From May 20th to May 26th of the same week (hereinafter the same), there were 10 companies planning to go public on the A-share market that terminated the review process, all of which withdrew their application materials.

Five companies applied for the Shanghai Stock Exchange, namely Zhejiang Dongfang Komai Electronics Co., Ltd. (hereinafter referred to as "Dongfang Komai"), Guangdong Dapu Communication Technology Co., Ltd. (hereinafter referred to as "Dapu Technology"), Wuhan Gelanruo Intelligent Technology Co., Ltd., Jincheng Technology Co., Ltd., and Xuan Zhu Biotechnology Co., Ltd.; Four companies applied for the Shenzhen Stock Exchange, namely Zhejiang Weil Star Optics Co., Ltd., Suzhou Weida Smart Technology Co., Ltd., Hubei Xiangjiang Electric Co., Ltd., and Hecheng Technology Co., Ltd.; One company applied for the Beijing Stock Exchange, namely Jiangsu Yudi Optics Co., Ltd.

An informed source told the First Financial Daily reporter that the main reason for Dongfang Komai's withdrawal was that the financial indicators did not meet the new regulations. The company's net profit for the most recent year of the reporting period did not reach 100 million yuan. In addition, Dapu Technology is the first IPO project to terminate the review process after the penalty imposed on Dahua Certified Public Accountants (Special General Partnership) (hereinafter referred to as "Dahua Office").

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It is worth noting that after the IPO review meeting was held on February 5th this year, more than three months later, the Shanghai Stock Exchange Listing Review Committee will review the IPO situation of Lian Yun Technology (Hangzhou) Co., Ltd. on May 31st.

Dongfang Komai's financial indicators do not meet the new regulations

Under the new "Nine National Articles," the threshold for listing has been raised, and Dongfang Komai's IPO has been thwarted as a result.

Dongfang Komai applied for listing on the main board of the Shanghai Stock Exchange, and the IPO application was accepted on June 30, 2023. It entered the inquiry stage on July 25 of the same year. After replying to one round of inquiries, the review was terminated in May of this year due to the withdrawal of the application.

The company's main business is the research and development, design, production, and sales of various electronic paper display module products. According to the prospectus, from 2020 to 2022 (the reporting period), the company's operating income was 477 million yuan, 864 million yuan, and 1214 million yuan, with a total of about 2555 million yuan; the net profit (based on the lower value before and after non-deduction) was 62.8651 million yuan, 85.2523 million yuan, and 89.8795 million yuan, with a total of 238 million yuan.

According to the company's reply to the inquiry letter, in the first half of 2023, Dongfang Komai's revenue was 629 million yuan, and the net profit was 43.1325 million yuan.

Looking at the net cash flow generated by operating activities, from 2020 to 2022 and the first half of 2023, the net cash flow generated by Dongfang Komai's operating activities was -164 million yuan, -138 million yuan, 66.4915 million yuan, and 67.6497 million yuan, respectively.Dongfang Kemai has chosen the first set of listing standards for the main board. However, the new regulations have raised the cumulative net profit indicator for the most recent three years from 150 million yuan to 200 million yuan, the net profit indicator for the most recent year from 60 million yuan to 100 million yuan, the net cash flow from operating activities for the most recent three years from 100 million yuan to 200 million yuan, and the cumulative operating revenue indicator for the most recent three years from 1 billion yuan to 1.5 billion yuan.

In this light, Dongfang Kemai's net profit for the most recent year of the reporting period did not reach 100 million yuan, which does not meet the new regulation requirements.

Additionally, there is a significant difference between the net cash flow from operating activities and the net profit during the reporting period of Dongfang Kemai, with substantial fluctuations in this difference. This has also attracted the attention of the exchange and prompted inquiries.

According to the prospectus, for each period of the reporting period, the difference between the net cash flow from operating activities and the net profit for the period was -233 million yuan, -227 million yuan, and -25.3846 million yuan, respectively.

"The main reason is that the scale of inventory and accounts receivable has increased with the expansion of the company's operating scale. There is a certain time difference between procurement payments and sales receipts, and some customers use letters of credit or bank acceptance bills for payment settlement. If the situation where the net cash flow from operating activities is lower than the net profit cannot be effectively improved, it may lead to liquidity risks for the company," said Dongfang Kemai.

Dapu Technology withdrew its application after Dahua was penalized.

Dapu Technology, which applied for a science and innovation board IPO, was the first IPO project to terminate the review process after Dahua was penalized.

Dapu Technology's IPO application was accepted on June 1, 2023, and entered the inquiry phase on June 26 of the same year. After responding to one round of inquiries, it was terminated on May 21 of this year due to withdrawal.

On May 10 of this year, the Jiangsu Securities Regulatory Bureau issued an administrative penalty decision. Dahua, while auditing the annual financial statements of Jintong Ling from 2017 to 2022, had significant deficiencies in risk assessment and internal control testing procedures, did not take appropriate audit measures to address fraud risks, and had significant deficiencies in substantive procedures, violating the provisions of relevant professional standards. It failed to fulfill its due diligence obligations, and the audit report it issued contained false records.

In response, the Jiangsu Securities Regulatory Bureau ordered Dahua to correct the violations, confiscated business income of 6.8868 million yuan, imposed a fine of 34.434 million yuan, and suspended its securities service business for six months. This means that the penalty imposed on Dahua was five times its business income, reaching a "one confiscation and five penalties" ratio. In addition, the signing certified public accountants Fan Rong, Yan Lisheng, and Hu Zhigang were each fined 1.5 million yuan, 800,000 yuan, and 400,000 yuan, respectively.According to Wind data, based on the latest announcement date as the reference, this year to date, among the 50 IPO projects that have hired the Dahua Accounting Firm, 14 have withdrawn their materials, 34 are under suspended review status, and 2 have obtained registration from the China Securities Regulatory Commission (CSRC).

In accordance with the newly released stock issuance and listing review rules, if there are circumstances where the issuer's sponsor, securities service institution has been legally subjected to regulatory measures by the CSRC, such as restrictions on business activities, orders to suspend business for rectification, or the appointment of other institutions for custody or takeover, and these measures have not been lifted, the issuer, sponsor, and securities service institution shall promptly notify the exchange. The exchange will then suspend the review of the issuance and listing, and notify the issuer and its sponsor.

At the same time, as stipulated, if the issuer is required to replace the sponsor or securities service institution, the new sponsor or securities service institution should complete due diligence and issue relevant documents within three months from the date of suspended review. They should also review the documents issued by the original sponsor or securities service institution, provide a review opinion, and explain any differences.

Of course, DaPu Technology itself also carries certain risks. The company stated in its prospectus that there are risks of difficulty in maintaining a high growth of operating income and the risk of declining performance, as well as risks associated with the deterioration of international trade and business environment.

DaPu Technology's operating income for the fiscal years 2020 to 2022 was 137 million yuan, 266 million yuan, and 317 million yuan, respectively. The net profit attributable to the parent company after deducting non-recurring gains and losses were -22.43 million yuan, -22.84 million yuan, and 33.05 million yuan, respectively. The net cash flow generated from operating activities were -5.49 million yuan, 28.64 million yuan, and 37.04 million yuan, respectively.