“Investor Network” Zhang Wei
In recent years, new energy vehicles have developed rapidly, and demand for new energy battery trays continues to increase. Some battery tray manufacturers with good performance, large scale, and advanced technology are also expected to become “good helpers” for listed companies to enrich their performance.
In January, Huada Automobile Technology Co., Ltd. (hereinafter referred to as “Huada Technology”, 603358.SH), a leader in automotive stamping parts, disclosed a response notice to an inquiry letter from the Shanghai Stock Exchange, explaining the performance of the proposed merger and acquisition company, whether the transaction had potential interest arrangements, and whether insider trading was suspected before stock trading was suspended.
According to the annual report, Huada Technology's revenue in 2022 increased 9.46% year on year, but net profit decreased 27.35% year on year. It remains to be seen whether Huada Technology can reverse its “increase revenue without increasing profit” through mergers and acquisitions of high-quality assets.
Regulatory Inquiries Agency Investors Withdrawal
On December 26, 2023, Huada Technology released the “Plan on Issuing Shares and Paying Cash to Purchase Assets and Raise Supporting Funds”. According to the plan, Huada Technology plans to purchase 44% of the shares of Jiangsu Hengyi Industrial Technology Co., Ltd. (hereinafter referred to as “Jiangsu Hengyi”) by issuing shares and paying cash. The counterparties are five natural person shareholders, including Ju Xiaoping, He Liping, Wan Xiaomin, Zheng Xinrong, and Zou Zhanwei.
According to an interim announcement issued on the same day, Huada Technology plans to use its own capital to purchase the remaining 10.2% shares in Jiangsu Hengyi. The counterparties are two investment institutions, including Yibin Chendao New Energy Industry Equity Investment Partnership (limited partnership) (hereinafter referred to as “Yibin Chendao”) and Ningbo Meishan Bonded Port Area Chaoxing Venture Capital Partnership (limited partnership) (hereinafter referred to as “Ningbo Chaoxing”).
According to reports, Jiangsu Hengyi's main products are new energy battery trays. Due to the development of the new energy vehicle industry, Jiangsu Hengyi's performance soared due to the positive impact of the increase in demand for battery trays to support it. In 2021, 2022 and the first 10 months of 2023, Jiangsu Hengyi's revenue was 767 million yuan, 1,143 million yuan, and 1,328 billion yuan respectively, with net profit of 27.1353 million yuan, 29.9294 million yuan and 81.64 million yuan respectively.
In addition, according to company research information, Huada Technology is the largest shareholder in Jiangsu Hengyi, holding 45.8%; Ju Xiaoping's five natural shareholders hold a total of 44% of Jiangsu Hengyi's shares, while Yibin Chendao and Ningbo Chaoxing hold 9.18% and 1.02% of the shares. Huada Technology, 5 natural person shareholders, and 2 investment institutions hold 100% of Jiangsu Hengyi's shares.
As can be seen, as the controlling shareholder, Huada Technology's intention to acquire shares of Jiangsu Hengyi's other shareholders is also obvious. It wants to buy all the shares of Ju Xiaoping's seven shareholders so that Jiangsu Hengyi can become a wholly-owned subsidiary, thus enjoying its performance dividends exclusively.
Arguably, Jiangsu Hengyi's performance has soared, and there is nothing wrong with Huada Technology's desire to wholly own it. However, the strangeness of this merger and acquisition is that Yibin Chendao and Ningbo Chaoxing are strategic investors introduced by Jiangsu Hengyi during the capital increase in June 2022, and so far they have only been involved for 18 months. After such a short time, why did they quit in a hurry?
In response, the Shanghai Stock Exchange issued an inquiry letter on January 9 this year requesting Huada Technology to “explain the background and main considerations of the relevant transaction, taking into account the circumstances of Yibin Chendao and Ningbo Chaoxing's investment in Jiangsu Hengyi after only 18 months, whether there is a 'clear share real debt' situation, and whether there are any other potential benefit arrangements.”
In January, Huada Technology disclosed an inquiry letter in response to the announcement that due to adjustments in Jiangsu Hengyi's listing plan, Yibin Chendao plans to withdraw based on its own funding arrangements and fund investment plans, and Ningbo Chaoxing plans to withdraw based on its own capital and investment planning arrangements.
Huada Technology specifically mentioned that the investment agreement signed between Jiangsu Hengyi and Yibin Chendao and Ningbo Chaoxing when they took shares did not agree on terms such as capital protection and income protection, and that during the shareholding period, Jiangsu Hengyi did not regularly pay fixed income to Yibin Chendao and Ningbo Chaoxing, there was no “clear share actual debt” situation, and there were no other potential benefit arrangements.
Huada Technology also stated that the withdrawal of Yibin Morning Road and Ningbo Chaoxing will not have a significant adverse impact on Jiangsu Hengyi's customers and order acquisition. Before Yibin Morning Road and Ningbo Chaoxing took shares, Jiangsu Hengyi had already entered the supplier system of SAIC Motor Group and Ningde Times.
According to the response document, in 2021, 2022, and the first 10 months of 2023, Jiangsu Hengyi's top five customers included companies such as SAIC Motor Group, Ningde Times, Xiaopeng Motors, and Honeycomb Technology. Huada Technology believes that Jiangsu Hengyi has stable cooperative relationships with major customers such as SAIC Motor Group.
Short-term transactions for direct family members of directors and executives
Judging from financial data, Jiangsu Hengyi is a veritable “cash cow.” Another important reason why Huada Technology is anxious to “take back” all of Jiangsu Hengyi's shares is that it wants to use Jiangsu Hengyi's profitability to boost the performance of listed companies.
According to the annual report, Huada Technology's 2022 revenue was 5.163 billion yuan and net profit was 260 million yuan. While revenue increased 9.46% year-on-year from 4.717 billion yuan in 2021, net profit decreased 27.35% year-on-year from 358 million yuan in 2021.
According to reports, Huada Technology's main business is the development, production and sale of passenger car body parts and related molds. In 2022, traditional fuel vehicle body parts accounted for nearly 75% of revenue, new energy vehicle parts accounted for 20% of revenue, and molds and other revenue accounted for about 5% of revenue.
In order to mitigate the “increase in revenue without increasing profit” situation, Huada Technology stated in its 2022 annual report that it is necessary to optimize the customer structure, accelerate the development of NEV customer resources on the basis of consolidating the traditional fuel vehicle stamping and welding parts business, and keep up with the pace of transformation of fuel vehicle manufacturers to NEVs to simultaneously support the development of NEV body parts products for customers.
In the first three quarters of 2023, Huada Technology's revenue and net profit were 3,628 million yuan and 262 million yuan, up 3.08% and 7.83% year-on-year respectively. CICC released a research report stating that Jiangsu Hengyi, as one of the leading companies in NEV battery trays and was also a core supplier in the Ningde era, is expected to fully benefit from the iterative upgrading of battery system technology. Coupled with the increase in the share of the new energy business, Huada Technology is expected to enter a period of rapid development.
On the other hand, due to planning a major asset restructuring, Huada Technology applied for suspension of stock trading on November 19, 2023 on November 18, 2023. Excluding market factors and same-sector factors, the cumulative rise and fall within the 20 trading days before the suspension of trading was 24.30% and 27.47%, respectively, and both exceeded 20%.
Changes in Huada Technology's stock price before the proposed suspension of trading attracted the attention of the Shanghai Stock Exchange. The Shanghai Stock Exchange requested Huada Technology to self-check illegal situations such as insider information registration and insider information management, the specific source of the market rumor on the day of the application for suspension of trading, the relevant insider information on the stock trading situation of the person familiar with the relevant insider information, and whether it is suspected of insider trading.
Huada Technology replied that on December 18, 2023, due to planning to apply for the suspension of stock trading in this transaction, the company has formulated a strict and effective confidentiality system in accordance with relevant laws and regulations, adopted necessary and sufficient confidentiality measures, limited the scope of knowledge of relevant sensitive information, and strictly fulfilled its obligation to keep this transaction information confidential before it is disclosed in accordance with law. At the same time, after online verification, no specific source of market rumors was found on the day of the application for suspension of trading.
Huada Technology also revealed that during the six months before the suspension of trading (December 19, 2023), some personnel traded shares of listed companies. Specifically, Ge Jiacheng, son of the company's director and general manager Ge Jianghong, bought a total of 2,700 shares from July 11 to August 29, 2023, and sold a total of 2,700 shares from October 27 to December 4; company executive Liu Zhe bought 3,800 shares on July 21, 2023 and sold 3,800 shares on August 2.
On January 19, Huada Technology issued the “Notice on Short-Term Transactions with Direct Family Members of Directors and Executives”, stating that Ge Jiacheng's profit of 6083 yuan from this short-term exchange was transferred to the company's account on January 18, 2024.
Huada Technology also stated that Ge Jiacheng's act of trading shares of listed companies is a personal financial investment. Ge Jianghong is unaware of the transaction; Ge Jianghong and his son Ge Jiacheng are already deeply aware of the seriousness of this short-term transaction and will strengthen their study of relevant laws and regulations in the future to prevent such incidents from happening again.
As of the close of trading on January 19, Huada Technology's stock price was 22.5 yuan/share, down 3.76% in 2024, and the company's market value was 9.888 billion yuan. (Produced by Thinking Finance) ■