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Yangtze Business Daily News● Changjiang Business Daily reporter Wang Jing

Huiyuan Juice, the former national beverage, is set to enter the capital market again, with the share price of the acquirer, Guozhong Water Group (600187.SH), soaring.

On July 29, Guozhong Water's stock price hit the daily limit, with the share price at 2.76 yuan per share, and the total market value of 4.454 billion yuan. Since July 22, its stock price has achieved six consecutive daily limits.

The strong reaction in the secondary market stems from the acquisition of Guozhong Water. On the evening of July 22, Guozhong Water announced that it was planning an acquisition to indirectly control Beijing Huiyuan, the "national beverage" Huiyuan Juice.

A reporter from the Yangtze Business Daily noticed that through this acquisition, Guozhong Water and Huiyuan Juice may achieve a "win-win" situation.

For Huiyuan Juice, after the acquisition is completed, it will be able to return to the A-share market; for Guozhong Water, it will improve its fundamentals and maintain its listing status.

The Yangtze Business Daily reporter will continue to pay attention to whether this acquisition can be completed smoothly and what the results are.

Huiyuan Juice seeks A-share listing

On the evening of July 22, Guozhong Water issued an announcement stating that the company intends to indirectly acquire Beijing Huiyuan Food and Beverage Co., Ltd. (hereinafter referred to as "Beijing Huiyuan") by paying cash.

The announcement shows that since 2022, Guozhong Water has acquired 36.486% of the shares of Zhuji Wenshenghui, a holding platform company established by Wensheng Assets to participate in the reorganization of Beijing Huiyuan, three times, and indirectly holds 21.89% of Beijing Huiyuan's shares. After the company plans to complete the acquisition, it will hold a total of no less than 816 million yuan in Zhuji Wenshenghui's registered capital, accounting for no less than 51% of its registered capital, thus becoming the controlling shareholder of Beijing Huiyuan.

It is understood that Beijing Huiyuan is the well-known "national beverage" Huiyuan Juice. Huiyuan Juice was founded in 1992 and was once a representative juice brand in the hearts of Chinese people. In 2007, Huiyuan Juice was listed on the Hong Kong stock market. However, due to fierce market competition, Huiyuan Juice began to decline and eventually delisted from the Hong Kong Stock Exchange in 2021 and went bankrupt for reorganization.

On July 16, 2021, upon application by creditors, the court ruled that Huiyuan entered into a reorganization procedure. Wensheng Asset, as the only reorganization investor, invested 1.6 billion yuan to reorganize Beijing Huiyuan. In the official announcement, Wensheng Asset stated that "part of the funds were used to pay Huiyuan's bankruptcy expenses and repay small debts, and more than 90% of the funds were used to upgrade and strengthen Huiyuan's production and operations."

Wensheng Asset also stated that it will design the best securitization plan for Beijing Huiyuan and strive to achieve A-share listing within three to five years.

It is worth noting that during this period, many capitals were "eager to invest" in Huiyuan Juice, including well-known beverage companies such as Coca-Cola and Tiandi No. 1.

However, the "winner" seems to have been determined. In December 2022, Guozhong Water spent 850 million yuan to acquire 31.48% of the shares of Zhuji Wenshenghui from Wensheng Assets, thereby indirectly holding 18.89% of Beijing Huiyuan; in April of that year, Guozhong Water acquired 3.13% of the shares of Wensheng Assets held by Shanghai Yongrui for a total transfer price of 50 million yuan; in July 2023, Guozhong Water acquired 1.88% of the shares of Wensheng Assets held by Shanghai Yongrui for a third time, with a transfer price of 30 million yuan.

Guozhong Water said that if the transaction can be implemented smoothly, it will optimize the company's asset structure and help increase the company's asset scale and profitability.

Guozhong Water Recovers from Losses by Leveraging Strength

If this transaction is successfully implemented, it may achieve a "win-win" situation.

It is understood that Guozhong Water is a water company that mainly engages in sewage treatment, tap water supply and environmental protection engineering technical services, and is also a subsidiary of the Pengxin Group.

In recent years, the operating conditions of Pengxin Group's three listed companies, Pengdu Agriculture and Animal Husbandry, Pengxin Resources, and Runzhong International Holdings, have all deteriorated. On July 4 this year, Pengdu Agriculture and Animal Husbandry was delisted. After Pengxin Resources lost 108 million yuan in 2023, it is expected to lose another 40 million to 60 million yuan in the first half of this year; after Runzhong International Holdings lost 172 million yuan in 2023, it lost another 290 million yuan in the first quarter of this year.

Guozhong Water Group also fell into trouble. In 2009, Guozhong Water Group successfully went public through a backdoor listing. In 2014, the company's revenue and net profit both hit new highs, at 720 million yuan and 150 million yuan, respectively. However, the situation quickly took a turn for the worse. From 2015 to 2020, except for a profit of 40 million yuan in 2017, Guozhong Water Group continued to suffer losses in non-GAAP net profit in the remaining years.

In 2021 and 2022, Guozhong Water achieved operating income of 384 million yuan and 288 million yuan respectively, with year-on-year changes of 1.42% and -25.2%, and net profits of -91 million yuan and -116 million yuan, with consecutive losses.

For Guozhong Water, transformation is imminent. Since 2015, Guozhong Water has begun to divest loss-making subsidiaries, and has continued to acquire and even cross-border, but the results have not been good. Until December 2022, it successfully won the "hot cake" of Huiyuan Juice.

At that time, the project cooperation agreement signed by Guozhong Water included a bet agreement, in which Wensheng Asset promised that Beijing Huiyuan's audited cumulative net profit excluding non-recurring items from 2023 to 2025 would be no less than 1.125 billion yuan, which means that Beijing Huiyuan needs to achieve an average annual net profit excluding non-recurring items of no less than 375 million yuan.

In 2023, Guozhong Water achieved operating income of 220 million yuan, a year-on-year decrease of 24.6%, and its net profit turned from loss to profit of 30.04 million yuan, mainly due to the indirect holding of 21.9% of Beijing Huiyuan's shares, which contributed 82.836 million yuan in profits.

According to the 2023 financial report, Beijing Huiyuan's net profit level for that year had reached the target, and it helped Guozhong Water to turn losses into profits.

In the first quarter of this year, Guozhong Water's operating income was 42.8746 million yuan, a year-on-year decrease of 35.23%; but its net profit was 1.9673 million yuan, a year-on-year increase of 111.68%.