Jinghua Optics, a delisted company, plans to relist through a second listing and aims to sprint towards an IPO. Will the betting agreement make the Beijing Stock Exchange "unofficially" qualified for listing?

The appeal of the "19 Measures for Deepening Reform" (Opinions on the High-Quality Construction of the Beijing Stock Exchange) is becoming evident.

On September 27th, Guangzhou Jinghua Precision Optics Co., Ltd. (referred to as "Jinghua Optics") had its application for listing on the Innovation Level of the National Equities Exchange and Quotations (NEEQ) accepted after being delisted from the New Third Board.

According to the application documents, Jinghua Optics plans to submit an IPO application to the Beijing Stock Exchange within 18 months after listing.

It is worth mentioning that this is the first company to be relisted and explicitly state its intention to go public on the Beijing Stock Exchange after the implementation of the "19 Measures for Deepening Reform".

Jinghua Optics is mainly engaged in the manufacturing of precision optoelectronic instruments, automotive intelligent perception systems, and precision optical components. Its performance during the reporting period is quite impressive - with revenues of 1.221 billion yuan and 1.195 billion yuan in 2021 and 2022 respectively, and net profits attributable to shareholders of 63 million yuan and 92 million yuan during the same period.

Interestingly, the investors of Jinghua Optics did not explicitly include "listing on the Beijing Stock Exchange" as a qualified listing condition in the equity repurchase agreement, which means that the controlling shareholder, He Jian, still bears the obligation to repurchase shares.

Jinghua Optics, with its reputation as a "good student", is attracting a lot of attention as to whether it can successfully land on the Beijing Stock Exchange.

The "Wager" Dilemma of Outstanding Performers

On September 1st, the China Securities Regulatory Commission (CSRC) formulated and released the "Opinions on the High-Quality Construction of the Beijing Stock Exchange" (referred to as the "19 Measures for Deepening Reform"), with the plan to enhance the market size and activity of the Beijing Stock Exchange through 3 to 5 years of efforts.

Against this backdrop, the Beijing Stock Exchange also announced on the same day eight reform measures to optimize the execution standards for "continuous listing for 12 months" and the determination of the issuance floor price.

According to the interpretation by the Beijing Stock Exchange, "continuous listing for 12 months" refers to either continuous listing for 12 months in the previous listing or continuous listing for 12 months in the current listing.

This means that companies that have been delisted from the New Third Board can apply for relisting on the Innovation Level and directly apply to the Beijing Stock Exchange as long as they meet the requirement of continuous listing for 12 months before delisting.

As mentioned in a previous article by Xin Feng (ID: TradeWind01) titled "Accelerated Listing Review on the Beijing Stock Exchange: Reforms Benefit Delisted Companies, Shorter Queue Expected", delisted companies may return to the New Third Board and eventually become listed companies on the Beijing Stock Exchange.

Now, it can be seen that this reform has indeed facilitated the return of some delisted companies. On September 27th, Crystal Optics, which was listed on the New Third Board in 2015 and delisted in 2021, submitted an application for listing on the Innovation Level to the National Equities Exchange and Quotations (NEEQ), and stated its plan to apply for an IPO on the Beijing Stock Exchange within 18 months after listing.

"The company has a clear plan to issue and list on the Beijing Stock Exchange. The company has signed service agreements for issuing and listing with lead underwriters, accountants, lawyers, and other intermediaries, and is expected to submit the application documents for issuing and listing on the Beijing Stock Exchange within 18 months after listing," said Crystal Optics.

Crystal Optics has become the first company to delist and then apply for a second listing and have a clear plan for an IPO on the Beijing Stock Exchange after the 19th round of deep reforms.

In terms of performance, Crystal Optics can indeed be considered an outstanding performer.

In 2021 and 2022, Crystal Optics' revenue was 1.221 billion yuan and 1.195 billion yuan, respectively, with net profits attributable to shareholders of 63 million yuan and 92 million yuan during the same period.

Such profit levels have far exceeded the listing standards - one of which is "the net profit for the past two years is positive and the cumulative amount is not less than 8 million yuan, or the net profit for the past year is not less than 6 million yuan."

Compared with Beijing Gaowei Technology Co., Ltd. (referred to as "Gaowei Technology"), which passed the IPO review on the ChiNext board on September 27th this year, Crystal Optics is also not inferior. In 2021 and 2022, Gaowei Technology's net profit attributable to shareholders was 47 million yuan and 59 million yuan, respectively, both lower than Crystal Optics.

However, TradeWind01 noticed that some investors of Crystal Optics do not seem to include "listing on the Beijing Stock Exchange" in the scope of qualified listings, which may result in the actual controller He Jian still being burdened with the "share repurchase" put option.

From 2020 to 2021, He Jian signed put option agreements with a total of 8 investors, including Liu Ruichun, Feng Yusheng, and Guangzhou Shizuniao Investment Enterprise (Limited Partnership), stipulating that if Crystal Optics fails to submit a domestic IPO application before December 2023, these 8 investors have the right to require He Jian to repurchase the shares of Crystal Optics held by him.

During this period, due to Hu Ying transferring her equity to Wang Xiantao, He Jian's share repurchase commitment to Hu Ying became invalid.

In August 2023, the remaining 7 investors and He Jian signed a "Termination Agreement for Investment Documents," stipulating that since Crystal Optics plans to list domestically, the share repurchase clause is invalid from the beginning, and the terminated clause cannot be reinstated.

"In view of Crystal Optics' plan to make its initial public offering and list its shares in China for the first time, the Agreement shall be terminated from the date of its signing, and all clauses, including but not limited to the relevant share repurchase clauses, shall be invalid from the beginning, and the terminated clauses shall not be reinstated," the Agreement stated.

However, this termination does not seem to be complete.

According to the Agreement, the listing on the Beijing Stock Exchange is not explicitly included in the clause "making its initial public offering and listing its shares in China for the first time," so there is still uncertainty as to whether the repurchase clause has been completely terminated.

"Since the above termination agreement does not explicitly include the listing on the Beijing Stock Exchange in the clause 'making its initial public offering and listing its shares in China for the first time,' the share repurchase clauses agreed upon by He Jian, Liu Ruichun, Feng Yusheng, Xu Dongmei, Wan Qinying, Song Fei, Guangzhou Shizuniao Investment Enterprise (Limited Partnership), and Wang Xiantao have not been lifted yet. "Crystal Optics stated that it directly targets the consumer market.

Crystal Optics' business is divided into three main sectors: precision optoelectronic instruments, automotive intelligent perception systems, and precision optical components.

Specifically, precision optoelectronic instruments, which include astronomical telescopes, sports optics, and microscopes, are the main source of revenue for Crystal Optics.

In 2021 and 2022, the revenue from precision optoelectronic instruments was 922 million yuan and 777 million yuan, accounting for 75.53% and 65.07% of the total revenue, respectively.

However, compared to its peers, Crystal Optics' gross profit margin for precision optoelectronic instruments is not high, reaching only 36.48% in 2022. This is 5.61 and 7.51 percentage points lower than Yongxin Optics (603297.SH) and Macrody (300341.SZ), respectively.

The reason for this difference lies in the fact that Crystal Optics' precision optoelectronic products are mainly consumer-grade, while Yongxin Optics and Macrody's microscope products are mainly used in the fields of life sciences, industrial testing, and education, which allows them to enjoy higher profit margins.

"The company's precision optoelectronic instruments mainly include astronomical telescopes, sports optics, microscopes, and meteorological products, with a focus on consumer branding and channel construction," explained Crystal Optics. "Yongxin Optics and Macrody mainly produce and sell microscope products, which are mainly used in the fields of life sciences, industrial testing, and education, serving research institutions, well-known universities, hospitals, etc. They mainly rely on self-production and enjoy profits in this segment."

Currently, Bresser, Explore Scientific, and ALPEN are all brands of precision optoelectronic instruments under Crystal Optics.

From the situation of their Tmall flagship stores, Bresser's microscopes and telescopes mainly target children and middle and high school students. For example, one of their best-selling products is the "German Bresser Children's Handheld Microscope," advertised as a "scientific experiment toy for primary school students," with a price of about 104 yuan. ALPEN focuses on telescope products, with prices ranging from hundreds to thousands of yuan. The Science Exploration product line, which focuses on astronomical telescopes, is more high-end, with prices ranging from thousands to tens of thousands of yuan.

Among them, Bresser and ALPEN were acquired by Crystal Optics. In 2009 and 2018, Crystal Optics acquired the German brand Bresser with a history of more than 60 years and the American brand ALPEN with a history of more than 20 years.

Perhaps due to the influence of the brands themselves, Crystal Optics' sales expenses are not high, reaching only 92 million yuan and 110 million yuan in 2021 and 2022, accounting for only 7.52% and 9.19% of the total revenue, respectively.

Crystal Optics is not satisfied with only serving C-end customers. Since 2015, it has entered the new energy vehicle field.

Specifically, Crystal Optics mainly provides panoramic parking and assisted driving vision systems for GAC Group, Desay SV, and other companies in the automotive intelligent perception system sector." Currently, the revenue growth rate is quite impressive, reaching 100 million yuan and 222 million yuan in 2021 and 2022 respectively, with a growth rate of up to 122% during this period.

However, the gross profit margin of the automotive intelligent perception system is quite limited, only 4.35% in 2022, which is the lowest among the three major businesses of Jinghua Optics.

At the same time, against the backdrop of the price reduction trend in new energy vehicles, there is still a great deal of uncertainty as to whether the gross profit margin of Jinghua Optics' automotive intelligent perception system business can be further improved.

However, for Jinghua Optics, which is a "top performer" in terms of performance, these may not be issues.