financial report, DeHao Runda's illiquid assets accounted for a high proportion of operating income, increasing year by year, and the annual growth rate almost doubled. In the case of a decline in revenue in 2012, fixed assets and construction in progress increased significantly.

The reporter's statistics on the company's recent three-year earnings report found that Dehao Runda's non-liquid assets accounted for 58%, 119% and 192% of operating income, respectively.

In the past three years, the proportion of fixed assets and construction in progress has increased year by year. Fixed assets accounted for 23.27%, 39.89% and 80.98%, respectively; construction-in-progress ratios accounted for 18.68%, 61% and 70.22% respectively.

It is worth mentioning that in 2012, the top five sales customers who accounted for 29.88% of the total sales of Dehao Runda in the whole year, in their financial reports, do not use a word, only use "first place, second place , third place, fourth place, fifth place" instead. Yuan Ji believes that such a practice is suspected of being in violation of regulations.

Huge debt to maintain the security of the capital chain

Policy support from the government is the most important driving force for the development of the LED industry in the past three years. In the field of LEDs, Dehao Runda has continued to bear tremendous pressure from its already squeaky capital chain, regardless of the huge cost of investment.

As of 2012, Dehao Runda provided European households with small household appliances OEM processing and manufacturing business as a percentage of operating income, still up to 68%, and its LED lighting business has yet to make a significant contribution to net profit.

According to the financial report, the amount of subsidies that the company obtained from the government for more than three years of net profit did not help solve its tight capital chain. The issuance of corporate bonds, private placements and large-scale borrowings is the most important means for Dehao Runda to return old debts and supplement daily operating liquidity.

The company’s latest issuance of corporate bonds was 800 million yuan (the “12 Dehao Debt” for a three-year period with a coupon rate of 5.95%). The bond originally planned to raise 1 billion yuan, mainly for “repaying commercial banks. Short-term loans amounted to RMB 319.90 million. “The remaining raised funds are used to supplement the company's working capital”.

At the same time, due to the tight cash flow in daily operations, Dehao Runda also used 300 million yuan in its additional fundraising in 2010 to supplement working capital.

Last year, Dehao Runda borrowed a total of 2.889 billion yuan, of which short-term borrowings reached 1.769 billion yuan, accounting for 19.22% of total assets, an increase of 3.10 percentage points year-on-year (an increase of 677 million yuan over 2011); long-term borrowing from 2011 The 539 million yuan surged to 1.12 billion yuan, accounting for 4.21 percentage points of the total assets, an increase of 12.17%.

In the past six months, Dehao Runda has had a large capital expenditure twice, costing a total of 1.98 billion yuan.

The first time was December 27, 2012. Dehao Runda announced that it intends to obtain a total of 20.05% of NVC Lighting's shares through a wholly-owned subsidiary, Dehao Runda International (Hong Kong) at a total price of RMB 1.34 billion. The largest shareholder of lighting.

Secondly, on May 13 this year, Dehao Runda invested 640 million yuan in phased investment in Beijing Weimei Shengjing Advertising Co., Ltd., accounting for 21.27%.

"From the financial data of this company, there is no evidence that they can afford such high capital expenditures." Yuan Ji believes.

A company that relies mainly on government industrial policy subsidies and new debts to pay off old debts, once the government subsidies decline, the true face of its net profit "streaking" will appear immediately (this has been clearly reflected in its quarterly net profit) .

( This article is reproduced on the Internet. The texts and opinions expressed in this article have not been confirmed by this site, nor do they represent the position of Gaogong LED . Readers need to verify the relevant content by themselves. )

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