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China Fund News reporter Nan Shen

On the evening of August 6, Longping High-Tech announced that the company plans to issue no more than 152 million A shares to its controlling shareholder CITIC Agriculture at a price of 7.87 yuan per share. It is expected to raise no more than 1.2 billion yuan. The net amount of funds raised after deducting issuance expenses will be used entirely to repay bank loans and supplement working capital.

After the completion of this issuance, CITIC Agriculture and CITIC Industrial Bank's combined shareholding ratio in Longping High-Tech will increase from 17.36% to 25.93%.

Longping High-Tech said that CITIC Group acquired shares in 2016 and became the largest shareholder. Through this issuance, CITIC Agriculture will provide long-term financial support for the development of the listed company, further consolidate the foundation for the sustained and stable development of Longping High-Tech, and reflect CITIC Agriculture's firm confidence in the company's future development prospects.

Fixed increase is conducive to alleviating high debt ratio

According to the announcement, the target of this issuance of shares by Longping High-Tech is CITIC Agriculture, the company's controlling shareholder, and the target of the issuance subscribes to the company's shares issued in cash in RMB. CITIC Agriculture is a related party of the company, and CITIC Agriculture's subscription of the issued shares constitutes a related transaction.

The total amount of funds raised from the issuance of shares to specific objects this time shall not exceed RMB 1.2 billion (including the principal amount). The net amount of funds raised after deducting relevant issuance expenses is intended to be used entirely to repay bank loans and replenish working capital. The issuance price this time is RMB 7.87 per share (the latest price is RMB 10.1 per share). The number of shares issued this time is determined by dividing the total amount of funds raised by the issuance price. The number of shares to be subscribed shall not exceed 152 million shares (including the principal amount), which shall not exceed 30% of the company's total share capital before the issuance to specific objects this time.

After the completion of this issuance, the combined shareholding ratio of CITIC Agriculture and CITIC Industrial in Longping High-Tech will increase from 17.36% to 25.93%. After the completion of this issuance, the shares subscribed by the issuance objects shall not be transferred within 18 months from the date of completion of the issuance.

The announcement stated that in 2016, CITIC Group became the largest shareholder of Longping High-Tech, taking the first step into the seed industry. Since then, CITIC Group has firmly supported the high-quality development of Longping High-Tech in all aspects and is committed to building Longping High-Tech into a world-class seed industry group. Through this issuance, CITIC Agriculture will provide long-term financial support for the development of the listed company, further consolidate the foundation for the sustained and stable development of Longping High-Tech, and reflect CITIC Agriculture's firm confidence in the company's future development prospects.

In addition, the announcement stated that Longping High-Tech currently has a high asset-liability ratio, a large amount of financial expenses, and a heavy financial burden. This issuance will help reduce the company's asset-liability ratio. In recent years, Longping High-Tech has had less equity financing, and the company's asset-liability ratio has remained at a high level for nearly a year. The asset-liability ratio at the end of March 2024 was 62.8%, higher than the industry average of 34.19%. As of the end of March 2024, the company's total liabilities were 16.893 billion yuan, of which short-term liabilities were 6.516 billion yuan.

Revenue has increased steadily in recent years, but net profit has fluctuated greatly

According to data, Longping High-Tech was established in 1999 and listed in 2000. It is a modern seed industry high-tech group established by Academician Yuan Longping as one of the main initiators, and is also the core platform of the crop breeding field under CITIC Group. The company is a leading "breeding, propagation and promotion integrated" seed company in China, with a global leading hybrid rice seed business, a leading hybrid corn seed business in China and a top three in Brazil, and a leading pepper, cucumber, millet and sunflower business in China.

The company's independently developed rice, corn and other major crop varieties have been promoted to a total of 250 million mu, with a cumulative increase in grain production of more than 5 billion kilograms and a cumulative increase in farmers' income of 12 billion yuan. In 2022, the company and its major industrial subsidiaries were selected into the list of national seed industry enterprises, and are the main force in implementing the national food security strategy and implementing the "seed industry revitalization action".

In recent years, Longping High-Tech's main business has maintained steady growth, with operating income increasing from 3.13 billion yuan in 2019 to 9.233 billion yuan in 2023, an increase of about 2 times. However, the company's net profit fluctuates greatly, with losses in two of the past five years, and non-net profits in the past three years.

According to Longping High-Tech's previous performance forecast, the company expects to make a profit of 90 million to 120 million yuan in the first half of 2024, but its net profit after deducting non-operating items will be -290 million to -220 million yuan.

As of the close of trading on August 6, Longping High-Tech's latest market value was 13.3 billion yuan. As of the end of the first quarter of this year, the company had 121,000 shareholders.

Editor: Xiaomo

Audit: Wooden Fish

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