Maybe more challenges ahead.
On February 5, Risong Technology (688090:SH), a Smart Manufacturing solution and equipment provider, finished its primary stock purchase allocation – underwritten by Guangfa Securities – at an issuing price of CNY 27.55 per share. It is reported that the money raised will bankroll its project of industrial robots and intelligent equipment production base, R&D center construction, etc.
Industry analysts believe that the implementation of Risong's project will be conducive to expanding its production scale, enhancing its R&D and design strength and expanding its competitiveness in the field of industrial robots. In addition, the national and local governments have launched a number of policies to promote the development of the industrial robot industry, promoting development in various areas and increasing policy support, which will provide the industry with greater market space and rare development opportunities. This is a major opportunity for Ruisong technology and other robotics companies.
Risong technology was founded in 2012. It is an integrated supplier of smart manufacturing systems, covering R&D, design, manufacturing and application in the fields of robotics, intelligent technology and high-end intelligent equipment, providing customers with complete sets of flexible automation and intelligent system solutions. Their systems are mainly used in the automobile industry, automobile parts, 3C, machinery, elevators, motorcycles, ships and other fields.
According to the financial data disclosed in their prospectus, from 2016 to the first half of 2019 Risong technology achieved operating revenues of CNY 655 million, 705 million, 736 million and 319 million respectively, and realized net profits of CNY 33.4 million, 58.4 million, 68.6 million and 17.7 million.
In addition, the prospectus also disclosed the main customers of Risong, including Toyota, Honda, Mitsubishi, Mazda, Fiat Chrysler, GAC passenger cars, GAC new energy, BYD, Desai battery, Hitachi Elevator, Wuyang Honda, CIMC group, CSSC Huangpu, etc.
However, as mentioned in the prospectus, as of the end of June 2019, the company's debt to asset ratio (55.3%) was relatively high. On the one hand, this industry has a large demand for working capital. With the continuous rise of the company's scale, the company's demand for capital; on the other hand, with the investment in the company's new production base, the company's cash outflow from investment activities is large.
In addition, the focus Risong technology customers on the automobile industry lead to specific issues; since 2018, robot sales in the automobile industry have been declining.
The inflection point of industrial robotics' growth in 2018 is mainly due to the recession of the automobile industry and the sluggish growth of the 3C industry, which leads to the decline of the growth rate of China, the world's largest market. In the future, Risong technology may face huge market incremental pressure.
According to the data of the national passenger vehicle market information joint meeting, from January to December 2019, the retail sales of narrow-sense passenger vehicles decreased by 7.4% year-on-year, a larger decrease than the growth rate of - 3% in 2018. According to the CAAM (China Association of Automobile Manufacturers), this is a more-than-expected decline.
Shi Jianhua (师建华), deputy secretary-general of the CAAM, also mentioned in an interview recently that "how the development trend of China's automobile market in 2020 will go depends on the overall trend of the macro-economy. At present, the recovery is not strong enough to achieve a positive growth in 2020, and it is expected to have a negative growth of 2% in the whole year. In the next few years, China's car market will continue to show a low-speed growth trend. "
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