After the opening of the lunar year of the tiger, on February 7 and 8, the share price of A-share coating enterprise Asia Cuanon Technology (Shanghai) Co.Ltd(603378) fell by 15.13%.
On February 8, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) announced that after the company’s self-examination and written consultation with the company’s controlling shareholders and actual controllers, as of the disclosure date of this announcement, it was confirmed that there were no major matters that should be disclosed but not disclosed.
Before the crash, the company issued four heavy announcements. On January 28, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) which released the performance and profit report in the half year and the third quarter of 2021 said that the company’s net profit attributable to the parent company in 2021 ranged from 438 million yuan to 580 million yuan, of which the individual impairment loss caused by real estate customers led by Evergrande amounted to 599 million yuan. Some investors in the stock bar questioned that Asia Cuanon Technology (Shanghai) Co.Ltd(603378) is suspected of “financial bathing” – making the financial deficit bigger in the annual report is actually concealing the net assets, which can be released for profit in the future.
The reporter of China Securities Journal noted that since 2020, the net cash flow generated by the company’s operating activities has decreased for a long time, and the net cash flow generated by financing activities has increased. The company mainly relies on financing to maintain capital turnover. Nevertheless, the company paid 80 million yuan of year-end bonus to nearly 5000 employees on January 28.
On February 8, the reporter of China Securities News called Wang Yongjun, the company’s director, executive vice president and Secretary of the board of directors to inquire about the above-mentioned relevant information. In view of the suspected “financial bath” of large amount accrual, Wang Yongjun said that the company had discussed this with accounting firms, and 80% of the accrual ratio was “relatively fair”. For the 80 million yuan year-end bonus, Wang Yongjun said that it was issued according to the performance standards, which was more than that in previous years. For the reduction of the company’s operating cash flow, Wang Yongjun said that “there is no cash flow shortage in the company”, and then ended the call on the grounds of “guests arrived” and asked the reporter to send text messages to ask questions. As of press time, Wang Yongjun did not reply to reporters’ SMS questions.
200 million yuan “strength certificate”
On January 28, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) announced a major lawsuit. The company listed Evergrande Real Estate Group Co., Ltd. and Shenzhen Evergrande Material Equipment Co., Ltd. as defendants. Statistics show that Evergrande materials is a wholly-owned subsidiary of Evergrande real estate
source: company announcement
According to the announcement, on January 15, 2021, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) signed a strategic cooperation framework agreement with Evergrande materials, which agreed that Evergrande materials intended to purchase exterior wall coatings from Asia Cuanon Technology (Shanghai) Co.Ltd(603378) between January 1, 2021 and December 31, 2023, with a total intention of RMB 700 million, and Asia Cuanon Technology (Shanghai) Co.Ltd(603378) paid Evergrande materials a strength certificate of RMB 200 million within three days after the signing of the agreement.
According to the contract, Evergrande materials will pay Asia Cuanon Technology (Shanghai) Co.Ltd(603378) customization fee, special fee and other additional fees every month according to the supply mode during the duration of the strength certificate. The contract also stipulates that Asia Cuanon Technology (Shanghai) Co.Ltd(603378) has the right to unilaterally terminate this agreement if Evergrande materials returns the strength certification fee overdue. In addition to returning the strength certification fee and paying additional fees such as customization fee and special fee, Evergrande materials shall also pay Asia Cuanon Technology (Shanghai) Co.Ltd(603378) liquidated damages for overdue payment at the interest rate of 0.05% per day based on the overdue amount. Evergrande real estate promises that if Evergrande materials fail to return the strength certificate as agreed in the contract, Evergrande real estate will be responsible for returning it.
On January 18, 2022, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) sued Evergrande materials and Evergrande real estate to the court. Asia Cuanon Technology (Shanghai) Co.Ltd(603378) said that in view of the current business difficulties of the defendant, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) requested the court to order the cancellation of the above agreement; Order the two defendants to jointly return 200 million yuan of strength proof to Asia Cuanon Technology (Shanghai) Co.Ltd(603378) ; The two defendants were ordered to pay customization fees, special freight and liquidated damages to Asia Cuanon Technology (Shanghai) Co.Ltd(603378) . The amount calculated to January 17, 2022 was about 438 million yuan.
According to the announcement, the Guangzhou intermediate people’s court has transferred the case to the mediation stage before the Asia Cuanon Technology (Shanghai) Co.Ltd(603378) inquiry on 26 January 2022.
80% of credit impairment losses
On January 28, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) also announced that it was expected that the company’s net profit attributable to the parent company in 2021 would range from 438 million yuan to 580 million yuan. Three months ago, the third quarterly report of 2021 released by the company showed that the net profit attributable to the parent company in the first three quarters of 2021 was 131 million yuan.
As for the main reasons for the performance loss in 2021, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) announced that some real estate customers of the company had credit risk expansion and obvious signs of impairment. According to relevant regulations, the 24th Meeting of the Fourth Board of directors of the company decided to withdraw 598845100 yuan of impairment loss for corresponding financial assets (including 44.3546 million yuan of impairment loss that had been withdrawn previously), It has a significant impact on the profits in the reporting period. Customers involved in this single provision mainly include Evergrande enterprises, China Fortune Land Development Co.Ltd(600340) enterprises, Blu ray enterprises, R & F enterprises, etc.
According to the announcement on withdrawing credit impairment loss issued on Asia Cuanon Technology (Shanghai) Co.Ltd(603378) January 28, the company’s real estate customers currently have a total of about 749 million yuan of accounts receivable balance, notes receivable, revenue performance bond and house purchase debt repayment without online signing, including 631 million yuan involving China Evergrande, accounting for about 85.35%
source: company announcement
It is worth noting that Asia Cuanon Technology (Shanghai) Co.Ltd(603378) the provision amount of credit impairment loss reached 599 million yuan, accounting for 80% of the total receivables of the above real estate customers. In this regard, some investors in the stock bar questioned that this was a “financial bath”.
According to Gordon finance, the so-called “financial bath” means that the company makes the deficit bigger in the annual report. In fact, it conceals the net assets and can be released for profit in the future.
According to the 2021 restricted stock incentive plan previously released by Asia Cuanon Technology (Shanghai) Co.Ltd(603378) , the company granted about 2322400 shares to Wang Xin, chief financial officer, and more than 300 core managers and core technical (business) personnel in 2021. The assessment year for the lifting of the sales restriction of the incentive plan is three fiscal years from 2021 to 2023, and the assessment is conducted once in each fiscal year. According to the assessment requirements, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) before 2022 and 2023, the net profit attributable to shareholders of listed companies after deducting non recurring profits and losses should reach 517 million yuan and 702 million yuan respectively
source: company announcement
tight operating cash flow
The reporter of China Securities Journal found that the company’s operating cash flow was negative for a long time, mainly relying on financing cash flow to maintain capital turnover.
In the first quarter of 2020, the net cash flow from the company’s operating activities decreased by 470 million yuan and the net cash flow from financing activities increased by 164 million yuan; In the first half of 2020, the net cash flow from the company’s operating activities decreased by 214 million yuan and the net cash flow from financing activities increased by 257 million yuan; In the first three quarters of 2020, the net cash flow from the company’s operating activities decreased by 460 million yuan, and the net cash flow from financing activities increased by 326 million yuan.
In 2020, the data were reversed. The net cash flow from the company’s operating activities increased by 253 million yuan from the decrease in the first three quarters, and the net cash flow from financing activities increased by 590 million yuan.
After a sudden improvement in the fourth quarter of 2020, in 2021, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) net cash flow from operating activities decreased again. In the first quarter of 2021, the net cash flow from the company’s operating activities decreased by 1.012 billion yuan, and the net cash flow from financing activities increased by 379 million yuan; In the first half of 2021, the net cash flow from the company’s operating activities decreased by 678 million yuan and the net cash flow from financing activities increased by 519 million yuan; In the first three quarters of 2021, the net cash flow from the company’s operating activities decreased by 110 million yuan, and the net cash flow from financing activities increased by 1.22 billion yuan.
Over the past two years, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) has continuously launched fixed growth plan financing. In 2020, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) raised about 400 million yuan from Li Jinzhong, the actual controller, to supplement working capital or repay bank debts after deducting issuance expenses. In November 2021, Asia Cuanon Technology (Shanghai) Co.Ltd(603378) announced the fixed increase plan, which shows that the company plans to raise no more than 600 million yuan from Li Jinzhong, the actual controller of the company, and will be used to supplement working capital or repay bank debts after deducting issuance expenses. As of September 30, 2021, Li Jinzhong controlled 58.01% of the equity of the company through direct and indirect shareholding, was the actual controller of the company, and served as the chairman and general manager of the company.
The executive secretary of the group agreed to pay the annual bonus of nearly 5000 employees of the group on August 15, although the executive secretary of the group agreed to pay the final bonus of nearly 603 employees of the group. According to public reports, the total amount of year-end bonus reached 80 million yuan. During the telephone interview with Wang Yongjun by a reporter of China Securities News, he himself had no objection to this amount
source: official account of WeChat Asia Cuanon Technology (Shanghai) Co.Ltd(603378) public.
Asia Cuanon Technology (Shanghai) Co.Ltd(603378) the article also said that in 2021, the prices of raw materials in the upstream rose sharply, and the downstream real estate market faced difficulties. Superimposed with intermittent outbreaks, most enterprises in the industry faced great challenges.
