An announcement that triggered a plunge!
On May 13, Hesheng Silicon fell 7.27% to close at 57.01 yuan / share. Just the night before, the company announced that its second largest shareholder, Fidelity Industrial, reduced its holdings by a total of 6.5 million shares, accounting for 0.69% of the company's total shares, from March 12 to May 11, 2021, cashing out about 332 million yuan.
The reporter noted that in the case of the industry maintaining prosperity, continuing cash dividends over the years, and the company is implementing major new projects, the company's shareholder Fuda Industry is continuing to reduce its holdings and cash out more than once.
Listed companies are reduced to cash machines
Shareholders frequently reduce their holdings and cash out, are they not optimistic about the performance prospects?
The data shows that since 2020, the silicon industry has continued to boom, and the company has achieved an annual net profit attributable to the mother of 1.4 billion yuan, an increase of 27.7% year-on-year, and intends to pay 2.9 yuan to all shareholders in 10 ways, with a total of 272 million yuan of proposed cash. In the first quarter of 2021, the company achieved another good performance, achieving revenue of 3.276 billion yuan, an increase of 76.21% year-on-year; net profit attributable to the mother of 900 million yuan, an increase of 261.30% year-on-year.
Checking the past announcements of Hesheng Silicon Industry, it was found that its second largest shareholder, Fuda Industry, even operated in violation of the law in order to reduce its holdings.
According to the announcement on December 26, 2019, The Company's shareholder, Fidelity Industrial, received a regulatory letter from the Zhejiang Securities Regulatory Bureau, which reduced its holdings by 431,800 shares through a centralized auction on October 31 and November 1, 2019, with a total transaction amount of 12.1457 million yuan. As a shareholder holding more than 5% of the shares, Fidelity Industrial failed to fulfill its pre-disclosure obligations in accordance with regulations.
Fidelity Industrial is a private company of Huang Wenda and has been the second largest shareholder of Hesheng Silicon since its listing date. The cooperation between Huang Wenda and the controlling shareholder Luo Liguo has a long history. In 1995, the two established "Hesheng Hat Industry" and began to do OEM production for international brands such as Gap and Gucci.
In 2005, Luo Liguo started a business for the second time and turned to the silicon material industry with high scientific and technological content. Huang Wenda, through Aubert Trading, jointly invested US$29.8 million with Luo Liguo to establish Hesheng Chemical (the predecessor of Hesheng Silicon), holding 30% and 70% of the shares respectively.
In 2011, Auber Trading transferred its stake in Hesheng Silicon to Huang Wenda's company, Fuda Industrial. As of the listing, Huang Wenda had invested a total of about 258 million yuan in Hesheng Silicon.
Hesheng Silicon was listed on October 30, 2017, and one year later, about 191 million shares (28.48% of the total share capital) expired and the ban was lifted. On November 19, 2018, the company announced that Fidelity Industrial, a shareholder of the company holding 24.62% of the shares, intends to reduce its holding of 600,000 shares (accounting for 0.0896% of the total share capital) through a centralized auction transaction, and intends to reduce its holdings by no more than 81.8609 million shares (accounting for 12.2180% of the total share capital) through the transfer of the agreement.
That is to say, as soon as the lock-up period expired, Fidelity Industrial impatiently reduced its original shares in half. The total amount of the two transactions is about 3.314 billion yuan, and according to this value, Huang Wenda's investment income is more than 25 times. Among them, the transfer agreement was taken over by the children of Luo Liguo, the actual controller of Hesheng Silicon Industry, and the transfer price was 40.15 yuan per share. According to the relevant announcements, Roche's takeover is mainly based on optimism about the company's value and future development.
On May 8, 2019, the company announced that the shares transferred by Fidelity Industrial to Roche's children have completed the transfer registration. Only half a year later, in November 2019, Fidelity Industrial announced that it intends to reduce its holding of 1.6 million shares (accounting for 0.1706% of the total share capital) through a centralized auction, and the reduction will be completed a month later.
Affected by the epidemic, the stock price of Hesheng Silicon Industry once fell to nearly 20 yuan / share. After surviving the epidemic, on January 26, 2021, Fidelity Industrial threw away its shareholding reduction plan again, planning to reduce its holdings by no more than 28.14 million shares (no more than 3% of the shares).
According to the deadline in the announcement on May 12, the average price of the reduction of Fuda Industry is about 51 yuan, which is much higher than the 40 yuan at the time of the first reduction, that is to say, as of this reduction, Huang Wenda's investment income has been far more than 25 times.
The Roche family was no longer able to take over
Behind Huang Wenda's high returns is based on the continuous development of the fundamentals of Hesheng Silicon Industry. However, what impact will the continuous cashing out of the two shareholders have on the listed company?
According to the statistics of the Silicon Industry Branch of the China Nonferrous Metals Industry Association, Hesheng Silicon is currently the largest industrial silicon production enterprise in China. Its main products are industrial silicon and silicone two categories. Among them, the industrial silicon business is mainly concentrated in Xinjiang. The local area has the advantage of abundant raw materials, energy and other resources, and low prices.
Previously, out of confidence in the company's future development, the Roche family would take over once a shareholder withdrew. For example, in the prospectus, the company mentioned that 12 investment institutions were introduced in 2011, and for various reasons, 10 investment institutions withdrew, and finally the Roche family completed the equity transfer.
At the beginning of the listing, Hesheng Silicon has not carried out any form of equity financing, and the required funds are its own funds and bank loans. In 2013, Hesheng Group, the controlling shareholder and controlled by the Roche family, converted the 500 million yuan lent to Hesheng Silicon into equity investment to optimize the company's financial situation. It shows its high recognition of listed companies.
However, in addition to the first agreement transfer after the ban, Fidelity Industrial's later reduction plan has not seen the Roche family take over. This may be because the Roche family has no strength to take over, or it is lacking in skills.
According to the data, Hesheng Silicon has signed an agreement with the Yunnan Provincial Government in 2019 to invest 20 billion yuan to build a "hydropower silicon" project in Zhaotong in two phases, including an annual output of 800,000 tons of silicone monomers and siloxane downstream deep processing projects. Although the project is good, this huge investment will undoubtedly drag down the company's cash flow.
The cash flow of the line gas has deteriorated
The company's 2020 annual report pointed out that the company is one of the enterprises with the most complete business chain and the largest production scale in China's silicon material industry. At the same time, it is pointed out that in the second half of 2020, with the improvement of the domestic epidemic situation, all walks of life have recovered significantly, downstream demand has been gradually released, and silicon prices have continued to rise, maintaining a high level.
However, the industry's leading position, continued revenue and profit growth, did not bring the same increase in cash flow.
According to the first quarter of 2021, the advance payment for the current period was 416 million yuan, an increase of 150.72% year-on-year. At the same time, accounts receivable were 538 million, an increase of 83.5% year-on-year. In other words, upstream payments are increasing, and so are open accounts downstream, which, if not changed, will be a significant drag on operating cash flow.
With the overall upward trend of bulk commodities and industrial raw materials, companies in the upstream of various industrial chains are relatively strong. Recently, reports such as "one price a day", "cash settlement", "first payment and later goods" are not uncommon. In this regard, the International Finance News reporter called Hesheng Silicon Industry, in the future, can the company enhance its voice and improve cash flow in the sales process? As of press time, no response had been received.
Trainee reporter: Fu Zhixue
Editor: Wang Liying
Editor-in-Charge: BiDandan