On April 9, China Tianrui Cement (01252.HK) crashed in the end of the market, causing widespread concern.
On the afternoon of the 9th, China Tianrui Cement suddenly plummeted 99.04% in just 25 minutes near the close, and its share price plummeted from HK$5.1 per share to HK$0.048 per share. The total market capitalization has also evaporated from around HK$14 billion to HK$140 million.
Red Star Capital Bureau noted that on the morning of April 10, China Tianrui Cement announced on the Hong Kong Stock Exchange that it would temporarily stop trading from 9 a.m.
Topics such as "plummeting 99%" and "becoming an immortal in an instant" also continue to spark discussions among netizens. So what happened in the 25 minutes near the close of trading yesterday? What are the fundamentals of China Tianrui Cement? What are the reasons behind the plunge?
Part 1: Plummeting by more than 99%
What is the concept of a 99.04% plunge? Netizens ridiculed: If someone bought 1 million Hong Kong dollars of China Tianrui Cement after the lunch break yesterday, the market value will only be 9,600 Hong Kong dollars after the market closes, and it will not even be 10,000 Hong Kong dollars.
What really happened that afternoon?
Judging from yesterday's transaction information, China Tianrui Cement traded 281 million shares on the same day, with a turnover of HK $24.3816 million. Among them, the buying order was mainly Futu Securities, which was 22.777 million shares, while the selling order was mainly Zhongwei Financial (00245.HK), selling 20.046 million shares.
It is understood that the users of Futu Securities, which buy orders, are mainly retail investors. For retail investors, it may be difficult to resist the temptation of "buying the bottom" in the face of a stock that has plummeted by 99%. On the same day, in addition to Zhongwei Financial, Guoyuan Securities, Fosun International, and Zheshang International Financial positions sold 5.87 million, 4.82 million and 4.16 million shares respectively.
According to CCASS data, as of last Wednesday (April 3), China Tianrui Cement shares were mainly concentrated in Huarong International and ABC International, holding 470 million shares (16%) and 436 million shares (14.8%) respectively, while Zhongwei Financial held 82.2 million shares (3%) on the same day.
According to the latest financial report data, Zhongwei Financial's revenue in 2023 will be HK $114 million, a year-on-year decrease of 53.07%; The loss attributable to the company's owners was HK $24.834 million, a year-on-year decrease of 96.02%.
The highest annual revenue in the previous five years was in 2020, at HK$318 million, and the company's current market capitalization is less than HK$2 billion. In the brokerage industry, Zhongwei Financial's revenue and market value are small.
Regarding the plunge of China Tianrui Cement, on the afternoon of April 9, the staff of China Tianrui Cement Office responded: It is not clear why the stock price plummeted, and the company's production and operation are normal.
Part II: About China Tianrui Cement
China Tianrui Cement is a cement production enterprise in Ruzhou City, Pingdingshan District, Henan Province, and the actual controller is Li Liufa.
In the secondary market, China Tianrui Cement was listed on the main board of Hong Kong on December 23, 2011, and its share price rose from about HK$2 per share in 2011 to a high of HK$8.89 per share in 2020, and ranked seventh in the comprehensive strength of China's cement listed companies in 2021. In terms of business, it is mainly distributed in Henan, Liaoning, Anhui, Tianjin and other provinces and cities, and its clinker, cement and aggregate production capacity ranks among the top in the country.
From the perspective of business, the data of the past five years show that the company's revenue from 2019 to 2020 basically remained at about 12 billion yuan, and in 2021, the revenue reached a high point of 12.717 billion yuan, and then continued to decline in the following two years, and the overall revenue showed weakness.
From the perspective of profits, the net profit of the enterprise from 2019 to 2020 was basically maintained at about 1.8 billion yuan, and the net profit began to decline in 2021, and the net profit in 2022 decreased sharply to 449 million yuan, and in 2023, it will turn from profit to loss.
Source: Corporate Financial Report, Red Star Capital Bureau
According to the 2023 annual report of China Tianrui Cement, the company's revenue in 2023 will be 7.889 billion yuan, a year-on-year decrease of 28.64%, and the loss attributable to the company's owners will be 634 million yuan, turning into a loss year-on-year.
In terms of gross profit margin, the gross profit margin of enterprises decreased from 24.5% in 2022 to 20.7% in 2023. In this regard, the annual report mentioned that the decline in gross profit margin is mainly due to the fact that the decline in cement prices in 2023 is greater than the decline in cement ton costs.
In addition, according to the statistics of the digital cement network of the China Cement Association, in 2023, the average transaction price of the national cement market will fall by 15% year-on-year. Under the influence of multiple factors, it is estimated that the profit of the cement industry in 2023 will be about 32 billion yuan, a year-on-year decrease of about 50%.
It is worth mentioning that Li Liufa is also known as the "Henan cement king" by the outside world. In the 2018 Hurun Report, he and his wife Li Fengjiao ranked second on the Henan Rich List with a net worth of 15.5 billion yuan. According to the "2024 Hurun Global Rich List", the wealth of the Li Liufa family reached 27.5 billion yuan, ranking 900th.
Part 3: Why the Crash?
Why the share price of China Tianrui Cement will plummet, the market speculates that the company's poor liquidity may be one of the reasons.
In fact, China Tianrui Cement, as a listed company with a market value of more than 10 billion, had a low trading volume. On the previous trading day (April 8, 2024), the single-day trading volume of China Tianrui Cement was less than HK$500,000.
In the past month, it is also the norm to have a single-day trading volume of less than one million Hong Kong dollars, which means that China Tianrui Cement has a serious lack of liquidity.
On the other hand, public data shows that China Tianrui Cement has stock pledges, and the pledge amount involved is not small.
China Tianrui Cement announced in January that on January 18 this year, 173 million yuan of term loan financing had been settled, and the relevant controlling shareholder Yu Kuo pledged 160 million shares as collateral for the loan had been released. On the same day, the Group was granted a loan facility of up to approximately RMB166 million by the lender for a period of 12 months under another loan facility, with 97 million shares pledged by Yu Kuo to the lender as loan security. The pledged shares account for approximately 3.3% of the equity.
According to the Southern Metropolis Daily, an analyst of a Chinese-funded brokerage firm in Hong Kong said, "The stock price plummeted by 99%, and it happened before the close, and there was a high probability that the stock was pledged. ”
In addition, on April 9, Hong Kong stocks plummeted at the same time, not only China Tianrui Cement, Haosen Financial Technology (03848. HK), Zhongmu International (01822. HK) also suffered a flash crash, falling by 90.96% and 45.5% respectively as of the close of the day, and its market value evaporated to HK$837 million and HK$243 million respectively.
Red Star News reporter Liu Mi
Edited by Deng Lingyao
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