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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

Juewei Foods (603517.SH), the “No. 1 in braised food,” has been filed a case by the China Securities Regulatory Commission.

On the evening of August 15, Juewei Foods issued an announcement stating that on the same day, the company received a notice of filing a case from the China Securities Regulatory Commission, and the company was filed by the China Securities Regulatory Commission for suspected illegal and irregular information disclosure.

A reporter from the Yangtze Business Daily found that in April last year, Juewei Foods also had an information disclosure scandal, and the company and its chairman, financial director and others were punished by regulators.

As the leader in the braised food industry, Juewei Foods relies on the franchise model to cover its business across the country. By the end of 2023, the company's number of distributors reached 15,950.

However, in recent years, Juewei Foods has generally shown an increase in revenue but not in profit. In 2023, the company's operating income exceeded 7 billion yuan, a record high, but the net profit attributable to the parent company's shareholders (hereinafter referred to as "net profit") was still lower than the 2016 level.

In the secondary market, Juewei Foods' stock price "keeps falling". Influenced by the news of the CSRC's case filing, on August 16, the company's stock price hit the limit down, closing at 13.22 yuan per share, a drop of nearly 90% from the high point three years ago, and the corresponding market value evaporated by about 57.5 billion yuan.

Case filed for information disclosure violations

Juewei Foods’ information disclosure may fail again.

According to the announcement, Juewei Foods received a "Notice of Case Filing" issued by the China Securities Regulatory Commission on August 15. On June 7 this year, the China Securities Regulatory Commission decided to file a case against the company because the company was suspected of violating laws and regulations in information disclosure.

On June 7, the China Securities Regulatory Commission decided to file a case against Juewei Foods, but the company did not disclose the matter until more than two months later, on August 15. The long interval between the two was somewhat surprising.

Regarding the above-mentioned case filed by the China Securities Regulatory Commission, Juewei Foods stated that at present, the company's various production and business activities are being carried out normally. During the investigation period, the company will actively cooperate with the investigation of the China Securities Regulatory Commission.

So, in what aspects did Juewei Foods violate laws and regulations in information disclosure? The company has not disclosed it, and the outside world has no way of knowing for the time being.

This is not the first time that Juewei Foods has violated laws and regulations in information disclosure.

On April 29, 2023, Juewei Foods was punished by the Hunan Securities Regulatory Bureau for illegal and irregular information disclosure.

The specific reasons for the punishment involve four items. First, the equity investment transfer agreement was not disclosed in a timely manner. On June 29, 2021, Shenzhen Wangju, a wholly-owned subsidiary of Juewei Foods, signed an equity transfer and capital increase agreement with Jiangsu Hefu's E-round financing investors and related shareholders. Four months later, the transaction was completed. Shenzhen Wangju's equity ratio in Jiangsu Hefu dropped from 23.08% to 16.92%, and it recognized revenue of US$28 million, which had an impact of 114 million yuan on the company's net profit. This transaction was not disclosed until October 25, 2021.

Second, the joint investment of related parties was not disclosed. Hunan 415 is a company in which Shenzhen Wangju participated in the investment, holding 65.35% of the shares. In September 2019, Chen Xuan, the son of Chen Geng, a director of Juewei Foods, invested 20 million yuan in Hunan 415 and held 4.4% of the shares. This is a related transaction, and there are other related transactions of joint investment that the company did not disclose.

Third, related parties and related transactions were not disclosed. On March 9, 2021, Hunan 415, Shanghai Xinxiang, Shanghai Ganxiang and others acquired 85% of the equity of the original shareholders of Changsha Caiyun, a supplier of Juewei Foods. Among them, the above three companies acquired 15.5%, 20% and 17% respectively. On September 25 of that year, Juewei Foods disclosed that its former chief financial officer Peng Caigang served as the supervisor of Changsha Caiyun. The wife of Peng Gangyi, the then secretary of the board of directors of Juewei Foods, Wu Mou, held a 15% stake in Shanghai Xinxiang. In addition, relatives of Juewei Foods directors, supervisors and other relatives held part of the equity of Shanghai Xinxiang. Juewei Foods did not identify Changsha Caiyun as a related party, and did not identify the transactions with Changsha Caiyun as related transactions.

Fourth, the operating expenses of the stores, franchise fees, and management fees were used for business purposes. Juewei Foods collected the money through the personal accounts of employees and did not deposit it into the company account.

Based on the above-mentioned illegal and irregular behaviors, the Hunan Securities Regulatory Bureau decided to take regulatory measures of issuing warning letters to Juewei Foods, Chairman Dai Wenjun, former Secretary of the Board Peng Gangyi, former Financial Director Peng Caigang, Financial Director Wang Zhihua, Director Wang Zhenguo, etc.

The stock price has fallen 50.78% this year

The global economy is recovering, catering consumption is picking up, and Juewei Food’s operating performance is also recovering, but there is still some distance compared to before the epidemic.

On March 17, 2017, Juewei Foods went public on the A-share market through an IPO. Before and after the listing, from 2012 to 2019, the company's operating income and net profit continued to increase. In 2019, the operating income and net profit were 5.172 billion yuan and 801 million yuan, respectively, an increase of 162.67% and 426.97% over 2012.

Since 2020, affected by the epidemic and other factors, Juewei Food's operating performance has fluctuated significantly. From 2020 to 2023, its operating income continued to maintain a good momentum of uninterrupted growth, reaching 7.261 billion yuan in 2023, a record high. During the same period, the company's net profit was 701 million yuan, 981 million yuan, 233 million yuan, and 340 million yuan, respectively, with year-on-year changes of -12.46%, 39.86%, -76.29%, and 46.63%.

In 2023, the company's net profit will be 340 million yuan, less than the net profit of 380 million yuan in 2016. However, the operating income in 2023 will more than double that of 2016.

This shows that the company's revenue increased but profits did not.

In the first quarter of this year, the company achieved operating income of 1.695 billion yuan and net profit of 165 million yuan. The net profit has rebounded significantly, but it has not yet returned to the high level before the epidemic.

In the secondary market, Juewei Food’s stock price has performed poorly recently.

The candlestick chart shows that on February 18, 2021, Juewei Foods' stock price reached a high of 107.88 yuan per share, and then the stock price continued to fall. By August 16 this year, the stock price fell to 13.22 yuan per share, a range of decline of about 87.75%. Since the beginning of the year, the company's stock price has continued to fall from 26.86 yuan per share, and by August 16, the range of decline was 50.78%.

At present, the market value of Juewei Foods is only 8.195 billion yuan, which has evaporated about 57.5 billion yuan compared with its peak market value of 65.659 billion yuan in 2021.

Since the beginning of this year, funds have been reducing their holdings of Juewei Foods. At the beginning of this year, fund companies held a total of 80.3171 million shares of Juewei Foods, which dropped sharply to 16.5257 million shares at the end of the first quarter of this year and 15.9573 million shares at the end of the second quarter (the second quarter data is not officially released data).