news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

After the stock price rose to the daily limit in advance, East China Heavy Machinery (002685) rose to the daily limit again on July 29. On the news front, on the evening of July 28, East China Heavy Machinery disclosed an announcement that it planned to acquire the equity of Xiamen Ruixin Tuxin Technology Co., Ltd. (hereinafter referred to as "Ruixin Tuxin") and increase capital at a pre-investment valuation of no more than 300 million yuan. After the transaction is completed, the company will hold 43.18% of Ruixin Tuxin's equity and cross over into the GPU industry. In response to the market's doubts about the company's stock price rising to the daily limit in advance on July 26, East China Heavy Machinery accepted an interview with a Beijing Business Daily reporter on July 29.

The company said it has kept insider information confidential

Before the cross-border acquisition announcement was disclosed, Huadong Heavy Machinery's stock price rose to the daily limit in advance, and whether the company's insider information management was compliant triggered market discussions. On July 29, Huadong Heavy Machinery said in an interview with Beijing Business Daily that the company strictly followed the provisions and requirements of relevant laws and regulations to keep the insider information of major matters confidential.

On the evening of July 28, Huadong Heavy Machinery disclosed an announcement that the company intends to acquire Ruixin Tuxin's equity and increase capital at a pre-investment valuation of no more than 300 million yuan, that is, to acquire a total of 37.5% of Ruixin Tuxin's equity held by Xu Qinghe and Nanjing Ruifeng Juxin Enterprise Management Partnership (Limited Partnership) at a price of no more than approximately 113 million yuan, and to subscribe for Ruixin Tuxin's newly added registered capital of 336,700 yuan at a price of no more than 30 million yuan. After the completion of this transaction, the company holds 43.18% of Ruixin Tuxin's equity. The company is the single largest shareholder of Ruixin Tuxin and has the right to decide on the election of more than half of its board members. Ruixin Tuxin will be included in the company's consolidated financial statements.

It is worth mentioning that the share price of Huadong Heavy Machinery had already reached its daily limit in advance on the trading day before the acquisition plan was disclosed. Trading data showed that on July 26, Huadong Heavy Machinery's share price opened 0.36% lower. After the opening, the company's share price quickly turned red and remained volatile. After the afternoon opening, driven by a large number of buy orders, the company's share price quickly rose to the daily limit, and then opened the daily limit for a while, but eventually closed again. As of the close of the day, the company's share price reported a daily limit of 3.04 yuan per share.

Regarding the company's stock price limit-up ahead of schedule, Huadong Heavy Machinery told the Beijing Business Daily on July 29 that the company strictly complies with the provisions and requirements of relevant laws and regulations to keep the insider information of major matters confidential, and requires that before the insider information is disclosed, no insider shall disclose or leak the information, and shall not use the information for insider trading. At the same time, the company strictly implements the review and disclosure procedures, maintains the openness, fairness and justice of the company's information disclosure, and protects the legitimate rights and interests of investors to the greatest extent. The company's stock price is affected by many factors, including but not limited to the general rise of the industrial mother machine sector that benefits from the equipment renewal policy, and the improvement of the company's performance fundamentals.

Trading data showed that on July 29, the share price of East China Heavy Machinery once again hit the daily limit, with the daily limit price being 3.34 yuan per share.

Cross-border transformation

The acquisition of Ruixin Tuxin’s equity is not the first time that Huadong Heavy Machinery has crossed over. It is understood that Huadong Heavy Machinery is an enterprise mainly engaged in high-end equipment manufacturing business, mainly engaged in "container loading and unloading equipment" and "CNC machine tools".

Huadong Heavy Machinery told the Beijing Business Daily that the company recognizes that any cross-border acquisition involves integration challenges. In order to strengthen the company's internal control management and improve the standardization of corporate governance, it has been agreed in the "Investment Agreement" that the company has the right to nominate two-thirds of the board seats, and before paying the first phase of capital increase, the investor has the right to appoint a financial director and a risk control director (responsible for keeping the company's seal). The company attaches more importance to the broad business prospects of the acquisition project, creating new profit growth points for the company, and enhancing the company's core competitiveness and sustainable operating capabilities.

In fact, this acquisition is not the first cross-border attempt by Huadong Heavy Machinery. In March 2024, Huadong Heavy Machinery disclosed an announcement that the company signed a "Strategic Cooperation Agreement" with Zhejiang Lianhe Hydrogen Energy Technology Co., Ltd. and Shanghai Guoke Longhui Private Equity Fund Management Co., Ltd., intending to develop zero-carbon hydrogen energy ports through the establishment of a joint venture, and at the same time enter the hydrogen energy vehicle and port mobile machinery industry chain through the establishment of a hydrogen energy industry fund.

In addition, Huadong Heavy Machinery's 2023 annual report shows that in order to seize the strategic opportunity period of technology upgrading in the photovoltaic market, the company established a holding subsidiary, Wuxi Huadong Solar Technology Co., Ltd., in April 2023. It is a high-tech photovoltaic manufacturing enterprise newly created by the company under the "dual carbon" strategic deployment. The company's photovoltaic products are high-efficiency TOPCon cells, using the N-type technology route. The company's mass-produced N-type TOPCon cell conversion efficiency has reached the predetermined conversion efficiency level, achieved market-oriented sales and won customer recognition.

Net profit has been in the red for four consecutive years

Behind its successive cross-border attempts, East China Heavy Machinery's net profit has been in the red for four consecutive years, and its revenue has also declined sharply since 2020.

Data shows that from 2019 to 2023, East China Heavy Machinery's operating income was approximately RMB 13.683 billion, RMB 7.635 billion, RMB 7.059 billion, RMB 1.476 billion, and RMB 671 million, respectively; the corresponding attributable net profits were approximately RMB 357 million, -RMB 1.073 billion, -RMB 1.408 billion, -RMB 179 million, and -RMB 811 million, respectively.

In addition, in the first quarter of 2024, Huadong Heavy Machinery's revenue and net profit both declined. During the reporting period, the company achieved operating income of approximately 152 million yuan, a year-on-year decrease of 43.81%; the corresponding attributable net profit was approximately 20.8748 million yuan, a year-on-year decrease of 16.93%.

Regarding the company's performance, Huadong Heavy Machinery told the Beijing Business Daily reporter that the company's main business income has declined sharply in recent years, mainly due to the reduction of trade income and adjustment of the main business scope after the implementation of the new revenue standard, and the divestiture of the supply chain service business with large operating income but small profit scale. The company's net profit has been negative in recent years, mainly due to the continuous decline in market demand for the company's CNC machine tool business in recent years, the company's production and sales volume has declined, and the collection of accounts receivable has not been as expected, resulting in the provision of impairment of related goodwill and accounts receivable. At present, the business is in the process of being sold.

At the end of 2023, East China Heavy Machinery disclosed an announcement that it planned to sell its 100% equity in Guangdong Runxing Technology Co., Ltd. After the completion of this transaction, the listed company will dispose of its CNC machine tool business assets, promote the transformation and upgrading of its business structure, and focus on high-end equipment manufacturing mainly based on container loading and unloading equipment and expand the photovoltaic cell module business segment.

Financial commentator Zhang Xuefeng told the Beijing Business Daily that for poorly managed listed companies, acquiring new assets and entering new fields may bring new profit growth points. "However, companies should also pay attention to the integration risks involved," said Zhang Xuefeng. Investment and financing expert Xu Xiaoheng also said that cross-border mergers and acquisitions usually involve many uncertain risks. When listed companies enter industries with low correlation, management, talent, technology, and knowledge will become the shortcomings of corporate development, and there will be more problems in actual operations than expected.

Beijing Business Daily reporter Ma Huanhuan and intern reporter Wang Manlei