The battle to defend the price of "1 yuan" failed! Another auto dealer giant is locked in delisting

2024-07-17

The miracle did not happen in the end, and Guanghui Auto’s delisting at par value was locked!

As of today's (July 17) close, Guanghui Auto closed at 0.78 yuan per share. Since the closing price on June 20, it has dropped to 0.98 yuan per share. The stock price has closed below 1 yuan for 20 consecutive trading days, and the delisting at par value is a foregone conclusion. Following Pangda, another auto dealer giant has left the A-share market.

Backed by the Fortune 500

Guanghui Auto is currently one of the largest auto dealer groups in China. According to the 2024 China Auto Distribution Industry Dealer Group Top 100 Ranking, Guanghui Auto will achieve a total of 713,500 car sales in 2023, ranking first among major auto dealers in the country; the total operating income in 2023 will reach 137.9 billion yuan, ranking second in the country. The company's controlling shareholder, Xinjiang Guanghui Group, owns four listed companies: Guanghui Auto, Guanghui Energy, Guanghui Logistics, Alloy Investment and Guanghui Baoxin. Sun Guangxin, the actual controller of Guanghui Group, was once the richest man in Xinjiang and was known as the "Godfather of Western Business".

Founded in 1999, China Guanghui Auto has achieved rapid expansion by taking advantage of the explosive growth of my country's automobile market through large-scale mergers and acquisitions. It successfully went public through a backdoor listing in 2015 and topped the "Top 100 Dealer Groups in China's Automobile Distribution Industry" list in 2016.

However, as automobile sales enter a new normal of slight growth, the traditional dealer model is impacted by the direct sales model of new car-making forces. The company's stock price has continued to weaken since 2018, hovering below 3 yuan in 2022 and falling below 2 yuan at the end of 2023. In 2022, Guanghui Auto suffered a loss of 2.669 billion yuan. Although it turned losses into profits in 2023 with a net profit of 393 million yuan, the net profit margin was only 0.46%.

Guanghui Group has been on the Fortune Global 500 list for seven consecutive years, ranking 500th and 142nd in the 2023 Fortune Global 500 and Fortune China 500 respectively. However, even with such a strong background, it is still difficult to save Guanghui Auto from its decline. As time enters 2024, bad news about Guanghui Auto continues to come.

According to Phoenix.com, several Guanghui employees revealed that Guanghui Auto has delayed their wages. Employees of related stores said that most of Guanghui Auto’s wages are now delayed for two months, for example, April’s wages are paid in June, May’s wages are paid in July, etc. Wages vary from brand to brand, and are based on performance and store pay. Another Guanghui employee revealed that his store’s wages were discounted, with all employees receiving a 46% discount, and the first batch of wages receiving a 93% discount.

Not only did Guanghui Auto fail to pay its employees, its stores were also reported to be closed one after another, and there were even cases where car owners had paid but could not pick up their cars. It was reported online that car owners who bought Guanghui Auto in many places revealed that they had paid for their cars but could not pick up their cars. Some car owners also said that they could not go through the normal registration process because the certificate of conformity was mortgaged by Guanghui Auto to a financial institution.

The vigorous battle to defend the "1 yuan"

There are reasons for the decline in Guanghui Auto's business performance.Li Jinyong, Vice President of the All-China Federation of Industry and Commerce Automobile Dealers Chamber of Commerce and Chairman of the New Energy Vehicle CommitteeAnalysis shows that, on the one hand, most of Guanghui Auto's 4S stores are fuel-powered vehicles, and as we all know, the market share of fuel-powered vehicles is gradually shrinking. On the other hand, Guanghui has nearly 700 4S stores, which are huge in number and widely distributed in various regions, making management extremely difficult.

In terms of new energy construction, in the first half of this year, Guanghui Auto has successfully applied for 70 new energy store authorizations, including Xiaomi, Seres,Zeekr、auspiciousgeometry,CheryStar PathStar Era, DongfengLantu、Great WallAmong brands such as Zhixuan and Anhui Volkswagen, the number of new energy stores that have been built and put into operation has reached 55, an increase of 29 from 26 at the beginning of the year.

In terms of the operation and management of new energy stores, Guanghui Auto has taken the improvement of economic benefits as its agenda and strengthened the management and control of operational efficiency. In June alone, the company's sales of new energy vehicles increased by 90% year-on-year.

In the after-sales sector, Guanghui Auto is targeting the future development space of new energy after-sales business, striving to create new growth points for after-sales business, relying on the existing maintenance service team to build a nationwide after-sales service network; taking the body and spray center as a breakthrough point, actively exploring diversified cooperation opportunities in the automotive aftermarket with new energy OEMs, in order to create a new energy automotive aftermarket service system covering the entire value chain.

However, in an environment where most new energy vehicle brands are not yet profitable, the rapid layout of new energy vehicles has not solved Guanghui Auto's urgent needs. In order to maintain its listing, Guanghui Auto's major shareholders and management have recently increased their holdings and planned a control transfer transaction.

On July 10, Guanghui Auto announced that it had received a "Notice on Planning for Changes in Control of Guanghui Auto" from Guanghui Group. Currently, Guanghui Group is working with Xinjiang Jinzheng New Materials Technology Co., Ltd. (hereinafter referred to as:Jinzheng Technology) is planning the transfer of the company's equity, and this transaction may trigger a change in the company's control.On the evening of July 11, China Guanghui Auto issued an announcement stating that the controlling shareholder intends to transfer 24.5% of its shares to Jinzheng Technology, and the control rights are expected to change.On the evening of July 12, Guanghui Auto issued another announcement, signing a strategic cooperation agreement with Zhongjun Technology to accelerate its technological transformation.Influenced by this news, Guanghui Auto's stock price hit the daily limit on July 11 and 12, closing at 0.96 yuan on the 12th, just short of reaching 1 yuan.

However, on the evening of July 12, Guanghui Auto disclosed its first-half performance forecast, predicting a net loss of 583 million to 699 million yuan in the first half of 2024, compared with a profit of 601 million yuan in the same period last year; a non-net loss of 756 million to 872 million yuan, compared with a profit of 333 million yuan in the same period last year. Subsequently, the stock price ended its consecutive daily limit rise, and fell to the daily limit on the 16th and 17th, and it was unable to recover.

Regarding this vigorous battle to defend the "1 yuan" stock price, many industry insiders previously believed that Guanghui Group might be able to successfully maintain its listing status, but in the end, their hopes were dashed.

On June 15, Guanghui Auto iCAR Space Lanzhou Haifeng store opened. Image source: Guanghui Auto official website

Giants are delisting one after another. What happened to car dealers?

From wandering on the edge of the cliff to stepping off the cliff, a person related to Guanghui Auto told the media: "Due to the previous high dividend and transfer, the share capital reached 8.3 billion shares, and the policy does not allow share reduction. Recently, the low-priced stocks have fallen significantly. The closer they are to 1 yuan, the more siphon effect there is, and the stock price falls faster. In the end, it is regrettable to lock in the par value and delist." After the failure of the shell protection, whether the transfer of equity will be carried out as agreed, the above-mentioned person said, "This will have to wait for the two shareholders to discuss before a result can be reached." He also revealed that the company will continue to do a good job in production and operation, and continue to return to shareholders by finding strategic investors and other means.

The crisis of Guanghui Auto is just a microcosm of the plight of the auto dealer group. In addition to Guanghui Auto, most auto dealers in China are having a hard time. According to data from the China Automobile Dealers Association, the loss rate of dealers in 2023 is as high as 43.5%, and about 1,500 to 2,000 auto dealers across the country will withdraw from the network. Even the former "king of 4S stores" Pangda Group fell into the dilemma of delisting last year. How can the eggs remain intact when the nest is overturned?

Some netizens believe that the experience of Guanghui Auto, a company that has grown wildly and then collapsed, should cause the automotive industry to reflect.Jin Yongsheng, Chief Knowledge Officer of Shanghai Shuce Software Co., Ltd.It is believed that as the automobile market is booming, Chinese automobile dealer groups have encountered the temptation of the booming real estate, finance, Internet, culture and entertainment industries. A large number of dealers have turned to diversified operations, frantically opening stores, making acquisitions, and blindly chasing hot money. Their lack of awe for the automobile industry is likely to backfire.

As of the end of the first quarter of this year, the number of Guanghui Auto shareholders exceeded 100,000. After the delisting of stocks and convertible bonds, how to protect the interests of shareholders? How to maintain a high credit rating after losing the A-share listing qualification, so as to reduce financing costs, have become issues facing Guanghui Auto.

Li Jinyong pointed out that although Guanghui Auto has withdrawn from the A-share market, it will not close down or go bankrupt, but the deterioration of capital liquidity will be more unfavorable to its subsequent operations. At present, dealer groups represented by Guanghui Group must make a decisive move to integrate resources, close loss-making brands and stores, and carefully examine the development potential of new energy brands.

From a market value of 100 billion to a market value of only 6.466 billion, Guanghui Auto's rise and fall is regrettable. Automakers and dealers are interdependent, and the survival of auto dealers is closely linked to the prosperity of the auto market. To quote a comment from a netizen, "I hope everything will be fine."

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The battle to defend the price of "1 yuan" failed! Another auto dealer giant is locked in delisting

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