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On July 15, Shen Da Co., Ltd. issued an announcement on unusual stock trading movements, stating that the company's current operations are normal, the internal and external operating environment has not undergone major changes, and the company currently has no major events that affect abnormal changes in stock trading prices.

For Shen Da Co., Ltd., which achieved a 10CM daily limit from the 12th to the 16th, compared with the previous large-scale expansion and mergers and acquisitions, "one step at a time" seems to have become the key to the current development of the company. This old state-owned enterprise finally regained the label of "stable" and slowly entered its own middle age.

In addition, its disclosed performance for the first half of 2024, with a net profit of 45 million to 67.5 million yuan, an increase of 1.33 to 1.49 times, seems to indirectly confirm this point.

Overseas acquisition projects either fail or suffer losses

As a state-owned enterprise, Shen Da Co., Ltd. was established in 1986 and listed on the Shanghai Stock Exchange on January 7, 1993. Its core industries cover automotive textile interiors, new textile materials and import and export trade.

"Before 2017, the company was doing okay overall, its business was passable, and its balance sheet was healthy." A shareholder who has been following Shen Da Holdings for many years lamented that from the acquisition of overseas companies, to the difficulties in overseas integration, to the epidemic, losses have become the norm for the company.

By observing the growth experience of Shen Da Co., Ltd., it is not difficult to find that its net profit attributable to shareholders of the parent company has been decreasing year by year since 2016. It reached its lowest point in 2020, with a loss of 808.7 billion yuan, a significant year-on-year decrease of 1331.76%. It is indeed a big fall.

Public information shows that in 2015, Shanghai Shen Da Import and Export Co., Ltd., a wholly-owned subsidiary of Shen Da Holdings, indirectly acquired 100% of the shares of PFI, an American company whose main business is bedding, home textiles, heating products and handmade yarns, by increasing the capital of its overseas subsidiary CROSSRIVER, LLC (hereinafter referred to as "CR"). The project was completed in November 2015 and the acquisition price was US$31.7108 million, equivalent to RMB 203 million.

Shen Da originally wanted to expand its business through overseas acquisitions, but due to fate, the acquisition ended in bankruptcy. When Shen Da acquired the company in 2015, it stated in an announcement that "after the acquisition is completed, it is expected to increase sales revenue by 45 million to 68 million US dollars per year and increase total profits by 5 million to 8.6 million US dollars per year."

But in fact, PFI's net profit has never exceeded 10 million yuan in a single year. Data shows that in 2016, PFI achieved operating income of 230 million yuan and a net profit of 9.28 million yuan. In 2019, the company has turned from profit to loss and suffered a full-year loss of more than 40 million yuan.

So far, Shen Da Holdings’ overseas acquisition journey has not yet been completed.

In 2017, the company acquired 70% of the shares of Auria, a subsidiary of the automotive parts group IAC. The incorporation of IAC effectively strengthened the advantages of Shen Da's automotive interior business segment and significantly increased its business. However, according to Shen Da's 2023 financial report data, Auria and its affiliated companies had a revenue of approximately 6 billion yuan and a total profit of -540 million yuan, still in a loss-making state.

Take the essence and discard the dross

The road to overseas acquisitions has been bumpy, but fortunately the company's overall business direction has not made any major mistakes.

During the period when PFI continued to suffer losses, in 2019, Shen Da Co., Ltd. transferred 100% of the equity of Shanghai Sixth Cotton Textile Factory Co., Ltd. and 100% of the equity of Shanghai Seventh Cotton Spinning Factory Co., Ltd.; in May 2020, Shen Da Co., Ltd. completed the transfer of 100% of the equity of Shanghai Seventh Cotton Spinning Factory Co., Ltd. for a transaction price of 340 million yuan; and transferred 100% of the equity of Shanghai Second Printing and Dyeing Factory Co., Ltd., with the equity valuation of the factory being approximately 500 million yuan.

It can be seen that after the failure of PFI, Shen Da started to divest its textile related businesses. Its affiliated automotive interior decoration industry and import and export trade industry have shown positive trends in recent years.

Data shows that my country has become the largest automobile producer and consumer, thus promoting the development of the automotive interior industry. At present, more than 40% of consumers believe that car interiors are very important, and it is estimated that the market size of my country's passenger car interior industry will reach 228.5 billion yuan in 2025.

In terms of import and export trade, although the foreign trade situation is very severe, there is still a positive trend. According to customs statistics, from January to February 2024, the total value of my country's import and export of goods was 6.61 trillion yuan, an increase of 8.7% year-on-year. Among them, exports were 3.75 trillion yuan, an increase of 10.3%, and imports were 2.86 trillion yuan, an increase of 6.7%.

According to the 2023 financial report data, during the reporting period, Shen Da Co., Ltd. achieved operating income of 11.668 billion yuan, up 3.77% from 2022, and main business income of 11.650 billion yuan, up 3.75% from 2022. Among them, the income from automotive interior business accounted for 70.23% of the total income; the income from import and export trade business accounted for 29.23% of the total income; and the income from new materials business accounted for 1.47% of the total income.

It can be seen that Shen Da shares are currently "taking the essence and discarding the dross", and the overall business layout is in line with the development trend of the hot industry. In particular, it has seized the development trend of new energy vehicles, followed the transformation rhythm of traditional vehicle manufacturers, and actively sought high-quality projects from new car manufacturers while ensuring high-end customers. The proportion of its new energy vehicle business has steadily increased.

Positive development recognized by the market

The right direction will bring fruitful results. The growth in performance in the first half of the year and the renewed favor of capital are proof of this. The "middle-aged" Shen Da shares have become stable and reliable.

During the continuous limit-up period, Shen Da shares rose by 32.92% and the cumulative turnover rate was 8.43%. The latest A-share total market value reached 4.266 billion yuan, and the A-share circulation market value was 2.753 billion yuan.

According to the statistics of Securities Times Databao, the latest (July 15) margin trading balance of the stock was 136 million yuan, of which the financing balance was 134 million yuan, an increase of 1.7948 million yuan from the previous trading day, a month-on-month increase of 1.36%. The cumulative increase in the past three days was 847,500 yuan, a month-on-month increase of 0.64%.

Data from the Dragon and Tiger List showed that on July 15, the top five buying seats bought a total of 28.6083 million yuan, and the top five selling seats sold a total of 11.9387 million yuan, with a net purchase and sale amount of 16.6696 million yuan.

The list includes powerful sales departments. Among them, the top buyer was the well-known hot money Shangtang Road, which bought 108.208 billion yuan; the net purchase by institutions was 9.8213 million yuan; the third buyer was the Shanghai Dongfang Road Securities Sales Department of Oriental Fortune Securities Co., Ltd., which bought 5.3710 million yuan.

In terms of capital flows, on July 16, the main funds had a net inflow of 15.0568 million yuan, accounting for 14.34% of the total transaction volume. It can be seen that market funds are relatively recognized by it.