Recently, Jiangsu Zhongli Group Co.Ltd(002309) (002309) disclosed the performance forecast for 2021. It is estimated that the net profit loss will be 3.2 billion yuan to 4 billion yuan. Jiangsu Zhongli Group Co.Ltd(002309) it is mentioned in the announcement that the company’s accrued loss is expected to be about 2.2 billion yuan, mainly involving the impairment of accounts receivable, prepayments and inventory of private network communication business; For the guarantee provided by the subsidiary Zhongli electronic financing, the estimated liabilities are accrued; Losses are accrued for the long-term equity investment of the subsidiary Zhongli electronics.
On one side there was thunder, on the other side there was good news. Since April 2021, Jiangsu Zhongli Group Co.Ltd(002309) has successively issued announcements on the signing of supply and procurement contracts by wholly-owned subsidiaries and subsidiaries. Facing the company’s “bleak” current situation and “beautiful” future, investors choose to bet on the latter. Since April 2021, Jiangsu Zhongli Group Co.Ltd(002309) share price has fluctuated upward, with an increase of 53.78%. Not only that, the next day after stepping on thunder, the company’s share price opened higher and went higher, closing up 5.76% on the same day. It was not affected by negative news, but also became a “little red in the green cluster” under the general poor performance of the market.
Despite the awesome two market, Jiangsu Zhongli Group Co.Ltd(002309) still has many problems at the moment: the level of profit has continued to decline, the short-term debt pressure has increased dramatically, and the restructuring of fund-raising decisions has been a little trifling matter. When all sorts of problems are in suspense, is the expectation that PV business will be good enough to pull Jiangsu Zhongli Group Co.Ltd(002309) out of the mire for two consecutive years?
unexpected loss reduction due to equity transfer of subsidiaries
Statistics show that Zhongli electronics, established in 2009, is mainly engaged in the R & D, production and sales of information and communication technology equipment. In 2016, Jiangsu Zhongli Group Co.Ltd(002309) became the largest shareholder of Zhongli electronics with a shareholding ratio of 50.86% through increased shareholding, and included Zhongli electronics in the scope of consolidated statements.
The revenue of special communication equipment industry involved in Zhongli electronics has become an important part of Jiangsu Zhongli Group Co.Ltd(002309) financial report in the two years after consolidation, and the contribution of this business has increased from more than 1 billion yuan to nearly 2 billion yuan. Seeing the rising momentum of Zhongli electronics, in 2018, Jiangsu Zhongli Group Co.Ltd(002309) struck while the iron was hot and planned to acquire the remaining shares of Zhongli electronics through fixed increase fund-raising.
However, an announcement on September 5, 2019 announced that the fund-raising failed – Jiangsu Zhongli Group Co.Ltd(002309) ‘s application for fixed increase failed to pass the examination of the development and Examination Committee of the CSRC.
After the fixed increase was rejected, Jiangsu Zhongli Group Co.Ltd(002309) then began to transfer part of the equity of Zhongli electronics. On December 6, 2019, Jiangsu Zhongli Group Co.Ltd(002309) announced that it planned to transfer 21.76% and 10.1% equity of Zhongli electronics to Suzhou Shajiabang Tourism Development Co., Ltd. (hereinafter referred to as “Shajiabang tourism”) and Jiangsu Jiangnan commerce and Trade Group Co., Ltd.
It is worth mentioning that Shajiabang tourism, one of the transferee of this equity transfer, is the second largest shareholder in the first quarterly report and semi annual report of Jiangsu Zhongli Group Co.Ltd(002309) 2021 with a shareholding ratio of 5.61%. However, with a series of reduction actions since November 2021, Shajiabang tourism also withdrew from the position of the second largest shareholder while its shareholding ratio decreased to less than 5%.
After the equity transfer, Zhongli electronics became a joint-stock company of Jiangsu Zhongli Group Co.Ltd(002309) , and the revenue data of the special communication equipment industry was also fixed in 2019. This “high-quality asset” suffered from “breaking away”, which seemed quite regrettable at that time. However, as Zhongli electronics fell into the vortex of private network communication business, the impact on Jiangsu Zhongli Group Co.Ltd(002309) whose shareholding ratio fell again and again was greatly reduced.
the sum of two years’ losses exceeds 6 billion yuan
Put aside the unexpected factor of stepping on thunder, Jiangsu Zhongli Group Co.Ltd(002309) the poor performance in recent years is obvious to all. Even if the photovoltaic industry has ushered in new development opportunities after 2020, the deeply cultivated Jiangsu Zhongli Group Co.Ltd(002309) still has not got rid of the fate of loss. By the end of September 2021, Jiangsu Zhongli Group Co.Ltd(002309) on the premise that the revenue had increased by 31.92% year-on-year, the loss had further expanded to RMB 1.481 billion year-on-year, and the situation of increasing revenue without increasing profit had occurred for two consecutive quarters.
In the 2021 annual performance loss announcement on January 18, in addition to the provision of RMB 2.2 billion related to the private network communication business, another general reason for the loss is the poor performance of the photovoltaic business – the business is expected to lose about RMB 1.1 billion, of which the operating loss caused by the failure to fully release the production capacity due to the sharp rise of main raw materials and sea freight is about RMB 650 million.
If it is true as stated in the performance forecast, this will be Jiangsu Zhongli Group Co.Ltd(002309) a huge loss of more than 2 billion yuan for two consecutive years, and the company has also become one of the few listed companies in the photovoltaic industry with negative deduction of non net profit for four consecutive years. So far, all the profits of Jiangsu Zhongli Group Co.Ltd(002309) over the past ten years have been erased.
Coincidentally, Jiangsu Zhongli Group Co.Ltd(002309) was able to enter the photovoltaic industry through the acquisition of 51% equity of Suzhou Tenghui Photovoltaic Technology Co., Ltd. (hereinafter referred to as Suzhou Tenghui) ten years ago. Only from the profit data, Jiangsu Zhongli Group Co.Ltd(002309) has proved what a decade is like an afterlife.
In addition to the increase in losses, adverse factors such as the slowdown in R & D investment, the increase in short-term debt repayment pressure and the receipt of warning letters also hit.
In terms of R & D expenditure, from 2018 to 2020, Jiangsu Zhongli Group Co.Ltd(002309) decreased from 525 million yuan to 284 million yuan. The company explained that it was affected by the epidemic. By the end of September 2021, the R & D expenditure data had reached 276 million yuan, with a year-on-year increase of more than 30%, but this was also based on the low base in the same period.
The monetary capital data of Jiangsu Zhongli Group Co.Ltd(002309) has been maintained at a good level. In the past five years, it was only less than 3 billion yuan in 2018. However, by the end of September 2021, the data had dropped to around 2.4 billion yuan again. In addition, the company’s current ratio showed a rapid decline after 2014. In the third quarter of 2021, the data has decreased from 1.59 to 0.92, and the company’s short-term debt repayment pressure has increased rapidly.
Bad news keeps coming. On January 13 this year, Jiangsu Zhongli Group Co.Ltd(002309) issued an announcement on receiving a warning letter from Jiangsu securities regulatory bureau. According to the announcement, Jiangsu Zhongli Group Co.Ltd(002309) did not disclose the relevant information in time after receiving the execution notice that the shares held by Jiangsu Zhongli Group Co.Ltd(002309) controlling shareholder, chairman and legal representative were frozen by the court; Wang Weifeng, the acting in concert of the controlling shareholder and the then general manager of the company, did not timely inform Jiangsu Zhongli Group Co.Ltd(002309) for pre disclosure when he learned that his shares might be passively reduced.
why do mergers and acquisitions often “cancel orders”?
According to the annual report data, Jiangsu Zhongli Group Co.Ltd(002309) almost all of the photovoltaic industry revenue comes from Suzhou Tenghui. There is nothing wrong with focusing on the main business, but Jiangsu Zhongli Group Co.Ltd(002309) obviously wants to get rid of such constraints. The company’s initial investment in Zhongli Electronics was just going to break the situation, but the result was sad.
Looking back at Jiangsu Zhongli Group Co.Ltd(002309) the fund-raising plans and M & A plans in recent years, it seems that “chaos” can be described.
On March 10, 2020, Jiangsu Zhongli Group Co.Ltd(002309) launched the private placement plan and planned to raise 1.575 billion yuan for the new production project of 1GW high-efficiency heterojunction battery modules and the technical transformation project of 2.1gw high-efficiency TOPCON batteries and modules.
However, the fixed increase plan was rejected internally. On December 25, 2020, Jiangsu Zhongli Group Co.Ltd(002309) announced that due to the large breakthrough and progress in the mass production and conversion efficiency of TOPCON battery and heterojunction battery involved in the two technical routes of the raised investment project, after discussion by the board of directors, the company decided to terminate the refinancing scheme and apply to China Securities Regulatory Commission to withdraw the refinancing related application documents.
This is not the first time that Jiangsu Zhongli Group Co.Ltd(002309) staged “self denial”. A vigorous asset restructuring plan of the company in 2018 also “ended without illness”.
From February 2018, Jiangsu Zhongli Group Co.Ltd(002309) began to plan to acquire the equity of China Shipbuilding Industry Group Power Co.Ltd(600482) battery head enterprise Shenzhen bike Power Battery Co., Ltd. (hereinafter referred to as “bike power”) by issuing shares and paying cash, and the transaction price may reach 10 billion yuan.
Unfortunately, after nearly a year of waiting, this plan was declared broken. On January 10, 2019, Jiangsu Zhongli Group Co.Ltd(002309) announced that in view of the macro-economic environmental factors such as sharp fluctuations in the secondary market and deleveraging during the planning of major asset restructuring, combined with the actual situation of the target company and the company’s future development plan, the company decided to terminate the planning of this major asset reorganization. After the failure of the M & a vision, Jiangsu Zhongli Group Co.Ltd(002309) share price fell all the way, with the maximum pullback rate of nearly 70%.
In November 2021, the listed company Anhui Xinli Finance Co.Ltd(600318) threw out the restructuring plan, with the same goal of BIC power – it plans to set up the main financial industry and put in 75.62% equity of BIC power, hoping to become a new energy company. Subsequently, the share price of Anhui Xinli Finance Co.Ltd(600318) doubled in 18 trading days.
I don’t know how Jiangsu Zhongli Group Co.Ltd(002309) feels when comparing the two phases. After repeated self denial, Jiangsu Zhongli Group Co.Ltd(002309) caused the company to sink deeper and deeper in the performance loss.
