freepokernodeposit| The main business has suffered losses for four consecutive years, and the debt ratio has reached 99%. Huicheng Technology's cross-border games have been "cheated"
Deducting non-net profit for four consecutive years, Huicheng Technology (002168) can hardly afford to lose money.FreepokernodepositYes. Recently, Huicheng Technology disclosed the 2023 report and the first quarterly report of 2024, showing that the company's operating performance has declined continuously. Last year, although Huicheng Technology turned losses into profits, it mainly relied on compensation, and the deduction of non-net profit was still negative.
After years of losses in the main business, the sustainable development ability of Huicheng Science and Technology is in doubt. The author noticed that by the end of the first quarter of this year, the asset-liability ratio of Huicheng Technology had reached 99.17%. In terms of the balance sheet, liabilities are mainly derived from accounts payable, other payables and long-term loans.
Under the continuous loss of performance, Huicheng Technology also falsely increased its profits in 2019 and 2020, with a total profit of more than 300 million yuan in two years. Huicheng Technology is suspected of breaking the law, mainly involving game-related subsidiaries such as Dokemeng, and Doc Kemeng completes the performance bet by falsely increasing profits.
The deduction of non-net profit has been negative for 4 consecutive years
Recently, Huicheng Technology disclosed the financial results of 2023 and the first quarterly report of 2024, the company still has not improved the situation of losses in the main business. According to the report in 2023, the company realized revenue of 254 million yuan, an increase of 3.99% over the same period last year, and a net profit of 1.897 million yuan, an increase of 101.64% over the same period last year.
On the face of it, Huicheng Technology's performance increased significantly in 2023, but it relied on non-operating profit and loss. Last year, the company's non-operating profit and loss reached 123 million yuan, of which Kohan performance promised compensation of about 100 million yuan, received government subsidies of 41.19 million yuan. Excluding non-operating profit and loss, the company's main business net profit loss is 121 million yuan.
From a business point of view, Huicheng Technology is mainly distributed in three major sectors, namely, the electric power industry, the new energy industry and the game industry. The sector with the largest revenue is the power industry, accounting for 53% of revenue in 2023, with a gross profit margin of 16.47%, down 8.23 percentage points from the same period last year.
The gross profit margin of the new energy industry and the game industry increased significantly, to 25.67% and 88.58% respectively in 2023, down 21.57 percentage points and 17.20 percentage points respectively compared with the same period last year.
In addition, Huicheng Technology also disclosed that in the first quarter of 2024, the company's revenue was 31.24 million yuan, down 31.28% from the same period last year; net profit was 37.63 million yuan, down 79.60% from the same period last year; and 37.22 million yuan was deducted from non-net profit, down 72.66% from the same period last year.
The author is concerned that Huicheng Technology has deducted negative non-net profit for four consecutive years. From 2019 to 2022, the company deducted non-net profits of-1.182 billion yuan,-184.2 million yuan,-205.5 million yuan and-125.6 million yuan respectively.
The main business continues to lose money, and the debt ratio of Huicheng Technology continues to rise. By the end of the first quarter of 2024, the total debt of Huicheng Technology was 884 million yuan, with an asset-liability ratio of 99.17%. In other words, the financial affairs of Huicheng Technology are close to the brink of "insolvency".
From the balance sheet, the liabilities of Huicheng Technology are mainly composed of three parts, namely, accounts payable, other payables and long-term loans, with amounts of 209.8 million yuan, 279.1 million yuan and 163.9 million yuan respectively. Judging from the 2023 financial report, other payables are mainly shareholder borrowings.
False increase of profits is punished by supervision.
On February 1 this year, Huicheng Technology issued a notice saying that the company had received a "prior notice of administrative punishment" from the China Securities Regulatory Commission. As early as November 2022, Huicheng Technology received a "case filing notice" issued by the China Securities Regulatory Commission on suspicion of illegal information disclosure, and the China Securities Regulatory Commission filed a case against the company for investigation.
The main company suspected of violating the law is Duokemeng, a subsidiary of Huicheng Technology Holdings. Huicheng Technology acquired DoKemeng in 2017, making a move in the field of layout games. At that time, Huicheng Technology acquired a 77.57 per cent stake in Dokemeng at a price of 1.383 billion yuan, with a value-added rate of 2759.59 per cent.
Huicheng signed a performance bet agreement with Dookemeng, which promised that the net profit from 2017 to 2019 (calculated before and after deducting non-recurring gains and losses) would not be less than 145 million yuan, 188 million yuan and 245 million yuan, respectively. According to the announcement at that time, do Kemeng completed the performance bet every year.
However, by 2020, as soon as the performance bet is completed, the performance of dokemeng will quickly "change its face". In the current period, dokemeng revenue fell 33.32% year-on-year to 462 million yuan, while net profit fell 82.49% year-on-year to 46 million yuan. To this end, Huicheng Technology also provided for a goodwill impairment of 908 million yuan.
"when things go wrong, there must be demons." The CSRC found the clue when inquiring, comparing and calculating the prepaid accounts of Huicheng Technology. The prepaid accounts in the financial statements of listed companies are mainly composed of Dookemeng and related subsidiaries for the purpose of prepaid promotion fees to game promotion companies.
Comparing the business and financial data provided by Dookemeng and related subsidiaries and advertising agencies, the CSRC found that Dorkemeng and related subsidiaries did not include the consumed recharge amount in sales expenses and operating costs, but a large number of prepaid accounts.
After the CSRC adjusted according to the calculation method, Huicheng Technology is suspected of underwriting sales expenses in 2019.Freepokernodeposit2.1429 million yuan, underrecorded operating costs 8 million yuan, inflated profits 230.1429 million yuan; in 2020, suspected of underrecording sales expenses 76.2435 million yuan, inflated profits 76,2435 million yuan.
In other words, Dookemeng is to achieve the 2019 performance bet target by falsely increasing profits. Due to the unfinished performance bet, Huicheng Technology requires the relevant compensation obligor to compensate in accordance with the agreement on performance compensation in the Equity transfer Agreement of Chengdu Duokemeng Network Technology Co., Ltd., of which Cohan should pay 446.9895 million yuan in performance compensation.
According to the progress announcement of the litigation matters involved in the performance commitment compensation issued by Huicheng Technology, as of December 9, 2023, Kou Han, the compensation obligor, had paid 100 million yuan in performance compensation to the company, and the balance of performance compensation still to be paid to the company was 346.9895 million yuan.
As mentioned earlier, Cohan paid 100 million yuan in performance compensation, Huicheng Technology's net profit in 2023 was able to turn into profit, but did not change the deduction of non-net profit to negative.
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