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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

The operating performance of industry-leading company Zhaofeng Holdings (300695.SZ) has shown significant adjustments.

On August 18, the 2024 semi-annual report disclosed by Zhaofeng Holdings showed that in the first half of the year, the company achieved operating income of 325 million yuan, a year-on-year decrease of 3.64%; the net profit attributable to the parent company's shareholders (hereinafter referred to as "net profit") was 66.3079 million yuan, a year-on-year decrease of 13.22%.

This is the first time that Zhaofeng shares has seen a decline in both revenue and net profit since mid-2019.

Zhaofeng shares is mainly engaged in the research and development, production and sales of automotive wheel hub bearing units. It is one of the few companies in China that has completely independent research and development capabilities, can provide professional technical solutions, and mass-produce a full range of automotive wheel hub bearing units.

However, Zhaofeng's operating performance is not ideal. In the eight years from 2016 to 2023, the company's net profit after deducting non-recurring gains and losses (hereinafter referred to as "net profit after deducting non-recurring gains and losses") hovered around 180 million yuan.

A reporter from the Yangtze Business Daily found that by the first half of 2024, some projects raised by Zhaofeng Holdings through its IPO in 2017 still failed to meet expectations seven years later.

In the middle of this year, the company plans to pay a cash dividend of 49 million yuan to shareholders, accounting for 74.51% of the current net profit.

What is highly questionable is that the company's dividends are extremely unstable. In the past four years, it has only paid dividends once.

Revenue and net profit both fell

The performance of Zhaofeng shares has declined again, and the operating pressure is obvious.

According to the semi-annual report, in the first half of this year, Zhaofeng shares achieved operating income of 325 million yuan and net profit of 66.3079 million yuan, down 3.64% and 13.22% year-on-year respectively. The non-net profit was 59.2915 million yuan, down 10.95% year-on-year.

From a single quarter perspective, the company's operating income in the first and second quarters of this year was RMB 152 million and RMB 173 million, respectively, with year-on-year changes of 11.64% and -13.96%; net profit was RMB 26 million and RMB 40 million, respectively, with year-on-year changes of 5.21% and -22.11%. Data shows that the company's revenue and net profit in the second quarter, although increased compared with the first quarter, showed a significant year-on-year decline.

The last time Zhaofeng's revenue and net profit both fell was in mid-2019. At that time, the company's operating income and net profit were 215 million yuan and 80.2555 million yuan, respectively, down 7.85% and 11.99% year-on-year.

Zhaofeng shares did not specifically explain the reasons for the decline in both revenue and net profit in the first half of this year. In the semi-annual report, the company mentioned that at present, the automotive industry is accelerating its development in the direction of the "new four modernizations", and the industry has entered a new development stage with diversified demand and optimized structure. The automotive parts related industries are also facing many changes and requirements. The industry competition is becoming more and more fierce, and the company is facing various difficulties and challenges.

According to Zhaofeng Shares' explanation, the company has strong market competitiveness. The company has developed more than 5,200 types of various types of automobile wheel hub bearing units, covering wheel hub bearing units for major road vehicles from micro cars to heavy vehicles, from traditional fuel vehicles to new energy vehicles. The product models and categories cover the world's major mid-to-high-end passenger cars, commercial vehicle models and various new energy vehicle models including Mercedes-Benz, BMW, Audi, Ford, GM, Volkswagen, Honda, Toyota, Peugeot, etc.

Although Zhaofeng shares have strong market competitiveness, the company's overall operating performance is not ideal.

Zhaofeng shares were listed on the A-share market in 2017. In 2016, before the listing, the company achieved operating income of 511 million yuan, net profit and non-net profit of 199 million yuan and 182 million yuan respectively. From 2017 to 2023, the operating income fluctuated and reached 806 million yuan in 2023, an increase of 57.73% over 2016.

During the same period, the company's net profit and non-net profit fluctuated frequently. The lowest was 126 million yuan in 2021, and the net profit in 2023 was 184 million yuan, lower than that in 2016. From 2017 to 2023, the company's non-net profit was 192 million yuan, 153 million yuan, 201 million yuan, 132 million yuan, 113 million yuan, 149 million yuan, and 182 million yuan, respectively, with obvious fluctuations. The non-net profit in 2023 was the same as that in 2016.

In summary, in the eight years from 2016 to 2023, the company's net profit and non-net profit fluctuated significantly, and overall stagnated.

Only one dividend was paid in the past four years

The profitability of Zhaofeng shares has not seen any significant improvement, and some of the company's fundraising and investment projects have not met expectations.

In September 2017, Megashares went public through its IPO and successfully raised 1.045 billion yuan. After deducting related expenses, the net amount was 958 million yuan, which just met the funds required for the company's IPO project.

According to the prospectus, the company's IPO projects are the annual production of 3.6 million sets of automobile hub bearing unit expansion projects, enterprise technology center upgrade projects, electric vehicle hub motor drive and control system research and development projects, automobile hub bearing unit equipment automation, management intelligent technology transformation projects, and supplementary working capital related to the main business. Except for the working capital supplement project, the rest of the projects had been filed at the time, and the construction period was 24 months.

The company has been listed for 7 years, and the above IPO project has not met expectations.

According to the special report on the deposit and use of raised funds in the first half of 2024 released by Zhaofeng Shares on the evening of August 18, the investment progress of the enterprise technology center upgrade and renovation project is only 44.14%, and the research and development project of electric vehicle hub motor drive and control system has been changed. The annual production capacity expansion project of 3.6 million sets of automobile hub bearing units has been completed and will reach the scheduled usable state by the end of 2023. The project has also undergone some changes. From 2021 to 2023 and the first half of 2024, the benefits realized by the project due to increased production capacity were 50.5433 million yuan, 51.0391 million yuan, 79.6954 million yuan and 10.3031 million yuan respectively. This is the only project that has seen benefits so far, and it has not actually met expectations.

The company changed and added a new project, the construction project of an intelligent factory with an annual output of 30 million automobile hub bearing unit precision forging parts, with an investment progress of 59.06%. The newly added project of establishing a joint venture company "Shaanxi Shaanxi Automobile Zhaofeng Technology Co., Ltd." will have a profit of -5.5502 million yuan in the first half of 2024.

At the beginning of 2022, Zhaofeng shares also raised 230 million yuan through a private placement to be used for the annual production of 480,000 sets of commercial vehicle maintenance-free hub bearing units and remote operation and maintenance platform (Phase I) project and the annual production of 2.3 million sets of new energy vehicle hub bearing units project. The first project was changed to an annual production of 300,000 sets of new energy vehicle electronic control construction project.

After a year and a half, the investment progress of these two projects was 0.45% and 13.03% respectively, and the progress was relatively slow.

Surprisingly, although both mid-term revenue and net profit fell, Mega Holdings plans to pay a cash dividend of 49 million yuan to shareholders, with a dividend rate of 74.51%.

In the four years from 2020 to 2023, the company continued to make profits, but only distributed dividends once in 2021, with a dividend amount of 13 million yuan and a dividend rate of 10.12%.