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Reporter of China Business Network: Huang Hai Editors of China Business Network: Lu Xiangyong, Wen Duo, Dong Xingsheng

Four consecutive limit downs directly caused A-share listed companies toShanzi Hi-Tech(000981.SZ) is pushed to the brink of delisting at par value.

At noon on July 28, Shanzi Hi-Tech’s WeChat account published an article titled “A Letter to All Shareholders: Persist in Doing Difficult but Right Things” signed by Ye Ji, the actual controller, chairman and general manager of the company. In the article, Ye Ji apologized to investors for underestimating the probability of the risk of delisting at par value.

Ye Ji said that under the regulatory rules, the company initiated a repurchase application on July 26, and on the same day, he personally initiated a maximum increase in holdings without triggering a tender offer. At the same time, he has applied to the board of directors to stop paying his salary until the stock price returns to above 1.6 yuan per share. Ye Ji said that he will continue to take all-round measures to stabilize the stock price to a safe range, effectively protect the interests of shareholders and stakeholders, and get through this special period together.

Repurchase and increase holdings

Shanzi Hi-Tech's stock price has been hitting the daily limit for four consecutive trading days since July 22, 2024. On July 26, the company's stock closed at 0.86 yuan per share.

On the evening of July 26, Shanzi Hi-Tech issued three announcements in a row, involving share repurchases and chairman’s share purchases.

According to Shanzi Hi-Tech, the company plans to repurchase the company's shares at a price not exceeding RMB 1.60 per share within 6 months from the date the board of directors deliberates and approves the share repurchase plan. The total repurchase amount will not be less than RMB 600 million and not more than RMB 1 billion.

As for the purpose of repurchased shares, the company disclosed that they will be used for employee stock ownership plans or equity incentive plans. If the company fails to implement the above purposes within 36 months after the completion of the share repurchase, the repurchased shares will be cancelled in accordance with the relevant procedures.

It is worth noting that the maximum capital investment of 1 billion yuan is almost equivalent to the company's total cash and cash equivalents as of the end of the first quarter of 2024.

Financial data shows that as of March 31, 2024 (unaudited), Shanzi Hi-Tech's cash on hand was RMB 1.051 billion. Assuming that the repurchase funds of RMB 600 million to RMB 1 billion are fully used, with March 31, 2024 as the calculation base date, the total repurchase funds account for approximately 57.10% to 95.17% of the company's cash.

In this regard, Shanzi Hi-Tech stated in the announcement that based on the company's current operating and financial conditions, the company's vehicle business is progressing smoothly, and the revenue from commercial vehicle and passenger vehicle businesses is gradually increasing. This repurchase will not have a significant impact on the company's operations, finances and future development.

However, Shanzi Hi-Tech previously stated in response to investors' questions that Heilongjiang Yunfeng Automobile is a holding subsidiary of Shanzi Hi-Tech, focusing on building a vehicle manufacturing base with overseas markets as the entry point and comprehensively and continuously developing a vehicle manufacturing base for overseas markets. The first vehicle will officially roll off the production line in June 2024, and the annual production and sales volume is expected to reach more than 120,000 vehicles.

In addition to the share repurchase, on the same day, Shanzi Hi-Tech also disclosed an announcement that the chairman intends to increase his holdings in the company's shares. Based on his confidence in the company's business development and recognition of the company's long-term investment value, the company's chairman Ye Ji plans to increase his holdings of the company's shares by 10 million shares through the secondary market within six months from July 29, 2024 with his own or self-raised funds.

In 2023, as the company's chairman and president, Ye Ji received a pre-tax salary of 3.0023 million yuan from Shanzi Hi-Tech.

Expected loss in the first half of the year

It was said that the whole vehicle would roll off the assembly line in June, but there is no news so far.

According to Shanzi Hi-Tech's semi-annual performance forecast, the company expects a net loss of 600 million to 800 million yuan in the first half of this year; after deducting non-recurring gains and losses, the net loss is about 350 million to 500 million yuan. In the first quarter of this year, the company's operating income was 1.18 billion yuan, a year-on-year increase of 2.07%, and the net profit attributable to the parent was 458 million yuan, and the net profit after deducting non-recurring gains and losses was 10.966 million yuan.

A simple calculation shows that in the second quarter of this year, Shanzi Hi-Tech expects to lose 1.058 billion to 1.258 billion yuan in a single quarter.

Shanzi Hi-Tech’s predecessor was Yinyi Holdings, a leading real estate developer that had been deeply rooted in Ningbo.

On February 27, 2020, Yinyi Co., Ltd. announced a change in the company's actual controller. Jiaxing Zihe Jinxin Equity Investment Partnership held 29.89% of the shares and became the company's new controlling shareholder, and Ye Ji became the company's new actual controller.

Since the reorganization, the real estate business has always been a burden that Shanzi Hi-Tech is looking forward to getting rid of. Shanzi Hi-Tech issued an announcement in March this year, saying that due to the difficulties in the operation of the real estate business, the company plans to publicly list and transfer the company's real estate business-related equity and debt assets, namely Yinyi Real Estate-related assets, through a property rights trading institution. After the transaction is completed, the company will completely withdraw from the real estate business.

In May this year, Yinyi Real Estate found a buyer for its related equity and debt.LianyungangDali Honglin Investment Co., Ltd., the final transaction price was 601 million yuan, which is approximately 45% of the total value of the target assets.

In the semi-annual performance forecast, Shanzi Hi-Tech said that the company has settled the transitional gains and losses and capital transactions for the transfer of real estate business, and it is expected that the divestiture will bring the company a non-recurring loss of 700 million to 800 million yuan.

On the other hand, the company's automotive parts business, which has been vigorously developed in the past two years, has not yet reached the break-even point.

After divesting its real estate business, Shanzi Hi-Tech plans to focus on vehicle manufacturing and the semiconductor industry chain. In response to questions from the outside world about the change in the company's stock name, the company's secretary once said that the company is actively building a high-end manufacturing ecosystem that is interconnected and interactive in multiple industries, including vehicle manufacturing, advanced semiconductor packaging materials, high-end automotive parts, and travel services.

The company's secretary mentioned three major tracks: vehicle manufacturing, semiconductor packaging, and high-end components. In June this year, Shanzi Hi-Tech responded to investors' questions and said that Heilongjiang Yunfeng Automobile is a holding subsidiary of Shanzi Hi-Tech, focusing on building a vehicle manufacturing base with overseas markets as the entry point and comprehensively and continuously developing overseas markets... The first vehicle will be officially rolled off the production line in June 2024, and the annual production and sales volume is expected to reach more than 120,000 vehicles. However, as of now, there is still no information on the relevant vehicles rolling off the production line.

reporter|Yellow Seaedit|Lu Xiangyong Wenduo Dong Xingsheng Gai Yuanyuan

Proofreading|Chen Keming

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