Zhongli Group stepped on the thunder private network communication pre-loss of 4 billion can its photovoltaic business turn the tide?

The veteran photovoltaic company Zhongli Group ushered in 2022 in mixed times.

Zhongli Group (002309. SZ) announced on January 18 that its wholly-owned sun companies have recently signed several PV module supply contracts with overseas companies, with a total transaction amount of about US$177 million.

According to the announcement, the suppliers of the transaction are Zhongli Talesun Hong Kong Limited ("Zhongli Talesun Hong Kong Limited"), a wholly-owned subsidiary of Zhongli Group, and Siyang Terrace New Energy Technology Co., Ltd. ("Siyang New Energy"), and the buyers are two American companies engaged in power business and an Indian company engaged in photovoltaic power plant business.

Zhongli Group said that the signing of contracts with many well-known overseas enterprises shows that under the background of "carbon peaking and carbon neutrality", the company has actively expanded overseas photovoltaic markets such as Europe and the United States and has achieved phased results, which is conducive to Further expanding the sales business of Therap Solar in the overseas photovoltaic market, and is conducive to digesting the company's photovoltaic module and cell production capacity in the climbing period.

Shell financial reporters paid attention to the impact of the private network communication business explosion and other impacts, Zhongli Group is expected to suffer a large loss in 2021.

According to the performance forecast of Zhongli Group on the evening of January 18, it expects the net profit attributable to the mother in 2021 to be a loss of 3.2 billion yuan to a loss of 4 billion yuan, compared with a loss of 2.92 billion yuan in the same period last year; and the operating income is expected to be 10.2 billion yuan to 11.2 billion yuan.

The main reason for the pre-loss of Zhongli Group's performance is because of the explosion of its private network communication business. The announcement disclosed that the accounts receivable, prepaid accounts and inventory of the private network communication business involved in Zhongli Group were subject to the impairment of assets, and at the same time, the guarantee provided for the subsidiary Zhongli Electronic Financing, the estimated liabilities, and the loss of the long-term equity investment of the subsidiary Zhongli Electronics, the above provision is expected to be about 2.2 billion yuan.

The so-called "private network communication business" that caused Zhongli Group to suffer huge losses is behind one of the black swan events that have attracted much attention in the capital market in 2021.

On May 30, 2021, Shanghai Electric (601727. SH) suddenly exploded, disclosing that the accounts receivable of its holding subsidiary, Shanghai Electric Communication Technology Co., Ltd. (the "Communication Company"), were generally overdue, and there was a risk that large amounts of receivables would not be recovered, or a loss of net profit attributable to the parent of 8.3 billion yuan. Since the turmoil, a number of executives of Shanghai Electric and Communications Company have been investigated.

Shanghai Electric is a large-scale comprehensive equipment manufacturing group under Shanghai State-owned Assets, and the communication company at the core of the event is reported to have been established in 2015, mainly producing and selling private network communication products.

In addition to Shanghai Electric, Sui Tianli, one of the shareholders of the communication company, and its subsidiaries are also involved in Hongda New Materials (002211. SZ), ST Kaile (600260.SH) and other listed companies about the private network communication business disputes. In August 2021, The New Third Board Listed Company under sui tian li's actual control, Haigao Communications (839211. NQ) announced that Sui Tianli is currently involved in the case and is being investigated by the public security organs.

In late September 2021, a spokesman for the CSRC said on the risks related to the involvement of the private network communication business of the relevant listed companies, saying that the CSRC, together with the relevant securities regulatory bureaus and exchanges, conducted a comprehensive investigation of the risks, transaction substances and information disclosure of listed companies engaged in such private network communication business, and found that such businesses were suspected of false trade and individual listed companies were suspected of financial fraud.

Shell financial reporters paid attention to the disclosure of the risks involved in the private network communication business of Zhongli Group in July 2021. According to the announcement at the time, Zhongli Group was involved in overdue accounts receivable of 507 million yuan with Shanghai Electric business, and Jiangsu Zhongli Electronic Information Technology Co., Ltd. ("Zhongli Electronics"), a shareholding company of Zhongli Group, as of the end of June 2021, involved a total of 878 million yuan of overdue accounts receivable for communication business, with advance payments of 771 million yuan and inventory of 783 million yuan.

In the 2021 semi-annual report, Zhongli Group disclosed that due to the explosion of Shanghai Electric's huge receivables, the impact of the company's private network communication business on the net profit in the reporting period was a loss of 1.142 billion yuan.

Zhongli Electronics, formerly known as Suzhou Tao Xiaomi Network Technology Co., Ltd., was established in 2009, Zhongli Group has invested in the company since 2013 to further extend the communication industry chain, and subsequently realized the holding, and at the end of 2018, it was planned to raise additional funds to acquire the remaining equity of Zhongli Electronics, making it a wholly-owned subsidiary. However, Zhongli Group's fixed increase plan was not approved. In December 2019, Zhongli Group, which was caught in a liquidity squeeze, transferred part of its equity to Changshu State-owned Assets, reducing its shareholding ratio to 19%.

In addition to the explosion of the private network communication business, the photovoltaic business of Zhongli Group is expected to lose about 1.1 billion yuan in 2021, of which the production capacity is not fully released due to the surge in the main raw materials of photovoltaic manufacturing and sea freight, and the operating loss is about 650 million yuan.

Zhongli Group, founded by Wang Boxing, was founded in Changshu Tangshi Cable Factory in 1988, the company started from the production of special wires and cables, was restructured into a joint-stock company in 2007, and landed on the Shenzhen Stock Exchange in 2009. After realizing the listing, Wang Baixing immediately established the predecessor of Tenghui, a backbone enterprise of Zhongli Photovoltaic, and officially entered the photovoltaic field.

In the past few years, with the continuous expansion of photovoltaic power plants, Zhongli Group has quickly jumped to the domestic photovoltaic giant, and has become famous for its acquisition of the equity of BAK Power with tens of billions of yuan. Entering 2019, due to the downturn in the macroeconomic situation and the shock of the international trade environment, as well as the continuation of the "531" policy in the photovoltaic industry in 2018, Zhongli Group was once in trouble.

In March 2020, Zhongli Group is now resuming signs of expansion, announcing that it intends to raise additional funds of 1.575 billion yuan for the production of new 1GW of heterojunction cells and modules per year and the 1GW high-efficiency TOPCon battery and module technology transformation project. In December of the same year, Zhongli Group said that in view of the large breakthrough and progress in the conversion efficiency of battery mass production in the two technical routes of the fundraising project, the company decided to formulate a better financing plan and fundraising project, so it terminated the above fixed increase.

Affected by the epidemic, Zhongli Group's performance in 2020 was poor, and the net profit attributable to the mother was a loss of 2.92 billion yuan.

Under the twists and turns, Zhongli Group still places hope on its photovoltaic business.

At the management expansion meeting previously held by Tensun Photovoltaic, Dong Shuguang, president of Tensun Photovoltaic, said that 2021 is the first year of The development of Tensun Photovoltaic production capacity, and in 2022, the company will usher in a rare year of industry development.

In the performance pre-loss announcement, Zhongli Group also proposed that the company's strategic deployment is to focus on the development of the photovoltaic industry, through the investment and technical transformation and expansion of the photovoltaic sector in the reporting period, forming a design capacity of 12GW of photovoltaic monocrystalline high-efficiency cells and 18GW of large-size photovoltaic high-efficiency modules, and intends to develop the company into a new energy industry group.

Beijing News shell financial reporter Zhu Yueyi Editor Wang Jinyu Proofreader Chen Diyan

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