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3 billion listed companies "swallow" 20 billion unicorns, Zhu Shihui can't wait for the IPO of Pioneer Electric?

Blue Whale News, October 10 (Reporter Shao Yuting) After the "six mergers and acquisitions" landed, the activity of A-share mergers and acquisitions has increased significantly, and a few days ago, a 3 billion market value listed company intends to swallow the acquisition of a unicorn with a valuation of 10 billion yuan, which has attracted much attention from the market.

On September 30, Guangzhi Technology (300489. SZ) announced that the company is planning to purchase 44.9119% of the shares of Pioneer Electronic Technology Co., Ltd. (hereinafter referred to as "Pioneer Electronics") by issuing shares.

It is worth noting that the actual controller of the two companies is Zhu Shihui, so this transaction is a connected transaction. However, in February this year, Pioneer Electric Technology has launched IPO listing counseling, why did it suddenly change lanes and choose to be swallowed up by Guangzhi Technology, which has been losing money for many years? In this regard, Blue Whale News called and sent a letter to both parties, but has not received a reply as of press time.

Guo Tao, an investor and senior artificial intelligence expert, said in an interview with Blue Whale News that since the actual controller of the two parties is the same person, there may be a risk of benefit transfer in this merger and acquisition transaction. In addition, the integration after the merger and acquisition, how to achieve business synergy and personnel placement are all issues that need to be considered.

After becoming the owner, the performance was lost, and Zhu Shihui was fined for occupying the funds of listed companies

As early as 2012, Guangdong Pioneer Rare Materials, the controlling shareholder of Pioneer Electronics, had broken through the GEM IPO, but due to significant uncertainty in the company's sustained profitability and other reasons, the CSRC did not approve the company's listing application.

In April 2019, Zhu Shihui, then chairman of Guangdong Pioneer Rare Materials, obtained control of the listed company CALC through the transfer of Yuebang Investment Agreement, and renamed it Guangzhi Technology. Then the company threw out a fixed increase plan, and Zhu Shihui subscribed for 439 million yuan. After several adjustments, the total amount of funds raised reached 731 million yuan, but all the funds raised were used to supplement liquidity. As a result, Zhu Shihui directly obtained 23.06% of the company's shares, and the total number of voting shares owned or controlled by the company accounted for 44.09%.

However, in the past few years since Zhu Shihui became the owner of Guangzhi Technology, he has not fundamentally improved the company's profitability, and in recent years, the performance of Guangzhi Technology has declined to a loss year by year. According to the financial reports of previous years, from 2020 to 2023, the company's operating income will be 415 million yuan, 724 million yuan, 936 million yuan, and 1.011 billion yuan respectively, a year-on-year increase of 221.69%, 74.29%, 29.24%, and 8.09%; The net profit was 24 million yuan, 04 million yuan, -114 million yuan and -241 million yuan respectively. In the first half of 2024, Guangzhi Technology achieved operating income of 572 million yuan, a year-on-year increase of 19.41%; The net profit was a loss of 35.4112 million yuan, a decrease from the same period last year.

Zhu Shihui also encountered twists and turns in the capital planning of A-shares, Guangzhi Technology and Guangdong Pilot Rare Materials, an affiliated company that failed in the previous IPO, jointly established a joint venture Anhui Zhongfei, and then Anhui Zhongfei transferred 55.56% of the equity of its subsidiary Anhui Guangzhi to Guangdong Pioneer Rare Materials free of charge, and Anhui Guangzhi mainly implements and operates infrared optics and laser device industrialization projects.

However, at the beginning of 2021, Guangzhi Technology issued an announcement saying that Anhui Guangzhi has repeatedly provided funds to the actual controller and the enterprises controlled by it through third parties, forming a non-operating capital occupation, with a cumulative amount of 831 million yuan, so it was issued a decision on administrative supervision measures by the China Securities Regulatory Bureau.

The left hand is down to the right hand, and Guangzhi Technology is struggling to survive on its own

Zhu Shihui's left hand to the right hand or there is also a bit of "helplessness", after entering the Guangzhi Technology, the listed company has been losing money for two and a half consecutive years, if the financial situation continues to deteriorate, Guangzhi Technology may come to the verge of delisting, from the current financial situation, Guangzhi Technology is increasing marketing efforts, in the first half of this year, Guangzhi Technology's sales expenses increased from 7.7373 million yuan last year to 15.8901 million yuan in the first half of this year, an increase of more than doubled, and the research and development expenses in the same period fell from 117 million yuan in the first half of last year to 74.6696 million yuan in the first half of this year, and the increase in sales expenses was mainly due to the growth of sales personnel. It is not difficult to see that Guangzhi Technology is actively adjusting the structure of expenses during the period to promote marketing and expand the scale of operating income.

At the end of 2023, the inventory of Guangzhi Technology was 677 million yuan, and as of the end of June 2024, the inventory of Guangzhi Technology rose to 867 million yuan, accounting for 24.67% of the total assets, and the inventory turnover rate also decreased from 1.34 times at the end of 2023 to 0.59 times at the end of June 2024, which means that the ability to convert inventory into cash continues to decline.

As of the end of June 2024, the accounts receivable on the books of Guangzhi Technology was 231 million yuan, the same as the end of 2023, but its accounts receivable turnover rate has dropped from 4.66 times at the end of 2023 to 2.47 times at the end of June 2024. Guangzhi Technology may face the dual impairment risk of inventory assets and accounts receivable, which will directly eat up the company's profits.

As of the end of June, Guangzhi Technology's short-term borrowings were 273 million yuan, and the non-current liabilities due within one year were 377 million yuan, compared with more than 50 million monetary funds, Guangzhi Technology's short-term debt repayment ability is very weak.

The production and sales of infrared optical products with a gross profit margin of 22.68% are mainly relied on to drive the enhancement of the sustainable profitability of Guangzhi Technology, which seems to be very difficult at present.

20 billion unicorns gave up IPOs, and a huge amount of M&A funds were paid by issuing shares

The Conductive Electrical Department, which is also controlled by Zhu Shihui, is thriving.

According to public information, LEAD was established in 2017 and is one of the core businesses of LEAD Technology Group, focusing on the R&D and manufacturing of sputtering targets and evaporation materials, and is the only supplier in China to enter the field of magnetic storage targets, and is also the first domestic manufacturer to deliver G4.5 generation high-migration oxide targets.

Since its establishment, LEAD has been favored by capital. Tianyancha APP shows that the company has previously received 4 rounds of financing, and the last round of financing will be completed in June 2023, including Hefei Industrial Investment Group, CICC Capital, BYD, Sinopec and many other large enterprises and institutions.

Pioneer Conductive Technology has been selected into the Hurun Global Unicorn List for three consecutive years, and its ranking has risen from 951 to 320. According to the "2024 Hurun Top 100 Chinese New Material Enterprises List" released on July 26, 2024, Pioneer Electric Technology was selected with a valuation of 20.9 billion yuan. Based on this calculation, the company's 44% equity value is about 9.2 billion yuan, which is much higher than the current total market value of 3.1 billion yuan.

On February 18 this year, LEAD signed a listing counseling agreement with Guosen Securities, and went through the counseling registration with the Jiangsu Securities Regulatory Bureau, but the market did not wait for LEAD's listing prospectus.

In the face of a huge amount of M&A funds, as of June 30, only 59.1165 million yuan of monetary funds on the books of Guangzhi Technology can only be issued shares to pay the transaction consideration, which is bound to constitute a major asset restructuring, the announcement shows that the company intends to purchase 44.9119% of the shares of the target company held by the lead rare materials through the issuance of shares, and also intends to purchase the shares held by other shareholders of the target company. Depending on the specific situation, we will raise matching funds at the same time as the purchase of assets through the issuance of shares.

In this regard, angel investor Guo Tao said that for companies planning to IPO, being acquired can avoid various uncertainties and risks in the process of independent listing, and at the same time can obtain the resource support of listed companies to accelerate the development of enterprises. The recent release of the "Six Policies for M&A" has also provided a more relaxed policy environment for M&A and reorganization, reduced the threshold and cost of M&A, and stimulated the enthusiasm of enterprises for M&A.

However, Gao Zelong, a digital economist and invited vice chairman of the Oriental Enterprise Innovation and Development Center, also warned of the risks. Gao Zelong told Blue Whale News that this kind of "snake swallowing elephant" type of transaction has valuation risks, and if the transaction price is too high, it may have a negative impact on the financial condition of Guangzhi Technology. Poor integration after a merger and acquisition can lead to problems such as declining performance or employee turnover.

On September 24, the China Securities Regulatory Commission (CSRC) issued the Opinions on Deepening the Market Reform of M&A and Restructuring of Listed Companies (i.e., the "Six Articles on M&A"). The "Six Mergers and Acquisitions" clearly put forward to support listed companies to inject high-quality assets and enhance investment value. In terms of increasing support for industrial integration, the "Six Mergers and Acquisitions" support the absorption and merger of listed companies under the same control.

Since the release of the "Six Mergers and Acquisitions", the activity of A-share mergers and acquisitions has increased significantly. The abandonment of independent listing plans and the pursuit of mergers and acquisitions by enterprises planning to IPO became an important phenomenon in the capital market during the year. According to incomplete statistics, within a week after the implementation of the "Six Mergers and Acquisitions", many companies such as Qinchuan IoT, Fuller, Guangzhi Technology, Power Investment and Finance, and Yuanda Environmental Protection disclosed major asset restructuring plans.