Due to involvement in a special network communication case, Changshu Guorui Technology Co., Ltd. (300600.SZ, hereinafter referred to as "ST Ruike") was fined 2 million yuan and consequently "capped."
ST Ruike recently released its financial report for the third quarter of 2024. The financial statements show that in the first three quarters of this year, the company achieved a revenue of 181 million yuan, a year-on-year increase of 27.53%; the net profit attributable to the parent company was -23.7093 million yuan, a year-on-year reduction in losses of 18.35%. Among them, the total operating income in the third quarter was 56.6575 million yuan, a year-on-year decrease of 5.58%; the net profit attributable to the parent company was -11.7974 million yuan, a year-on-year reduction in losses of 2.04%.
The reporter noticed that since 2021, ST Ruike has been in a loss for three consecutive years. This year, the company's net profit is still in a loss state, but the loss amount has been reduced year-on-year in each quarter. At the same time, in the first three quarters, the company's net cash flow from operating activities turned negative again after turning positive last year, and R&D expenditure has increased significantly, with the expenditure amount being almost equivalent to the whole year of 2023.
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Loss contraction
As a professional supplier of marine electrical and automation systems, ST Ruike is specialized in the research and development, production, sales, and integrated technical services of marine and ocean engineering electrical and automation systems and their system integration, with main products including marine power distribution systems and marine engine room automation systems, etc.
ST Ruike was listed on the Growth Enterprise Market of Shenzhen Stock Exchange in 2017. Apart from the growth in performance in the first two years, the overall performance has been declining since then. In 2023, the company's revenue has dropped from nearly 490 million yuan in 2018 to less than 200 million yuan, and the net profit attributable to the parent company has also turned from a surplus of more than 100 million yuan at the beginning of the listing to a loss, and has been in loss for three consecutive years.
Data shows that from 2021 to 2023, the net profit attributable to the parent company of ST Ruike was -234 million yuan, -465.3 million yuan, and -230 million yuan respectively; the net profit attributable to the parent company after deducting non-recurring gains and losses was -237 million yuan, -80 million yuan, and -460 million yuan respectively.
Regarding the reasons for the loss, ST Ruike stated in its annual report that in 2023, affected by the increasingly fierce market competition, changes in the external environment, and the year of significant changes in the company's management, the company's operating income during the reporting period has declined; the credit impairment loss of the company's accounts receivable has increased significantly compared to the previous year, leading to a corresponding increase in the company's loss.
However, the main downstream of ST Ruike is the shipbuilding and marine engineering equipment manufacturing industry, which has been developing well in recent years, and the performance of peer companies is generally improving.
This year, the performance of ST Ruike has improved, with a reduction in losses while the revenue has increased.From the financial report data, ST Ruike achieved a revenue of 53 million yuan in the first quarter of this year, a year-on-year increase of 19.64%; in the first half of the year, it achieved a revenue of 124 million yuan, a year-on-year increase of 51.85%; in the first three quarters, it achieved a revenue of 181 million yuan, a year-on-year increase of 27.53%.
In terms of net profit attributable to the parent company, ST Ruike's net profit attributable to the parent company in the first quarter of this year was 70,400 yuan, a year-on-year increase of 101.21%, achieving a turnaround from loss; in the first half of the year, it was -12 million yuan, a year-on-year increase of 29.91%; in the first three quarters, it was -24 million yuan, a year-on-year increase of 18.35%.
However, while reducing losses, ST Ruike's sales gross margin has still decreased year-on-year this year. Specifically, in the first quarter, it was 31.25%, compared to 33.96% in the same period last year; in the first half of the year, it was 28.22%, compared to 35.25% in the same period last year; in the first three quarters, it was 26.49%, compared to 33.02% in the same period last year.
In the first three quarters of this year, ST Ruike's net cash flow from operating activities turned negative again, at -13 million yuan, a year-on-year decrease of 241.64%. The company stated that this was mainly due to increased revenue but some receivables have not reached the collection point, and the increase in orders led to an increase in the payment for raw material purchases.
Correction of previous accounting errors
In addition to continuous losses, affected by the special communication case, ST Ruike has also received "non-standard audit reports" for three consecutive years and has received inquiry letters.
In May of this year, the China Securities Regulatory Commission (CSRC) issued a decision letter to ST Ruike, and the company's special communication business finally received a result.
According to the penalty decision, ST Ruike began to carry out special communication business in 2019. By participating in the false self-cycle business of special communication, the company's 2020 annual report inflated its operating income by 226 million yuan, inflated its operating costs by 186 million yuan, inflated its total profit by 40 million yuan, and the inflated income accounted for 39.61% of the disclosed revenue that year, and the inflated total profit accounted for 49.68% of the disclosed total profit that year.
Based on this, the CSRC ordered ST Ruike to correct, gave a warning, and imposed a fine of 2 million yuan; relevant responsible personnel were given warnings and fines. At the same time, starting from May 21, the company was subject to other risk warnings, and the company's stock abbreviation was changed from "Guo Rui Technology" to "ST Ruike".
At that time, ST Ruike told reporters that under the new regulatory rules, the company was ST due to the relevant penalties, but the relevant cases have basically ended, and the more than 200 million yuan of losses booked due to it were compensated by the company's original actual controller to the listed company.However, according to regulatory rules, during the period when ST Ruike's stock trading is subject to other risk warnings, it should disclose progress announcements on error corrections at least once a month until the financial accounting report correction announcements related to the administrative penalty decisions and the special audit opinions issued by the accounting firm are disclosed.
Recently, while releasing the third-quarter report, ST Ruike corrected previous accounting errors according to the decision, and the revenue and profits involved in the special communication business were not recognized after the correction, and the financial statements from 2020 to 2023 were retrospectively adjusted.
In the retrospective adjustment, ST Ruike used the "Other Current Liabilities" account as a transitional account for the inflated profits from special communication, adjusting the inflated profits of about 0.4 billion yuan from the revenue in the 2020 statement to "Other Current Liabilities", and in the 2021 statement, it offset other receivables of about 0.4 billion yuan, and correspondingly reversed the credit impairment loss of 0.4 billion yuan that had been provided for other receivables.
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