The actual controller was placed on file for investigation by the supervision organ, causing continuous vibration, and the share price of Huabao Flavours & Fragrances Co.Ltd(300741) (300741. SZ) plummeted for two consecutive days.
Following the 20% limit on January 24, Huabao Flavours & Fragrances Co.Ltd(300741) fell 18.56% in the three minutes of opening on January 25. As of the closing, the share price was 31.19 yuan / share, down 11.19%. The market value of the company evaporated 7.7 billion yuan in two days.
On the morning of January 24, the A-share listed company Huabao Flavours & Fragrances Co.Ltd(300741) suddenly announced that the company had recently received the notice of filing a case from Leiyang Supervision Commission, which decided to file an investigation into the violation of the law by Zhu linyao, the actual controller of the company. On the same day, Huabao International (00336. HK), a Hong Kong stock company, also announced that Zhu linyao, the chairman, CEO, executive director and controlling shareholder of the company, was under investigation on suspicion of violating the law.
Zhu linyao has two listed companies. For this emergency, Huabao Flavours & Fragrances Co.Ltd(300741) said in the announcement that Zhu linyao did not hold any position in the company and did not participate in the operation and management of the company. The above matters will not have a significant impact on the company’s daily production and operation activities, and the company will continue to pay attention to the progress of the above matters. Huabao international also said that it did not know any details about the illegal matters involved in Zhu linyao’s investigation. The company will make further announcements to inform the shareholders and the public of the progress of the company.
Although both companies said that the current production and operation were normal, the news immediately triggered a strong reaction in the market. On January 24, Huabao Flavours & Fragrances Co.Ltd(300741) closed down by 20% to 35.12 yuan / share, and its market value shrank to 21.63 billion yuan; Warburg international collapsed immediately at the opening. As of the closing of the day, it plummeted 66.5% to HK $4.86 per share. Its market value shrank to about HK $15.7 billion and evaporated HK $31.1 billion in a single day.
The Shenzhen Stock Exchange issued a concern letter to Huabao Flavours & Fragrances Co.Ltd(300741) after hours on the same day, requiring the company to fully evaluate the impact of Zhu linyao’s filing and investigation on the stability of the company’s control, finance and production and operation management. At the same time, it is required to explain Zhu linyao’s personal debt held by the company and the pledge of shares or other rights directly or indirectly held by the company, including the amount of debt, whether it involves corporate responsibility, whether it has been sued, the number of Pledged Shares, the amount of pledged financing, whether there is a risk of pledge closing positions, whether there are other equity restrictions, etc.
The investigation of Zhu linyao has attracted great attention, which is related to his performance in the capital market in recent years. According to public information, Zhu linyao was born in Sichuan in 1970 and is known as “China’s most mysterious female tycoon” because of sitting on two listed companies. At present, Zhu linyao holds about 71% of Huabao international shares and more than 50% of Huabao Flavours & Fragrances Co.Ltd(300741) shares. He has absolute control over the two listed companies.
It is understood that Warburg international has four main flavors, fragrances, raw materials, tobacco ingredients and condiments. Huabao Flavours & Fragrances Co.Ltd(300741) is the main body of A shares listed after its spin off, and is mainly engaged in the flavor business section, and has the title of “China tobacco flavor king”.
2021 semi annual report shows that in the first half of the year, sales of food flavors accounted for about 88% of total Huabao Flavours & Fragrances Co.Ltd(300741) revenue. The business includes two fields of tobacco and food, among which the main customers of tobacco flavor are provincial tobacco industry companies in 19 provinces such as Yunnan, Shanghai, Hunan, Zhejiang, Guangdong and Guizhou.
The announcement did not disclose the specific reasons for the fact that the actual controller was filed for investigation by the local supervision organ in Hunan. It is worth noting that the executives of Huabao Flavours & Fragrances Co.Ltd(300741) two major customers were investigated for violation of discipline and law. According to the Hunan Provincial Commission for Discipline Inspection and supervision, in October 2020, Lu Ping, secretary and general manager of Hunan Zhongyan Party group, was suspected of serious violation of discipline and law and was subject to disciplinary review and supervision investigation; In August 2021, Liu Jianfu, member of Hunan tobacco Party group and deputy general manager, was suspected of serious violation of discipline and law and voluntarily surrendered. In addition, on January 24, 2022, the website of the State Supervision Commission of the Central Commission for Discipline Inspection announced that Zhou Tao, deputy secretary and general manager of the Party group of Yunnan Zhongyan, was suspected of serious violation of discipline and law, voluntarily surrendered and is currently under investigation.
The above two companies are closely related to Huabao Flavours & Fragrances Co.Ltd(300741) . According to the prospectus previously disclosed by Huabao Flavours & Fragrances Co.Ltd(300741) , Yunnan China tobacco and Hunan China Tobacco ranked the first and second largest customers of the company from 2015 to 2017. In 2017, the two companies contributed about 28% and 13% of the revenue to Huabao Flavours & Fragrances Co.Ltd(300741) respectively.
From the perspective of fundamentals, Huabao Flavours & Fragrances Co.Ltd(300741) performance has continued to decline in recent two years. In 2020, the company achieved an operating revenue of 2.094 billion yuan, a year-on-year decrease of 4.16%; The net profit attributable to the parent company was 1.18 billion yuan, a year-on-year decrease of 4.45%. In the first three quarters of 2021, the company realized an operating revenue of about 1.364 billion yuan, a year-on-year decrease of 5.49%; The net profit attributable to the parent company was about 754 million yuan, a year-on-year decrease of 7.84%.
Since November 30, 2021, the share price of Huabao Flavours & Fragrances Co.Ltd(300741) has been declining all the way. As of January 25, 2022, the company’s share price has decreased by about 58.8%.
