On March 1, Jiangsu Yueda Investment Co.Ltd(600805) issued the announcement on the resolution of the 5th meeting of the 11th board of directors, in which the proposal on abandoning participation in the capital increase and related party transactions of Dongfeng Yueda Kia Automobile Co., Ltd. attracted more attention from the market. The announcement shows that due to business needs, Dongfeng Yueda Kia Automobile Co., Ltd. (hereinafter referred to as “Dyk company”) with a 25% stake in the company plans to implement a capital increase of US $600 million.
Jiangsu Yueda Investment Co.Ltd(600805) said in the announcement that it planned to give up its participation in the capital increase of Dyk company, and the abandoned part was funded by Jiangsu Yueda Automobile Group Co., Ltd. Since Yueda automobile group is an affiliated legal person of the company, the company gives up participating in the capital increase of Dyk company this time, which constitutes a connected transaction. After evaluation, the 100% equity value of Dyk company is 771 million yuan. The capital increase scale of Dyk company is 600 million US dollars. After the capital increase, the proportion of equity held by the company in Dyk company is reduced from 25% to 4.2%. After the capital increase, the scope of the company’s consolidated statements has not changed, which will not have an adverse impact on the company’s financial status, operating results, future main business and sustainable operation ability.
In combination with the performance forecast released in Jiangsu Yueda Investment Co.Ltd(600805) January, the company’s waiver of Dyk’s capital increase right should be based on two considerations. On the one hand, Dyk company continued to suffer losses in 2021 due to factors such as the decline of production and sales volume due to lack of core and the rise in the price of precious metals, which is expected to affect the company’s net profit attributable to the parent company by about -531 million yuan. In terms of performance, Dyk’s continuous loss has a great impact on Jiangsu Yueda Investment Co.Ltd(600805) ‘s performance. The company’s abandonment of the right to increase capital this time may be a wise move to stabilize the operating cash flow.
On the other hand, the industry pressure should not be underestimated. According to the statistics of the passenger car Federation, by the end of 2021, the national passenger car production capacity had totaled 40.89 million, and the capacity utilization rate was 52.47%. China’s passenger car industry is in the range of serious overcapacity. Among the 86 enterprises counted by the association, 64 enterprises have annual sales of less than 200000, and the capacity utilization rate is less than 50%. 29 enterprises have sales of less than 10000, and the capacity utilization rate is only 2.02%. At the same time, with the maturity of automobile consumption, the market head effect is becoming more and more obvious, and the competition in the automobile market is bound to gradually intensify.
It is worth noting that Jiangsu Yueda Investment Co.Ltd(600805) in this proposal, said that the automobile manufacturing business will no longer be an important part of the company’s business structure. In the future, the company will actively look for new investment projects to improve the company’s profitability. However, in the semi annual report of 2021, Jiangsu Yueda Investment Co.Ltd(600805) said that the company is a comprehensive investment company. During the reporting period, the company’s main business is “automobile related and intelligent manufacturing”, which can be divided into five aspects, including passenger car manufacturing, sales and supporting services, special vehicles, textiles, intelligent agricultural clothing and other businesses. The Jiangsu Yueda Investment Co.Ltd(600805) abandonment of Dyk’s right to increase capital this time is a signal that the company is actively exploring the road of transformation. (Wu Wenfeng)
