news

reporter | shen wei

another listed company has been put on the military procurement “blacklist” due to illegal purchasing practices.

in the early trading of august 27, huaru technology (301302.sz) issued an announcement. according to the news on the military procurement network (hereinafter referred to as "military procurement network") on august 26, the procurement planning office of the combat logistics department of the joint logistics support force has banned the company from participating in the military's material engineering service procurement activities from november 22, 2023 to november 22, 2026 in accordance with relevant regulations on military supplier management.

affected by this news, huaru technology's stock price plummeted by more than 10% at the opening on august 27, and finally closed at 13.47 yuan, a drop of 14.85% on the day. since the beginning of the year, the stock price has been nearly halved. in the morning trading on august 28, the stock fell slightly and then became popular.

suspended for three years

interface news reporters noted that as early as november 2023, huaru technology had announced that it had been included in the military procurement suspension list by the military procurement network. since then, the company has repeatedly stated that it has organized self-inspections and actively appealed. but at the same time, according to changes in the market environment and customer needs, the company has also adjusted its internal organizational structure and personnel structure to reduce costs and increase efficiency.

regarding the final "shoe dropping" of this penalty, on august 27, huaru technology's securities office stated that the company disclosed the relevant penalty as soon as it learned about it. from the announcement given, it did not indicate whether there is any possibility of appeal or reduction of penalty. the company will definitely actively strive for (appeal) in the future.

it is reported that the reason why huaru technology was suspended from purchasing this time was that it engaged in illegal activities such as collusion in bidding and false bidding during its participation in the equipment procurement project (project code: 2019-lb03-1179-3).

in addition to the company being suspended from purchasing, during the prohibition period, other companies controlled or managed by li jie, the then legal representative of huaru technology, were prohibited from participating in the above-mentioned military procurement activities, and the authorized representative gao jiancheng was prohibited from acting as an agent for other suppliers to participate in the above-mentioned military procurement activities.

it is worth noting that li jie, one of the actual controllers of huaru technology, resigned as chairman and legal representative of the company during the board of directors election in mid-2023.

according to the information, huaru technology focuses on military simulation and is committed to building china's own military simulation brand, providing customers with high-quality professional simulation products and technology development services in the fields of combat experiments, simulation training, equipment demonstration, test evaluation, and comprehensive support. the company's main customers are the military and defense industry enterprises.

channels for obtaining orders include the military procurement network, the army weapons and equipment procurement information network, bidding agencies, etc. during the prohibited period, the company cannot obtain orders through the military procurement network, but can obtain orders through channels such as the army weapons and equipment procurement information network and bidding agencies.

in response, huaru technology stated that the matter will not affect the company's continued operations.

the impact on orders may be more than 40%

it will not affect the company's continued operation, but the impact of the suspension of procurement on huaru technology's performance is not small.

according to huaru technology, the average proportion of orders the company obtained through the military procurement network channel from 2020 to 2023 was 37.33%.

it is worth noting that, in fact, since november 2023, huaru technology’s revenue orders have been reduced after the military procurement network suspended its purchases. huaru technology’s securities office said that the specific revenue impact still depends on the overall situation in 2024.

the financial report shows that in 2023, the company achieved a total operating income of 362 million yuan, a year-on-year decrease of 56.55%; the net profit attributable to the parent company was a loss of 222 million yuan, compared with a profit of 134 million yuan in the same period last year; the non-net profit was a loss of 242 million yuan, compared with a profit of 123 million yuan in the same period last year. among them, the loss in the fourth quarter alone exceeded 200 million yuan.

in the 2023 annual report, huaru technology also stated that during the reporting period, due to the suspension of procurement list items by the military procurement network and cyclical adjustments in the military industry, the company's new orders decreased and project acceptance was postponed. the main business revenue in the third and fourth quarters declined significantly, resulting in a significant decline in main business revenue in 2023.

in the first quarter of this year, huaru technology achieved operating income of 37.1399 million yuan, a year-on-year increase of 92.99%. huaru technology said, "the company actively explores channels for obtaining orders and promotes the implementation of projects. the number of projects executed and project acceptance has increased compared with the same period last year. in terms of products, the company's hardware sales business such as simulation training equipment has become more mature, and the corresponding income proportion and scale have increased."

in the latest announcement, the company stated that it will deepen the upgrade of the industrial chain from military simulation to the metaverse, actively expand related civilian businesses, and strive to transform the company's accumulated technological achievements in the military and military industry fields into industrial digital twins and related product research and development and digital content production in the field of national defense culture. it will actively explore digital creative application directions such as national defense education and military games, and carry out serious game development and operation, national defense course customization and promotion, immersive cultural and tourism project construction and management and other businesses.

at the same time, the company is actively exploring overseas markets, striving to achieve diversified revenue and multi-channel layout, and creating a stable and sustainable development model.

in addition, huaru technology pointed out that this decision on handling violations does not constitute an administrative penalty and does not touch upon the major illegal forced delisting circumstances stipulated in the "shenzhen stock exchange chinext stock listing rules."