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Text/Daily Capital

Restructuring is always an attractive feast for the capital market, but we also need to be careful about the thorns.

On August 1, the share price of China Electric Motor Co., Ltd. (hereinafter referred to as China Electric Motor) soared rapidly after the opening, and once rose by nearly 9%. It began to hit the daily limit at around 11 a.m., but the daily limit was broken from time to time during the trading session. As of the close of the day, its share price was 13.27 yuan per share, an increase of 10.03%, and the total market value was 3.121 billion yuan.

This is the sixth consecutive daily limit for China Electric Motor. Since July 23, China Electric Motor has hit the daily limit shortly after the opening, and then hit the daily limit again in the next two days. In the past three trading days, although the stock has hit the daily limit, the trading volume has increased rapidly, and all three days have been close to the historical high volume.

The reason for the daily limit is closely related to its reorganization. On the night of the first daily limit of China Electric Motor, China Electric Motor announced that it had received a notice from the controlling shareholder Ningbo Juntuo Enterprise Management Co., Ltd. (hereinafter referred to as Ningbo Juntuo) and major shareholders Wang Jianyu and Wang Jiankai that day that they were planning to transfer the company's shares, which may lead to a change in the company's control.

However, China Electric Motor also stated that since the matter is under negotiation and there is uncertainty, upon application, its stock will be suspended from the opening of the market on the morning of July 24, and the suspension is expected to last no more than two trading days.The company's controlling shareholder will be changed to Highland Resources and the actual controller will be changed to Guo Wenjun.At the same time, the company's stock will resume trading from the opening of the market on the morning of July 26. After the resumption of trading, its stock price continued to rise by the daily limit.

No wonder some optimistic investors think, "There will be at least 9 daily limit increases, and 4 more..." So, can this beautiful wish come true?

Public data shows that the history of China Electric Motor can be traced back to Wuxi Motor, which was established in 2003, with Wang Jianyu as the legal person. In August 2011, the company was changed to China Electric Corporation. On November 4, 2014, China Electric Motor ushered in its highlight moment and was successfully listed on the Shanghai Stock Exchange with an issue price of 14.88 yuan per share. It mainly develops, produces and sells large and medium-sized DC motors, medium and high voltage AC motors, generators, and power supply systems for motor test stations.

From the financial report level, after the listing of China Electric Motor, its net profit hovered below 50 million before 2019. In 2019, its net profit suddenly soared to 113 million yuan, and in 2020, it created its highest net profit in history of 171 million yuan. But then it fell off a cliff, and the net profit fell to 39.9381 million yuan in 2021. After that, it rebounded slightly, and also fluctuated at the level of 50 million yuan.

Unexpectedly, at the end of 2018, Wang Jianyu's family transferred a total of 21.47% of China Electric Motor's shares to Ningbo Juntuo, and entrusted part of the voting rights of their shares. The equity transfer amounted to 750 million yuan. As a result, Wang Jianyu's family lost its controlling stake in China Electric Motor, and the new controlling shareholder, Ningbo Juntuo, is a state-owned capital platform composed of institutions such as Minmetals Capital. Wang Jianyu also resigned as the company's chairman and became the director and general manager of China Electric Motor.

After the new controlling shareholder entered 2019 and 2020, China Electric Motor's performance grew rapidly. Regarding the huge increase in performance, China Electric Motor said at the time that it was mainly affected by the market, the increase in industry demand, the substantial growth of the company's main business, and the substantial increase in profitability. In addition,The company's fair value change income from trading financial assets in this period increased by RMB 34.3071 million compared with the same period last year., which has a significant impact on the company's performance growth in this period.

"Daily Capital Theory" checked the financial report of China Electric Motor and found that it began to conduct substantial financial management in 2019. The trading financial assets in that year were more than 82.3 million yuan, and reached 223 million yuan in 2020. After that, it decreased year by year. As of the first quarter of 2024, its trading financial assets were 46.5763 million yuan.

Judging from the changes in its fair value change income. In the recent 2021 and 2022, this indicator of China Electric Motor was in a loss state. In the first quarter of 2024, its fair value change income was still a loss of 15.1035 million yuan. Obviously, the effect of financial management is not good.

What is incredible is that on April 18, 2020, the founder Wang Jianyu climbed over the wall and entered the factory of Huayong Electric Motor to take pictures. He was caught by the staff and called the police. The local police then took him away for investigation. The normal logic is that as the founder of a listed company, it is obviously very strange for such a thing to happen. But no one expected that in the morning of April 20, China Electric Motor once hit the daily limit before the market opened, and it was close to the daily limit after the opening, and then fell back. As of the midday close, it was reported at 9.74 yuan, an increase of 7.74%.

As to why Wang Jianyu climbed over the wall to secretly photograph Huayong Electric, some people said that it was to steal technology. However, this view has been questioned by many. In short, perhaps only he himself knows the real reason.

So, who is the new controlling shareholder, and can he bring a bright future to China Electric Motor?

According to currently available information,Guo Wenjun is a genuine "financial sponsor"——It began to acquire Zhula Gold in 2001 and gradually acquired all the shares of the company. The gold mine is located in Alxa, the westernmost part of Inner Mongolia Autonomous Region.It is a very large gold mine.It is still being mined normally.

In 2009, A-share listed company Dayuan Shares (now delisted) took a fancy to the gold mine owned by Guo Wenjun. After several rounds of negotiations, the two parties signed an equity transfer agreement in 2010. Dayuan Shares promised to raise 2.1 billion yuan to acquire 100% of Zhula Gold's assets and the second phase of the low-grade gold ore heap leaching project, which were 1.675 billion yuan and 300 million yuan respectively.

However, in the end, the transaction was suspended because of defects in the equity transfer process of 100% of Zhula Gold held by Guo Wenjun. The following year, Dayuan Shares disclosed a new acquisition plan, in which the major shareholder Shanghai Hongze acquired 79.64% of Zhula Gold and 100% of Damo Mining (the predecessor of Xijin Mining), with the assets valued at 3 billion yuan.

However, the transaction was not successful in the end. Nevertheless, as the price of gold futures rose, Guo Wenjun's assets also grew. So, what is Guo Wenjun's intention in entering the field of wind power motors?

What may disappoint some investors is that according to the disclosed "Detailed Equity Change Report of China Electric Motor Co., Ltd." of Highland Resources, it has no clear plan to change the main business of the listed company or make major adjustments to the main business of the listed company in the next 12 months. After further verification and confirmation from relevant media, Highland ResourcesHighland Resources and its affiliates have no plans to inject their assets and businesses into the listed company through restructuring and listing within the next 12 months.。

In other words, there is no real room for imagination for China Electric Motor in the short term.

What is more noteworthy is that according to preliminary calculations, China Electric Motor is expected to incur a loss in the first half of 2024, a decrease of approximately 310% from the same period last year, and there is a risk of declining performance.

From a technical perspective, China Electric Motor has been rising from the daily limit to huge volumes of shipments for three consecutive days, and news is coming out one after another, so there is a great risk of a surge and a rapid decline.

[The article is for communication only, not investment advice, please be aware of investment risks. It is not easy to write, if your phone still has power, please help like and forward it. Thank you very much]