Henan Tongxin Transmission Co., Ltd.'s sprint selection layer was recently questioned in the first round, involving issues related to the company's product competitiveness, research and development capabilities, and the rationality of fundraising projects. The company plans to publicly issue no more than 25 million shares of RMB common stock to unspecified qualified investors (without considering over allotment options), and the raised funds, after deducting issuance expenses, will be used for projects such as the intelligent upgrade, renovation, and expansion of 300000 sets of transmission shafts.

Specialized and innovative "little giant" enterprise

According to Tongxin Transmission, the company has established long-term and stable cooperative relationships with automobile manufacturers and component suppliers such as Chengdu Dayun, Nanjing Kaima, and Sichuan Nanjun. The company is a specialized and innovative "little giant" enterprise of the Ministry of Industry and Information Technology, a national intellectual property advantage enterprise, and a national high-tech enterprise. The company has a series of independent intellectual property rights in the field of transmission shafts and has established a provincial-level engineering technology research center. After years of continuous research and innovation, it has mastered the key processes of non constant speed transmission shafts. As of the end of 2020, the company has obtained 2 invention patents and 38 utility model patents.

Industry insiders say that a car transmission shaft refers to a shaft tube with a universal joint, which is an important component in the vehicle transmission system that connects the gearbox and the wheel drive axle, and is crucial for the safety performance of the main engine. Benefiting from the development of the entire vehicle industry and the expansion of the consumer market, the domestic automotive parts industry has shown a good development trend.

According to statistics from the China Association of Automobile Manufacturers on 13750 large-scale automotive parts enterprises, the revenue of these enterprises in China was approximately 3.9 trillion yuan in 2020.

From 2018 to 2020 (reporting period), Tongxin Transmission achieved operating revenues of 123 million yuan, 116 million yuan, and 140 million yuan respectively; The net profits attributable to the parent company were 15.4561 million yuan, 17.1789 million yuan, and 29.608 million yuan, respectively.

High gross profit margin

For companies with higher gross profit margins than comparable listed companies in the same industry, Tongxin Transmission stated that the company's production capacity is basically at full capacity. By reducing the sales of light-duty series transmission shaft assemblies with lower unit prices and gross profit margins, as well as reducing the sales of transmission shafts in distribution models, and increasing the production and sales of heavy-duty and medium-sized series transmission shafts with higher unit prices and gross profit margins, the company's gross profit margin is showing an upward trend. In addition, during the reporting period, the overall cost of the company's main raw materials showed a downward trend.

The company plans to raise funds to invest 300000 sets of intelligent upgrade and expansion projects for transmission shafts, aiming to build a new intelligent production line and improve the existing production and processing capacity of transmission shafts.

Concentric transmission means that the transmission shaft is a key component for safety in the four major assemblies of the automotive transmission system, and is widely used in various models of cars. The development of the automotive and construction machinery industries has provided a vast demand space for transmission shafts. At the same time, the company and its component industry are generally facing severe pressure to improve quality, upgrade efficiency, and increase costs, requiring enterprises to further enhance their equipment manufacturing capabilities and process levels to cope with the above challenges.

According to the company's introduction, the fundraising project plans to build 10 new automated production lines, which will significantly increase production capacity and improve the efficiency of existing production lines. By configuring automatic loading and unloading robotic arms, the operating shifts of existing production lines can be increased, effectively reducing the number of production line personnel.

Regulatory inquiries

According to the prospectus, Henan Tongxin Transmission claims that "the company has advanced processing technology and automated processing flow, which results in higher quality and lower repair rate compared to similar domestic products, and higher satisfaction from downstream customers. With excellent product quality and price advantages, the company's products have entered the host market supporting system in Russia, South Korea, and other countries." In addition, the company purchases components such as universal joints, protruding forks, shaft forks, joint forks, shaft tubes, and sliding sleeves externally, and the production process involves outsourcing processing.

Regulatory authorities require Tongxin Transmission to supplement disclosure of whether the main components of the product are all purchased from external sources, market supply situation, price fluctuations, and whether there are customer designated suppliers for supply, in conjunction with the company's product production process, procedures, and other content. The added value of the company's independent production processes and their impact on product performance and quality, whether the production is only for component assembly, whether the products are sold under its own brand, and whether the company's production system complies with the general practices of companies in the industry.

At the same time, supplement the disclosure of the key performance and quality indicators of the company's main products compared to its main competitors, and analyze whether the statement "higher quality and lower repair rate than similar domestic models" has sufficient and reasonable basis.

In terms of the progressiveness technology of heavy-duty transmission shaft, the prospectus shows that the company has developed and built the first vertical heavy-duty transmission shaft end face tooth flange fork processing line in China and quickly seized the market; The company has obtained a patent for the "High Torque Y165E1 Series" heavy-duty truck transmission shaft assembly independently developed by YKD Company in Russia, filling the gap in the domestic field of high torque heavy-duty truck transmission shafts.

In response, regulatory authorities require the company to provide specific factual basis or proof for the statement of "building the first vertical heavy-duty transmission shaft end face tooth flange fork machining line in China", the technical characteristics and corresponding patent situation of the "high torque Y165E1 series" heavy-duty truck transmission shaft assembly and "heavy-duty truck technology", and whether the objective basis for the statement of "filling the gap in the domestic high torque heavy-duty truck transmission shaft field" is accurate.