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Produced by Radar Finance Hongtu | Edited by Li Yihui | Deep Sea

July 25, lithium battery diaphragm leaderEnjie SharesIt hit a new low for the year during the trading session.

Recently, the company received a warning letter from the Yunnan Securities Regulatory Bureau because the family of the company's actual controller failed to accurately identify and report the scope of persons acting in concert, resulting in inaccurate disclosure of relevant information of the listed company. At the same time, due to other violations, the Yunnan Securities Regulatory Bureau took measures to order the family of Enjie's actual controller and its persons acting in concert to correct their mistakes and issued a warning letter.

The above-mentioned persons who were issued warning letters include the company's chairman Paul Xiaoming Lee, vice chairman Li Xiaohua, etc. Among them, Paul Xiaoming is known as the richest man in Yunnan.

This is not the first time that Li Xiaoming and Li Xiaohua have been involved in trouble. In 2022, the two brothers were placed under residential surveillance at a designated location by the public security organs due to related matters.

However, Enjie Co., Ltd., which produced the richest man in Yunnan, has seen its share price fall continuously, with a drop of about 47% since the beginning of the year. Its current total market value is 28.2 billion yuan.

In terms of performance, according to the company's performance forecast, Enjie Co., Ltd.'s net profit attributable to shareholders of the parent company is expected to decrease by 74.5%-81.62% year-on-year in the first half of this year.

Industry analysts believe that the barrier to diaphragm technology is relatively high, and there is room for price reduction. As the industry leader, Enjie Co., Ltd. has begun to compete for market share by exchanging price for volume. But on the other hand, the decline in product prices means shrinking profits, which is undoubtedly a painful and tormenting process.

Many members of the actual controller’s family were warned

Tianyancha data shows that Enjie Co., Ltd. was established in 2006 and is located in Yuxi City, Yunnan Province, with a registered capital of RMB 977.7561 million.

On July 23, Enjie Co., Ltd. announced that the company recently received the "Decision on Taking Measures to Order Enjie Co., Ltd. to Correct and Issue a Warning Letter" (Administrative Supervision Measures Decision No. [2024] 015) issued by the Yunnan Securities Regulatory Bureau.

At the same time, the family of Li Xiaoming, the actual controller of the company, and the company's shareholders Heyi Investment and Heli Investment received the "Decision on Taking Measures of Ordering Correction and Issuing a Warning Letter to the Family of the Actual Controller of Enjie Co., Ltd. and Its Concerted Actors" (Administrative Supervision Measures Decision No. [2024] 016) issued by the Yunnan Securities Regulatory Bureau.

Upon investigation, it was found that the family of the actual controller of Enjie Co., Ltd. did not accurately identify the scope of persons acting in concert and report it to the company. During the information disclosure management process, Enjie Co., Ltd. did not find any inconsistencies in the same information, resulting in inaccurate information related to persons acting in concert of the actual controller's family disclosed in multiple periodic reports, interim reports and other information disclosure documents.

In response to this, the Yunnan Securities Regulatory Bureau decided to take administrative supervision measures against Enjie Co., Ltd., ordering it to correct its mistakes and issuing a warning letter.

In addition, upon investigation, it was found that the actual controller of Enjie Co., Ltd. had inaccurate identification of persons acting in concert and disclosure of relevant equity information, failed to disclose the simplified report on changes in equity in a timely manner as required, and stopped buying and selling the company's shares, thereby illegally reducing shareholdings beyond the proportion.

Specifically, since Enjie Co., Ltd. was listed, the actual controller's family did not identify Heyi Investment and Heli Investment (before September 27, 2021) as the actual controller's family's joint actors, resulting in the aforementioned parties failing to perform their reporting and announcement obligations and stopping buying and selling the company's shares.

Regarding the illegal reduction of holdings beyond the proportion, it was found that Li Xiaoming, as a shareholder of Enjie Co., Ltd. with more than 5% and a family member of the actual controller, and Heyi Investment and Heli Investment (before September 27, 2021) as the concerted actors of the family of the actual controller of Enjie Co., Ltd., reduced their holdings of Enjie Co., Ltd. by 12.381 million shares through centralized bidding transactions from December 24, 2019 to February 14, 2020, and the cumulative reduction of shares accounted for 1.54% of the total number of shares of the listed company. The above behavior violated Article 9 of the "Several Provisions on the Reduction of Shares by Shareholders, Directors, Supervisors and Senior Managers of Listed Companies" (CSRC Announcement (2017) No. 9).

Based on the above-mentioned violations, the Yunnan Securities Regulatory Bureau decided to take administrative supervision measures against Li Xiaoming, YanMa, Sherry Lee, Li Xiaohua, Yanyang Hui, Jerry Yang Li, Heyi Investment, and Heli Investment, including ordering them to correct their violations and issuing warning letters.

According to the company's past announcements, the actual controllers of Enjie Co., Ltd. are currently six people from Li Xiaoming's family, including Paul Xiaoming Lee, his younger brother Li Xiaohua, Li Xiaoming's wife Yan Ma, his sister-in-law Yang Yang Hui, his daughter Sherry Lee, and his nephew Jerry Yang Li.

Except for Li Xiaohua, the other five are all American citizens. Although Li Xiaohua is a Chinese citizen, he also obtained a US green card.

After being regulated, Enjie Co., Ltd., the company's actual controller and its joint actors all apologized to investors in the announcement, and the company's actual controller and its joint actors promised to use their own and self-raised funds to repurchase the shares that were sold in excess of the proportion and in violation of regulations within the next 12 months, and the generated profits will be turned over to Enjie Co., Ltd.

Radar Finance noticed that when Enjie's stock price was high, Li Xiaoming's family carried out a large-scale concentrated reduction of holdings. According to media statistics, from December 2021 to June 2022, Li Xiaohua indirectly reduced his holdings by 2.0337 million shares and directly reduced his holdings by 2.9185 million shares through Heli Investment and Shanghai Hengzou. At the same time, shareholders Sherry Lee and Jerry YangLi also reduced their holdings. In this round of reduction, the Li family has cashed out more than 2 billion yuan in total.

In addition, Enjie shares have frequently disclosed shareholder pledge announcements since 2023. According to the shareholder share pledge change announcement on July 10, Li Xiaohua, Heyi Investment and its concerted actors hold 401 million shares of Enjie shares, of which 50.96% of the shares are pledged, accounting for 20.88% of the company's total share capital.

Brothers Li Xiaoming and Li Xiaohua were once placed under residential surveillance

In its 2023 annual report, Enjie Co., Ltd. stated that the company is the world's largest supplier of lithium battery separators in terms of shipments and has the largest market share in the world.

As the "diaphragm leader", Enjie Co., Ltd. has been making great strides in the field of lithium batteries, but the Li Xiaoming brothers started their business in the tobacco industry.

Public information shows that Li Xiaoming was born in 1958 and Li Xiaohua was born in 1962. Both grew up in wealthy families and their father was the director of Yunnan No. 1 Plastic Factory.

After graduating from university, my brother Li Xiaoming joined the Kunming Plastics Research Institute of China and became the deputy director in just two years. He was only 26 years old at the time.

In 1989, Li Xiaoming, who had been the deputy director for five years, got an opportunity to study in the United States and went to the University of Massachusetts for postgraduate studies. Not long after Li Xiaoming went to the United States, his brother Li Xiaohua also came to the University of Massachusetts to study polymer materials.

After graduation, the Li brothers worked in the United States for a few years and returned to China in 1996 to start a business. They jointly established Hongta Plastics with local state-owned enterprises in their hometown of Yuxi, Yunnan. Its main business is cigarette labels and BOPP films for cigarette packaging, which are mainly used for cigarette outer packaging. In addition to Yunnan's Hongta Group and Hongyun Honghe Group, the company's customers also include other well-known tobacco companies such as Heilongjiang Tobacco and Sichuan-Chongqing China Tobacco.

With the support of tobacco companies, the Li brothers made their fortune. The prospectus of Enjie Co., Ltd. once recorded that since entering the cigarette film industry in 1996, after years of market development, it has accumulated a number of large and high-quality tobacco enterprise customers. Relying on these customer resource advantages, the company expanded into new business areas in 2006, successfully entered the cigarette label industry and achieved rapid development.

The so-called new business refers to the acquisition of Yunnan Yuxi Innovation Color Printing Co., Ltd. by the Li brothers in 2006, which was later renamed Yunnan Innovation New Materials Co., Ltd. in 2011. In September 2016, the company was listed on the Shenzhen Stock Exchange with the stock name of Innovation Shares.

At the beginning of its listing, Innovation's main business did not include lithium battery separators. It was not until 2018, after the company completed the asset restructuring of Shanghai Enjie, that it changed its name to Enjie Shares, thus entering the lithium battery separator business.

Starting from cigarette films and cigarette labels, to the development and growth in the packaging industry, and then entering the new energy field, the Li Xiaoming family has successfully captured the opportunities several times and finally created Enjie Co., Ltd.

In September 2021, the company's stock price peaked at more than 300 yuan per share. On the Hurun Rich List that year, the wealth of Li Xiaoming and Li Xiaohua reached 72.5 billion and 54 billion yuan respectively. However, on the Hurun Rich List in 2023, the wealth of Li Xiaoming and Li Xiaohua's family shrank to 18 billion yuan and 13.5 billion yuan respectively.

At the same time, Li Xiaoming has been in constant turmoil in the past two years. In November 2022, Enjie Co., Ltd. issued an announcement of major events stating that Li Xiaoming and the company's vice chairman and general manager Li Xiaohua were placed under residential surveillance at a designated location by the public security organs due to related matters.

On August 25, 2023, Enjie Co., Ltd. announced that Li Xiaoming recently received a "Decision to Withdraw the Case" issued by the public security agency, and it decided to withdraw the aforementioned case in accordance with relevant regulations. At present, Li Xiaohua and Li Xiaoming are both performing their duties normally in the company.

In February this year, an investor asked Enjie Co., Ltd. a question, which was roughly that a stock big V wrote an article pointing out that the company's actual controller Li Xiaoming cashed out tens of billions of yuan, immigrated to the United States with his family, and stopped upgrading and investing in industrial technology.

Later, Enjie Co., Ltd. responded on the investor interaction platform, "The above information is not true."

Enjie shares' profits fell sharply

The annual report shows that after completing a major asset reorganization in 2018, Enjie Co., Ltd.'s main business can be divided into three categories: film products (lithium battery isolation film, cigarette film and flat film), packaging printing products (cigarette labels and aseptic packaging), and packaging products (special paper, holographic anti-counterfeiting electrochemical aluminum and other products).

Among them, membrane products are the company's absolute main revenue source.FlushiFinD data shows that from 2021 to 2023, the company's membrane product revenue accounted for 86.61%, 89.35% and 89.38% respectively.

However, after years of rapid development, the current diaphragm industry is no longer prosperous, market competition is fierce, and prices continue to decline. In last year's annual report, Enjie Co., Ltd. stated that due to the downstream destocking and cost reduction requirements, the concentrated release of new production capacity of diaphragm companies, and the intensified market competition, the overall product prices of the diaphragm industry continued to decline for a year.

Affected by this, the company's operating income in 2023 was 12.042 billion yuan, a year-on-year decrease of 4.36%, and the net profit attributable to shareholders of listed companies was 2.527 billion yuan, a year-on-year decrease of 36.84%.

China Post Securities pointed out that due to the intensified industry competition, the company's diaphragm product sales prices have been adjusted, resulting in the company's gross profit margin declining quarter by quarter starting from 2023, which is a significant decline compared to the gross profit margin of over 40% in 2022.

Since the beginning of this year, Enjie shares' profits have continued to be under pressure. According to the latest performance forecast, the company expects the net profit attributable to shareholders of listed companies in the first half of 2024 to be approximately 258 million yuan to 358 million yuan, a year-on-year decrease of 74.5% to 81.62%.

The reason for the performance change is that in the first half of 2024, the overall supply and demand pattern of the lithium battery separator industry was slightly loose, coupled with downstream cost reduction pressure and intensified market competition, resulting in a downward trend in the prices of lithium battery separator products.

It is reported that the price war in the diaphragm industry started in the second half of last year and has continued to this day. According to data from Mysteel, the price of wet-process diaphragms was 1.3 yuan/square meter from February to March, and it has dropped to 0.9 yuan/square meter by April 3.

In this case, as stated in the performance forecast, Enjie Co., Ltd. "actively responded to market competition and increased its market expansion efforts." A relevant person in charge of the company told the media that the company has actively adjusted prices since the third quarter of 2023 and will continue to consolidate its leading position.

However, some people believe that the price of diaphragms will continue to fall in the future. In the view of Zhang Jinhui, a senior researcher at Xinrong Information, due to oversupply, companies have taken the initiative to reduce prices in bidding, and prices will continue to fall in the future, and some companies may start to lose money.

With fierce domestic competition, the industry leader Enjie Co., Ltd. has set its sights on overseas markets. According to a research report by China Post Securities, in 2023, the company's overseas sales revenue will be 2 billion yuan, a year-on-year increase of more than 50%. The company's Hungarian diaphragm base has been completed, and the first coated film production line has been put into operation. The U.S. market initially plans to build a 700 million square meter coated diaphragm production line.

However, it should be noted that sales of new energy vehicles in Europe and the United States have shown signs of slowing down, with data showing that sales from January to May 2024 only increased by 6.84% year-on-year.

The slowdown in the growth of downstream will directly reduce the demand for materials in various upstream links. Can going overseas help Enjie Co., Ltd. get out of the gloom? At present, there is still great uncertainty.