Behind The Huge "Cash Out" Of 7.1 Billion: The Expansion Of 300 Billion "King Of Apple OEM" Accelerates Again

On February 4, the stock price of Lixun precision fell by 4.95%. The net outflow of main capital on that day was 835 million yuan, and the total market value fell below 350 billion yuan.

On the evening of the previous day, Lixun precision announced that it had received a notice from the controlling shareholder, Lixun Co., Ltd. (hereinafter referred to as "lucent Limited") and its person acting in concert, one of the actual controllers and vice-chairman Wang Laisheng. Through the bulk trading system, Lixun Co., Ltd. and Mr. Wang Laisheng reduced the total number of tradable shares of the company with unlimited sales conditions, accounting for 2.00% of the total share capital of the company The total cash withdrawal exceeded 7.1 billion yuan.

As the most well-known leading technology stock in A-share market, the stock price of Lixun precision has been rising continuously in recent years, with the cumulative increase of 100.33% in 2020, and the market value has exceeded 440 billion yuan at the highest time. However, since 2021, with the continuous correction of Apple industrial chain plate, the stock price of Lixun precision has been continuously falling, with a cumulative decline of 12.69% in the year.

The real controller's reduction of holdings has put pressure on the already depressed stock price again, causing panic among many investors.

According to the precise announcement of Lixun, the reduction funds will be mainly used for investment in other industries and partial repayment of the loan of Lixun Limited Bank. At the same time, Lixun Co., Ltd. also promised: "in the next 12 consecutive months after the completion of the reduction, it will not sell the company's shares through the securities trading system."

What is the next step of Lixun precision?

In order to keep Apple's position as the king of OEM, Lixun precision may carry out more horizontal and vertical expansion in the future, which needs more financial support. -Photo by Gan Jun

Reduction discount less than 1%

Although the stock price of Lixun precision has been constantly adjusted in recent years, and public funds "withdraw" frequently, from the perspective of this block transaction, the receiving party still quite recognizes its value.

According to the disclosure on the website of Shenzhen Stock Exchange, on February 3, Lishun precision had eight large transactions. Both the buyer and the seller were securities business departments, with a transaction price of 51.11 yuan, and a total of 140 million shares were traded, with a transaction amount of 7.178 billion yuan.

Among them, the third seller's business departments are concentrated in Guangzhou and Shenzhen. Citic securities sold 3.57 billion yuan on Linjiang Avenue in Guangzhou, Guangfa Securities Shenzhen Gaoxin South 1st Road and Ping An Securities Co., Ltd. Shenzhen Jintian road sold 3.6 billion yuan in total.

On the buyer's side, Changjiang Securities Shanghai Dongming Road and other three business departments bought a total of 6.05 billion yuan, and Shenwan Hongyuan's Beijing Anding Road Securities Business Department bought 1.13 billion yuan. The reduction price of block trading was 51.11 yuan, which was less than 1% discount than the stock price of lichen precision on February 3.

For big deals of up to $7 billion, the discount is not high.

According to the precise announcement of Lixun, the capital reduction will be mainly used for investment in other industries and the capital demand for partial repayment of loans from Lixun Limited Bank.

The 21st century economic report reporters have found that in the past year, the shareholders of Lixun precision have frequently reduced their shares of listed companies, and the announced reasons for capital demand are similar.

Since January 2020, Lixun Co., Ltd., the controlling shareholder of the company, has reduced its shares for several times, totaling 107 million shares. At that time, the company pointed out that the actual controller's reduction was to "repay bank loans and reduce the stock pledge rate".

On July 22, 2020, the real controllers of Lucent precision, Lucent limited and Wang Laisheng, once again reduced their holdings of tradable shares with unlimited sales conditions through the block trading system, accounting for 1.85% of the total equity of the company. The purpose of the reduction is also to repay the loans from the Bank of Lixun Co., Ltd. and to support the related capital needs of lichen.

According to public information, as of February 2, 2021, the pledge rate of Lixun Limited has been reduced to 11.13%, while there is no share pledge under Wang Laisheng's name.

Large scale expansion layout

Why is Lixun precision so frequently reduced by shareholders? In the view of many market participants, behind the reduction of the actual controller, or the cash bullet prepared by Lixun precision in order to further expand the layout.

The reporter noted that at the same time of releasing the announcement on the reduction of the actual controller, Lixun precision also disclosed its latest overseas investment progress announcement.

The company will cooperate with luxshare precision limited, a wholly-owned subsidiary, casetek Holdings Limited and RIH Li International Limited (Rili International Co., Ltd.), Changshu Likai enterprise management partnership (limited partnership) (hereinafter referred to as "Changshu Likai") and rikai computer accessories Co., Ltd. (hereinafter referred to as "rikai computer") signed the capital increase agreement and the shareholders' agreement of rikai computer accessories Co., Ltd., and agreed that the company and its wholly-owned subsidiary Lixun Precision Co., Ltd. should use their own funds of RMB 57.60 respectively Two hundred million yuan and 240 million yuan jointly invested in Japanese armor computer with Changshu Likai.

With the investment of 6 billion yuan of its own funds, the move of Lishun precision is not small.

According to the Research Report of CICC, Taiwan enterprise Kaisheng is one of the world's leading companies in metal structural parts. Nippon computer is the mainland asset of Kaisheng, and is one of the key suppliers of apple computer, tablet, mobile phone and other metal structural parts and top module. By the end of October 2020, Nippon has a valuation of 5.52 billion yuan and a net asset of 4.22 billion yuan. From January to October of 2020, it has an income of 9.85 billion yuan and a profit of 7.177 million yuan.

According to CICC's estimation, considering the peak stock season at the end of the year, Nippon computer's annual revenue in 2020 will be about 17-18 billion yuan, and its net profit margin is expected to be significantly higher than that from January to October.

"No matter what the purpose is, the reduction of Lixun's actual controllers is not good news for shareholders. However, in connection with the recent investment behavior of the company and the company's accounts, the announcement explains that the real controller's reduction of holdings is for industrial investment and partial repayment of bank loans. This reason should be logical. " Zhang Xiaorong, President of the Institute of deep science and technology, told reporters of the 21st century economic report.

As a matter of fact, just over half a year ago, in July 2020, lichen precision, together with its major shareholders, acquired 100% of the equity of Weichuang investment (Jiangsu) Co., Ltd. and Weixin Zitong (Kunshan) Co., Ltd., which are wholly-owned subsidiaries directly and indirectly controlled by Wistron Zitong for RMB 3.3 billion. Among them, lichen precision plans to invest no more than 600 million yuan.

Before that, lichen precision had been the main assembly partner of apple airpods and apple watch.

CICC said: "in 2020, lichen precision joined hands with major shareholders in the merger and acquisition of Wistron subsidiary to enter the iPhone assembly process. This capital increase of Nippon will strengthen the key metal structural parts and top module capabilities, and take a key step in the system level capability of iPhone assembly."

In recent years, as Huawei has been curbed, Apple's leading position in the high-end mobile phone market has remained stable. Many analysts pointed out that the domestic consumer electronics industry chain will continue to rely more and more on apple in the short term. However, the highly bound Li Xun precision company with Apple needs to "grab the cake" from overseas apple industry chain manufacturers if it wants to achieve rapid growth again.

From the past development experience, since its listing, the company's external expansion has made great contributions to its position as the "king of OEM in Apple industrial chain".

According to wind data, Lixun precision entered the A-share market in September 2010. At that time, the company was just a company focusing on PC connector. But the year after landing in the capital market (2011), Lizun precision entered Apple's supply chain for the first time by acquiring 60% equity of Kunshan liantao electronics and became the supplier of iPad connecting line.

Subsequently, around apple, ricent precision successively developed module products such as antenna, wireless charging, linear motor and acoustic devices, and entered the whole machine manufacturing after 2017.

Among them, in 2016, the acquisition of Suzhou Meite, an acoustic enterprise, was an important opportunity for the company to seize the most important cash cow in recent years - Apple earphone airpods; in 2017, Lixun precision obtained the OEM qualification of apple airpods, and its product yield rate greatly praised by apple. Since then, it has become the largest OEM of airpods, which has installed a new engine for its own development.

Since its listing, the total revenue of Lixun precision has soared from 1.011 billion yuan in 2010 to 62.516 billion yuan in 2019, an increase of 60 times, and the net profit has increased from 129 million yuan in 2010 to 4.927 billion yuan in 2019, with an increase of nearly 50 times.

"In the past few years, lichen's precise business strategy has become more and more accurate, that is, it is deeply bound to apple, even to Apple's future scientific and technological innovation. For example, in 2017, although the company mainly made connectors at that time, one technology of the connector was to make chips on the soft board, and then fold the soft board to the back of the screen. This technology patent was owned by Samsung at that time, and the only one that could make this process well was Lucent. With this business, lichen successfully expanded Apple's share, and later got on the express train of airpods wireless headphones. " Sun Yanbiao, President of the first mobile phone industry research institute, told reporters.

And now the investment in Japanese armor is undoubtedly another big step for the external expansion of Lixun precision.

Rapid expansion of overseas production

It is worth noting that, in addition to the large-scale horizontal industry mergers and acquisitions, in recent years, under the influence of Sino US trade friction, the advantageous industries of Lixun precision are gradually transferring to overseas, and this part of the expansion action obviously costs a lot of money.

As early as 2016, in order to serve customers nearby, Lixun precision established its subsidiary, Vietnam Lixun. With the increasingly fierce Sino US trade frictions, in July 2019, lichen increased its investment in Vietnam. Through its wholly-owned subsidiary liantao Electronics Co., Ltd. (hereinafter referred to as ict-lanto), it invested no more than 70 million US dollars (about 483 million yuan) in Yi'an Province, Vietnam, and increased its capital to Vietnam with no more than 180 million US dollars (about 1.243 billion yuan) Li Xun.

In June 2020, the investment will be increased again, and ricent precision will increase its capital by no more than 454 million US dollars to Vietnam, Yunzhong and Yi'an, respectively, to meet the plant and capacity construction and related needs of the above Vietnamese subsidiaries.

In October 2020, Lucent precision re invested no more than US $92 million in cash to increase the capital of Lucent India Co., Ltd., which was used to meet the plant expansion and production capacity improvement of Lucent India.

"The main purpose of building overseas plants is to meet the needs of customers and disperse the risk of us crackdown," Zhang said. The cost of foreign factories is lower than that of domestic factories. However, with the construction cycle and cost hedging, I am afraid it is difficult to have obvious advantages. But when customers transfer to foreign countries, the industrial chain will inevitably shift along with it, which is also a helpless choice. "

Sun Yanbiao also said: "Apple has asked the whole supply chain to set up factories in Vietnam and India to supply the local market in the past few years. Apple will give more orders to those who set up factories that match Apple's certification earlier. There are multiple reasons for this, such as tax and transfer policy risks. "

In the uncertain prospect of trade friction, the further demand for overseas expansion undoubtedly adds more pressure to the capital demand for precise expansion.

Valuation confidence

In order to keep Apple's position as the king of OEM, Lixun precision may carry out more horizontal and vertical expansion in the future, which needs more financial support.

According to the statistics of the 21st century economic report, compared with other apple industry chain enterprises that often increase financing by a large margin, the majority of Lixun precision mainly issues short-term financing bonds.

Since its listing, Lixun precision has raised 24.021 billion yuan in total, including 1.261 billion yuan in initial financing, 6.631 billion yuan in two fixed increases, 3 billion yuan in one convertible bond financing, and 33 billion yuan in five short-term bonds.

And these financing, have played a vital role in the development of enterprises. In addition, the reduction of large shareholders has become another important source of funds.

However, one of the problems from the market is that, while expanding, in the face of a complex environment, how can we maintain investors' confidence in its valuation?

According to the data of the fourth quarter report of public funds in 2020, Lixun precision, which was favored by institutions, was reduced by fund institutions in the fourth quarter of last year.

By the end of 2020, although Lixun precision was still ranked among the top 10 stocks with the largest open market value of public funds, its position market value decreased by 14.2 billion yuan compared with that in the second quarter, and only 782 public funds held 847 million shares, a significant decrease compared with 1.23 billion shares held by 1683 public funds in 2020, with a reduction rate of more than 30%.

As of February 4, the total market value of the company has fallen below 350 billion yuan.

During this period, on the evening of January 24, Lixun precision once issued an announcement that at present, a total of 5 US patents involved in this "337 investigation", respectively involving conductive plastic technology and terminal horizontal row injection molding technology, which were independently developed and applied to high-speed external IO connector products.

Although Lixun emphasizes that the "337 investigation" will not have a substantial impact on the company's current production and operation after preliminary judgment, "the company has set up a special working group and hired a team of American 337 investigation and patent litigation lawyers to actively respond to the 337 investigation", the shadow of trade friction is still shrouded in the sky.

On February 4, an electronic industry analyst of a medium-sized securities firm in Shanghai pointed out that "the impact of trade friction is one aspect. The reason for the rapid growth of the performance of lichen precision in recent years is mainly due to the rapid growth of the supply of Apple's airpods series earphones. However, this year's growth rate of airpods series earphones will probably slow down, and it will take a long time to assemble this piece of lichen. In addition, since the beginning of 2021, due to the central bank's net withdrawal of funds for many consecutive days, as well as the rapid increase in the previous period and other factors, market panic is also a normal phenomenon. "

However, the performance growth after the expansion of the layout is a greater challenge for the company.