Hangzhou Honghua Digital Technology Co., Ltd. Announcement of IPO on the Science and Technology Innovation Board

The shares of Hangzhou Honghua Digital Technology Co., Ltd. (hereinafter referred to as “Honghua Digital”, “the company”, “issuer” or “company”) will be listed on the Shanghai Stock Exchange on July 8, 2021. The company reminds investors that they should fully understand the stock market risks and the risk factors disclosed by the company, and should not blindly follow the trend and “speculate new stocks” in the initial stage of IPOs, and should make prudent decisions and invest rationally.

Section 1 Important Notices and Tips

1. Important statement

The company and all directors, supervisors and senior management personnel guarantee the truthfulness, accuracy and completeness of the information disclosed in the listing announcement, promise that there are no false records, misleading statements or major omissions in the listing announcement, and assume legal liabilities in accordance with the law.

The opinions of the Shanghai Stock Exchange and relevant government agencies on the listing of the company’s stocks and related matters do not indicate any guarantee to the company.

The company reminds investors to carefully read the contents of the “Risk Factors” section of the company’s prospectus published on the website of the Shanghai Stock Exchange (www.sse.com.cn), pay attention to risks, make prudent decisions, and invest rationally.

The company reminds investors that for all relevant content not covered in this listing announcement, investors are requested to refer to the full text of the company’s prospectus.

Unless otherwise specified, the definitions of the abbreviations or nouns in this listing announcement are the same as those in the company’s initial public offering of shares.

2. Investment risk reminder

The company reminds investors to pay attention to the investment risks in the initial public offering of stocks (hereinafter referred to as “new shares”), and investors should fully understand the risks and participate in new stock transactions rationally.

Specifically, the risks in the initial stage of listing include but are not limited to the following:

(1) Relaxation of price limits

On the first day of listing, the main board company’s rate of increase and decrease is limited to 44%, and the rate of decrease is 36%. After that, the rate of increase and decrease is 10%. Within the first 5 trading days after listing on the Science and Technology Innovation Board, there is no limit on the price increase or decrease in the stock transaction price; after 5 trading days after listing, the rate of increase or decrease limit is 20%. There is a risk that stocks on the Sci-tech Innovation Board may fluctuate more drastically than the main board.

(2) The number of outstanding shares is small

In the initial stage of listing, the lock-up period of shares for original shareholders is 36 months or 12 months, the lock-up period for the sponsor’s follow-up shares is 24 months, and the lock-up period for the issuer’s senior management and core employees participating in the strategic placement is 12 months. , The lock-up period of offline restricted shares is 6 months. After this issuance, the company’s unrestricted circulating shares will be 15,440,365 shares, accounting for 20.32% of the total share capital after the issuance. The number of outstanding shares in the initial stage of the company’s listing is small, and there is insufficient liquidity. risks of.

(3) The P/E ratio is lower than the industry average

The issue price is 30.28 yuan/share, and the corresponding price-earnings ratio for this price is:

1. 10.08 times (earnings per share are calculated based on the net profit attributable to shareholders of the parent company before deduction of non-recurring gains and losses audited by an accounting firm in accordance with Chinese Accounting Standards in 2020 divided by the total share capital before the issuance);

2. 10.86 times (Earnings per share shall be calculated based on the net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses audited by an accounting firm in accordance with Chinese Accounting Standards in 2020 divided by the total share capital before the issuance);

3. 13.44 times (earnings per share are calculated based on the net profit attributable to shareholders of the parent company before deduction of non-recurring gains and losses audited by an accounting firm in accordance with Chinese Accounting Standards in 2020 divided by the total share capital after the issuance);

4. 14.48 times (Earnings per share is calculated based on the net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses audited by an accounting firm in accordance with Chinese Accounting Standards in 2020 divided by the total share capital after the issuance).

The company’s industry is the special equipment manufacturing industry (classification code: C35). As of June 24, 2021 (T-3), the average static P/E ratio of the industry released by China Securities Index Co., Ltd. in the most recent month is 38.93 times. The issue price of 30.28 yuan/share corresponds to the issuer’s 2020 diluted P/E ratio of 14.48 times, which is the lowest before and after deducting non-recurring gains and losses, which is lower than the industry’s average static P/E ratio of the most recent month published by China Securities Index Co., Ltd., but there is still a future. Falling stock prices bring the risk of loss to investors.

(4) The stock can be used as the target of margin financing and securities lending on the first day of listing

The Sci-tech Innovation Board stocks can be used as the target of margin financing and securities lending on the first day of listing, which may cause certain price fluctuation risks, market risks, margin call risks and liquidity risks. Price fluctuation risk means that margin financing and securities lending will aggravate the price fluctuation of the underlying stock; market risk means that when investors use stocks as collateral for financing, they not only need to bear the risks caused by the original stock price changes, but also Undertake the risks caused by the changes in the price of new investment stocks and pay the corresponding interest; margin call risk means that investors need to monitor the guarantee ratio level throughout the transaction process to ensure that it is not lower than the maintenance margin ratio required by margin trading and securities lending ; Liquidity risk refers to that when the underlying stock has severe price fluctuations, margin purchases or securities repayments, securities lending and sales, or securities repayments may be blocked, resulting in greater liquidity risks.

3. Special risk reminder

(1) The digital inkjet printing technology is in the early stage of application, and the market development is not as expected.

Digital inkjet printing technology has the characteristics of green, flexible, and high-definition. Its application and promotion can meet the needs of the traditional printing market to transform to “individualization, small batch, fast delivery, multiple patterns, and high quality”. The field can realize the substitution of traditional printing methods, but there are still problems such as relatively high cost of equipment and consumables. In the mass production market of large-scale simple patterns, traditional printing methods have not been completely replaced. At this stage, digital inkjet printing technology is still in the early stage of application, with good market prospects and rapid growth. According to the survey and statistics of China Printing and Dyeing Industry Association, the output of digital inkjet printing in China in 2019 is about 1.9 billion meters, accounting for 11% of the total printed cloth. At present, the textile printing market is mainly used in application scenarios such as short delivery requirements, relatively small batches, relatively high added value, and rich pattern colors. If the future digital printing technology cannot be used in stability, consumables costs, and the comprehensive cost of subsequent equipment maintenance, etc. In terms of further breakthroughs, digital inkjet printing technology has the risk of slowing down the progress of large-scale promotion and less than expected market development, which will have an adverse impact on the company’s future operating performance.

(2) The risk of the impact of the new crown epidemic on the company’s production and operation

At the beginning of 2020, the outbreak of a new type of coronavirus pneumonia (hereinafter referred to as “new crown epidemic” and “epidemic”) in China has caused various industries to be affected to varying degrees. With the global spread of the new crown epidemic, the company’s production, sales, logistics and transportation have all been affected to a certain extent in the short term.

The downstream application market of the company’s products is the textile printing market, and the terminal market is consumer goods such as clothing and home textiles. The changes in the demand of the terminal market will be transmitted to the demand for equipment and consumables in the textile printing market. The global spread of the new crown epidemic will reduce the demand for textiles in the end market. The large-scale shutdown of clothing, home textile and textile printing enterprises caused by the superimposed epidemic will inevitably lead to a short-term decline in the company’s digital printing equipment and consumables consumption. At this stage, China’s epidemic prevention and control has achieved significant results. The adverse effects of the new crown epidemic on the company’s domestic production, sales, logistics and transportation are being eliminated; however, the overseas epidemic situation is still severe, and major countries in the world have already imposed restrictions on the entry and exit of personnel and domestic activities. Certain restrictions have led to a certain degree of adverse effects on the global textile industry chain and terminal market demand. Affected by the new crown epidemic, the company’s operating performance growth in 2020 will show a significant slowdown. If the future development of the global new crown epidemic is out of control or difficult to effectively suppress in a short period of time, it will further impact the global textile industry industrial chain, and the company’s operating performance may be at risk of failing to meet expectations due to shrinking demand.

(3) Risks of disclosing core technology, commercial secrets, etc.

The company’s industry is a technology-intensive industry. Intellectual property rights, core technologies and commercial secrets are the key factors for the company’s continuous and stable development and deepening of the digital printing market. If the company’s intellectual property rights are infringed by competitors and core technologies and commercial secrets are leaked, the company will risk a decline in its competitive advantage in the market.

(4) Overseas market risks

During the reporting period, the company’s export revenue was 149,065.4 million yuan, 229,824,200 yuan, and 306.4589 million yuan, accounting for 31.77%, 39.17%, and 42.99% of the company’s main business revenue, respectively.

The global textile printing market is mainly distributed in Europe and Asia. The company’s main competitors MS, EFI-Reggiani, Epson, HP and other foreign companies have certain advantages in brand, capital, technology, and market channels. If the company’s products and services cannot continue to meet customer application needs and maintain good brand awareness and customer reputation, the company will face greater pressure to expand in overseas markets. At the same time, if the political environment, economic situation, trade policy with China, foreign exchange management and other factors of the country or region where the export market is located have major adverse changes, it will also adversely affect the company’s overseas market development and operation.

(5) The risk of uncollectible accounts receivable

At the end of each period of the reporting period, the company’s accounts receivable balances were RMB 92,610,900, RMB 121,333,800 and RMB 215,306,700, accounting for 19.59%, 20.52%, and 30.08% of operating income during the same period. The age is relatively short. As of the end of 2020, the balance of accounts receivable with an age of less than 1 year accounted for 87.74% of the total balance of accounts receivable.

In the future, as the company’s sales scale continues to expand, the balance of accounts receivable may continue to increase. If the future is affected by the economic environment, the new crown epidemic and other emergencies, and the customer’s own business development is not as expected, it will cause major adverse changes in the customer’s business and payment capabilities, or the foreign exchange control measures of the importing and exporting country and other force majeure factors. The change will cause the company to have the risk of not being able to recover the above-mentioned accounts receivable on time or in full, which will have a certain degree of adverse impact on the company’s operating performance.

(6) The risk of relatively diversified company equity

As of the signing date of this listing announcement, Jin Xiaotuan, the actual controller of the company, did not directly hold the company’s shares. He indirectly controlled 20.87% of the company’s equity through Ningbo Weixin, indirectly controlled 16.65% of the company’s equity through Chibo, and Baoxin Digital indirectly controls 8.43% of the company’s equity, and Jin Xiaotuan indirectly controls 45.95% of the company’s total equity. After this public offering, the proportion of shares controlled by Jinxiaotuan will further decline to 34.46%. The company’s equity is relatively dispersed. Except for shares controlled by Jinxiaotuan, there are 7 direct shareholders, with the highest shareholding held by shareholders. 18.75% of the company’s shares. If the proportion of the company’s actual controller controlling the company’s shares decreases, or the proportion of shares controlled by other investors increases, it may affect the actual controller’s control over the company, which will bring certain potential to the company’s business development or operational decision-making efficiency. risk.

(7) The risk that the core raw material nozzles of digital printing equipment mainly rely on outsourcing

The core raw material nozzles of the company’s digital printing equipment mainly rely on overseas purchases. During the reporting period, the company purchased sprinkler heads of RMB 86,839,900, RMB 113,325,900, and accounted for 29.71%, 31.65%, and 29.78% of the total purchases. There is a risk of high concentration of nozzle suppliers and reliance on outsourcing. . In the future, if the company’s digital printing equipment core raw material nozzle supplier has an adverse change in the business relationship with the company, or its supply price fluctuates sharply, or cannot be supplied in time due to force majeure factors such as trade disputes between countries, it will affect the company’s production Operation has an adverse effect.

(8) The issuer has the risk of multiple patent disputes

At present, the company still has 1 invention patent and 2 utility model patents in the process of patent litigation, and there is a certain degree of uncertainty in the outcome of the litigation. If the company’s related patents are declared invalid, the company’s invalidated patents or the technical points disclosed in their claims are at risk of being imitated by competitors; at the same time, the company still has other authorized patents that are invalidated by competitors in the future and are entitled to The department’s declaration of partial or total invalidity will result in the risk of patent disputes, which may adversely affect the company’s production and operation.

(9) There is a risk that the company’s performance may not be able to sustain rapid growth in the short term

After review, from January to March 2021, the company’s operating income was RMB 220,556,400, a year-on-year increase of 71.42%; operating profit was RMB 64,889,100, a year-on-year increase of 55.49%; net profit attributable to shareholders of the parent company was RMB 55,889,700, a year-on-year increase 55.19%; net profit attributable to owners of the parent company after deducting non-recurring gains and losses was RMB 55,618,800, a year-on-year increase of 62.01%. The operating performance of the first quarter of 2021 increased faster than the same period last year, mainly due to the domestic new crown epidemic. Effective control, the company’s production and operation have basically returned to normal, and digital printing has accelerated the replacement of traditional printing. In the same period last year, the new crown epidemic caused a certain negative impact on the company’s production, sales, logistics and transportation links, resulting in a relatively low amount in the same period last year. . There is a risk that the company’s performance may not be able to sustain rapid growth in the short term.

Section 2 Stock Listing Situation

1. Review of stock issuance and listing

(1) The decision of the China Securities Regulatory Commission to approve registration and its main contents

On June 1, 2021, the China Securities Regulatory Commission issued a document “Zheng Jian Ke [2021] 1878, approving the initial public offering of A shares by Hangzhou Honghua Digital Technology Co., Ltd. and listing on the Science and Technology Innovation Board (hereinafter referred to as “the offering”) Registration application. The details are as follows:

“1. Agree to your company’s application for registration of the initial public offering of shares.

2. This issuance of stocks by your company shall strictly follow the prospectus and issuance underwriting plan submitted to the Shanghai Stock Exchange.

3. This reply is valid within 12 months from the date of approval of registration.

4. From the date of approval of registration to the end of this stock issuance, if any major event occurs to your company, it shall promptly report to the Shanghai Stock Exchange and deal with it in accordance with relevant regulations. ”

(2) The Shanghai Stock Exchange’s decision to approve the listing of stocks and its main contents

The listing of the company’s A shares has been approved by the Shanghai Stock Exchange in the “Self-Regulatory Decision [2021] No. 295”. The A shares issued by the company are listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange. The stock abbreviation is “Honghua Digital Technology” and the stock code is “688789”; the total A shares of the company are 76,000,000 shares, of which 15,440,365 shares will be issued in 2021. It will be listed and traded on July 8.

2. Information related to stock listing

(1) Listing location and listing sector: Shanghai Stock Exchange Science and Technology Innovation Board

(3) Stock abbreviation: Honghua Digital, extended abbreviation: Hangzhou Honghua Digital Technology

(4) Stock code: 688789

(5) Total share capital after the issuance: 76 million shares

(6) Number of shares issued this time: 19 million shares

(7) The number of stocks with no circulation restrictions and lock-in arrangements for this listing: 15,440,365 shares

(8) This listing