The aftermath of Ninestar Corporation's acquisition is showing.

Investor's Network - Xie Yingjie.

With the title of "semiconductors + high-end printing", Ninestar Corporation (referred to as "Ninestar", 002180.SZ) acquired a New York Stock Exchange-listed company through a series of mergers and stood out in fierce competition. However, with the substantial impairment of goodwill, the company gradually bid farewell to its high times.

Due to rumors of financial fraud, Ninestar Corporation has once again been pushed into the forefront of public opinion. On June 19, a person with the name "Xiao Hanshan (TF Pharmacy)" posted on his WeChat Moments: Ninestar Corporation most likely committed financial fraud for many years. Feng Bing, the Assistant President and Capital Market Director of Ninestar Corporation, quickly responded and forwarded the screenshot of the post, stating: "It has been reported to the authorities".

The impairment of goodwill caused a loss in net income.

With the title of "one of the five largest laser printer manufacturers in the world", Ninestar Corporation was once favored by various funds. According to the financial report for the first quarter of 2024, Hong Kong Securities Clearing Company, CG Fund, China Europe Fund, E Fund, Social Security Fund, Pension Fund and others, representing Northbound Capital, are all among the top ten circulating shareholders of the company.

As a company covering the entire printing industry chain, Ninestar Corporation entered the integrated circuit field quite early. It owns Jihai Microelectronics Co., Ltd., which has products in printer control chips and supplies chips, and has developed a printer control SOC chip based on domestic CPU.

From 2019 to 2022, the company's revenue increased from 23.3 billion yuan to 25.855 billion yuan; net income attributable to shareholders increased from 744 million yuan to 1.863 billion yuan.

Afterwards, the company's fate took a turn for the worse. In 2023, the company's operating income was 24.062 billion yuan, a year-on-year decrease of 6.94%, and the net income attributable to shareholders was a loss of 6.185 billion yuan, a year-on-year turn from a profit to a loss.

Ninestar Corporation's previously impressive revenue performance was mostly due to mergers and acquisitions.

Since its listing in 2014, Ninestar Corporation has acquired many companies such as SCC, Hangzhou Shootian, Shengdie Assets, Zhuhai Xinwei, and Zhuhai Tuojia. In 2016, Ninestar Corporation initiated a hundred billion cross-border merger and acquisition, incorporating American printer giant Lexmark International, and successfully entered the ranks of global printer leaders.

At that time, Ninestar Corporation, with total assets of only 3.1 billion yuan, leveraged more than six times its own size to acquire Lexmark International. In addition to its own funds of 700 million yuan, the company's main sources of funding were shareholder loans and bank loans. According to the original plan, the company would smoothly enter the high-end printing field and open up domestic and foreign markets. However, due to factors such as exchange losses, Ninestar Corporation's original strategic progress was slow.

The annual report shows that in 2023, Ninestar Corporation's overall printing business shipments ranked fourth in the global laser printer market share, but the huge goodwill buried by mergers and acquisitions was triggered altogether.

In 2023, Lexmark International suffered huge losses, with revenue of 14.655 billion yuan, a year-on-year decrease of 7.19%, and net income suffering a huge loss of 8.944 billion yuan, a year-on-year decrease of 6481.16%.

Ninestar Corporation made an impairment loss of 7.884 billion yuan on Lexmark International's goodwill, accounting for 96.63% of the total goodwill impairment loss, making the company's goodwill impairment loss ranking first on the A-share market in 2023.

The company denied financial fraud.

In 2023, Ninestar Corporation's three major businesses - printing, general consumables, and chips - all experienced a decline in revenue performance, and the overall revenue was 24.062 billion yuan, a year-on-year decline of 6.94%, while the net income attributable to shareholders suffered a huge loss of 6.185 billion yuan, ranking tenth on the A-share market in terms of loss.

Except for chips, the printing business and consumables declined in both production and sales in 2023. Among them, the production and sales volume of the largest printing business declined by 23.46% and 13.68% respectively year-on-year, higher than the decline in domestic printer shipments during the same period (12%).

Regarding the downturn in the printer industry in 2023, Ninestar Corporation explained in the annual report that in terms of consumer markets, first, due to the impact of the market demand explosion in the fourth quarter of 2022, some demand was met in advance, resulting in an overall high level of manufacturer inventory, leading to a decline in printer shipments after a brief stability in 2023. On the other hand, as students returned to school and employees returned to work, most of the demand for home printing returned to schools and office printing, causing a certain decline in the market demand for consumable printers in the short term. In terms of commercial markets, in the second half of 2023, due to factors such as consumer downgrading and extended procurement cycles, the demand for procurement showed a significant decline.

What is even more worrying for investors is the issue of goodwill, which has always been the "sword of Damocles" hanging over Ninestar Corporation's head.

Despite the huge impairment loss on goodwill in 2023, the book value of goodwill generated by the acquisition of Lim International remained at 4.783 billion yuan at the end of the period, and the subsequent impairment risk still needs to be vigilant. In terms of product structure, the operating income of 10-30 billion yuan products is 401/1288/60 million yuan respectively.

As the controversy over the huge impairment of goodwill has sparked, a screenshot of a circle of friends posted by a user named Xiao Hanshan (Tianfeng Medicine) has recently been circulating on multiple platforms, in which the user claims that Ninestar Corporation has probably been committing financial fraud for many years.

Investor.com contacted Ninestar's investor relations department as an investor, and the person said that there is no financial fraud, and the screenshot is fake, which is a rumor.

There are differences of opinion among research institutions on the company's future development prospects. Some brokerages are pessimistic about their judgment, while others believe that Ninestar's core competitiveness lies in its rich industry experience. Despite the problems of high goodwill and declining performance, the company will continue to enjoy the growth dividends of the industry expansion in the future.

According to the latest research report by Xinda Securities, as one of the high-quality targets in the domestic printer leader, the company is capable of closing the loop of technology, patent, and production in the laser printer field in A shares. In 2023, the company has provisioned asset impairment losses of 9.383 billion yuan and is currently operating lightly. With the gradual improvement of downstream demand, the Xinchuang market is also expected to usher in a warming trend. The company's full-year performance is expected to achieve steady growth.

The stock price was 'halved' and the buyback plan was scrapped.

In the first quarter of 2024, Ninestar's revenue continued to decline, but net profit attributable to shareholders improved. According to the financial report, in the first quarter of 2024, Ninestar's revenue was 6.292 billion yuan, a year-on-year decrease of 3.49%, and net profit attributable to shareholders was 278 million yuan, a year-on-year increase of 31.34%.

Some key financial indicators are not optimistic. Wind data shows that the company's comprehensive gross profit margin was 34.12%, 32.61% and 31.66% from 2021 to 2023, and its profitability showed a downward trend.

From 2021 to 2023, Ninestar's accounts receivable were 3.028 billion yuan, 3.73 billion yuan, and 3.806 billion yuan. As of the end of the first quarter of this year, they increased year by year; the inventory indicators are also high, with 4,068 million yuan, 5,912 million yuan, 5,871 million yuan, and 5,685 million yuan in the recent three years.

In the secondary market, on November 7, 2022, Ninestar's stock price hit a historical high of 58.87 yuan/share during the day, and then showed a downward trend. It fell to a new low of 16.65 yuan/share on February 5 this year, with a plunge of 70% in the meantime, and then rebounded. As of June 21st, Ninestar's stock price closed at 26 yuan/share (before ex-right), with a total market value of 36.8 billion yuan.

The company is taking a series of measures to protect the shareholders. At the end of 2023, Ninestar announced that it plans to use its own funds to repurchase stocks through centralized auction trading. The repurchase price is not more than 40.42 yuan per share, and the total amount of repurchase funds is 200 million yuan to 400 million yuan. The purchased shares will be used to implement the company's employee shareholding plan or stock-based incentive.

It is worth mentioning that in the last round of repurchase completed in November 2023, Ninestar's repurchase price was still not less than 61 yuan per share, and the actual trading price was as high as 39.06 yuan/share and as low as 23.4 yuan/share. A total of 5.534 million shares were repurchased, with a total cost of 185 million yuan.

Ninestar recently announced that it will repurchase 5.3 million shares of the company's stock from January 31, 2024 to April 30, 2024, accounting for 0.37% of the total share capital, with a transaction amount of 102 million yuan. (Produced by Thought Finance)