Zoomlion's 9.4 billion restructuring plan is going to be put into a shell with a market value of 3.5 billion, which is targeted by regulators
For a long time, the reorganization of "snake swallowing elephant" has often attracted much attention, and the quality of "elephant" has also been questioned behind the small and broad.
Recently, the nearly 10 billion yuan merger and acquisition project initiated by Luchang Technology, which has a total market value of less than 4 billion yuan, has attracted the attention of the regulatory authorities. Construction machinery leader Zoomlion (000157. SZ, referred to as "Zoomlion") recently announced that it plans to spin off its holding subsidiary, Hunan Zoomlion Intelligent Aerial Work Machinery Co., Ltd. (hereinafter referred to as "Zoomlion"), to reorganize and list. According to the latest restructuring plan, 99.53% of the shares of Zoomlion will be injected into Shenzhen Luchang Technology Co., Ltd. (002813. SZ, referred to as "Luchang Technology").
However, this "snake swallowing elephant" merger and restructuring plan has been questioned. As the main body of this restructuring and listing, Zoomlion has been "riding a rocket" all the way since it locked in the listing of Backdoor Luchang Technology in 2022, soaring from 1 billion yuan to 4.5 billion yuan in just over two years, a fourfold increase, and a valuation of nearly 13 times in three years.
In this regard, the Shenzhen Stock Exchange issued two rounds of audit inquiry letters, asking about the development of Zoomlion's main business and the rationality of business growth.
A "shell" company with a market value of 3.5 billion yuan will swallow nearly 10 billion assets
This M&A and restructuring can be traced back to 2022, starting from Zoomlion's promotion of the "backdoor listing" of its subsidiary Zoomlion.
Luchang Technology was listed on the A-share market in 2016. According to the announcement disclosed by the listed company, the reporter found that in 2022, Zoomlion will become the controlling shareholder of Luchang Technology through the transfer of shares and tender offer. In January 2023, the two parties signed the "Agreement of Intent for Major Asset Restructuring", under which Luchang Technology will purchase 100% of the equity of Zoomlion by issuing shares and raise matching funds.
According to the restructuring plan released in February 2023, Luchang Technology will issue shares to 29 shareholders of Zoomlion to purchase 100% of the equity of Zoomlion, and raise matching funds from no more than 35 specific investors through non-public issuance of shares, so as to realize the restructuring and listing of Zoomlion (hereinafter referred to as the "Transaction"). After the completion of the transaction, Zoomlion will become a wholly-owned subsidiary of Luchang Technology, and Zoomlion will remain the controlling shareholder of Luchang Technology.
According to the revised draft of the subsequent transaction plan and transaction report, the transaction price of 100% equity of Zoomlion High-tech Machinery is 9.424 billion yuan. At the same time, Luchang Technology plans to raise a total of 3.35 billion yuan, of which 2.35 billion yuan will be used to supplement the working capital of listed companies and target companies or repay debts, and 1 billion yuan will be used for the construction of production bases in Mexico.
However, public information shows that from 2018 to 2022, Luchang Technology's revenue was 757 million yuan, 770 million yuan, 493 million yuan, 410 million yuan, and 341 million yuan respectively, and the non-net profit was 182 million yuan, 383 million yuan, 90.4101 million yuan, 5.8116 million yuan, and 7.2851 million yuan respectively, with a cumulative loss of 668 million yuan for five consecutive years. According to the annual performance report released by Luchang Technology on the evening of March 14, the company's operating income in 2023 will be about 284 million yuan, a year-on-year decrease of 16.7%, the net profit loss attributable to shareholders of listed companies will be about 27.43 million yuan, and the basic earnings per share loss will be 0.2286 yuan.
In addition, as of December 31, 2023, the total assets of Luchang Technology were only 511 million yuan, and as of the morning of March 27, 2024, the total market value was about 3.539 billion yuan. The 100% equity of Zoomlion High Machinery, the underlying asset of this transaction, was valued at more than 9.4 billion yuan.
As of the morning of March 27, 2024, the total market value of Luchang Technology is 3.539 billion yuan.
The performance of the injected underlying assets quadrupled in two years
In stark contrast, as the target asset of this reorganization, Zoomlion has achieved unparalleled performance growth compared with its peers in the industry and from its own development.
It is understood that Zoomlion is mainly engaged in the research and development, production, sales and service of aerial work machinery, and its main product series cover scissor, straight arm, curved arm and other aerial work machinery.
According to the data, in 2022, Zoomlion's market share will be 5.12%, lower than the 6.07% of Zhejiang Dingli, a leading global aerial work company. However, with a market share difference of nearly 1%, the domestic revenue of Zoomlion aerial work machinery products in 2022 has surpassed that of Zhejiang Dingli, Lingong Heavy Machinery, Xingbang Intelligent and Handler and other peers, and has achieved a leading position in the domestic market with high concentration.
In addition, while the annual revenue growth rate of Zhejiang Dingli and other peers is only double-digit, Zoomlion will achieve a year-on-year increase of nearly 300% in revenue in 2021, and it will maintain an astonishing speed, increasing its performance by four times in just two years. From January to August 2020, 2021, 2022 and 2023, Zoomlion's operating income was 1.028 billion yuan, 2.978 billion yuan, 4.583 billion yuan and 4.2 billion yuan respectively, and its business maintained rapid growth.
As for how to achieve rapid growth in performance, Zoomlion responded to a reporter from Nandu: "Mainly because the aerial work machinery market is not closely related to the construction industry, in recent years it is still in the stage of rapid growth in demand, and the mainland aerial work machinery industry is showing a trend of rapid development. ”
Compared with Zoomlion's confidence, Zhejiang Dingli, the world's leading aerial work platform, has a judgment on the domestic market: "The domestic aerial work platform market is in the growth period, and the industry penetration rate is low. At the same time, the competition in the domestic market is becoming increasingly fierce, and in recent years, lessors have been more cautious than ever in purchasing new machines, and the market is under pressure in the short term and improving in the long term. ”
It is worth noting that the valuation of Zoomlion has been evaluated by the income method, and with the rapid growth of performance, the overall valuation of Zoomlion has also risen. According to the announcement of the exchange, the company conducted three evaluations from November 30, 2020 to April 30, 2023, with 687 million yuan, 7.02 billion yuan and 9.42 billion yuan respectively, with a valuation growth rate of 921% in three years.
In the second round of inquiry, the Shenzhen Stock Exchange asked Luchang Technology to explain the reasons and reasonableness of the 921% increase in the appraised value of the underlying asset, that is, Zoomlion High Machinery, within 16 months.
In response to the report on the issuance of shares to purchase assets and raise matching funds and related party transactions (draft) (revised draft) of Shenzhen Luchang Technology Co., Ltd., the aerial work machinery industry is a relatively concentrated industry, and the operating income of Zoomlion Hi-Tech Machinery in 2020 will only account for about a quarter of the similar business income of XCMG Machinery, a domestic company in the same industry, and about one-third of Zhejiang Dingli. At the end of 2020, Zoomlion had a total of 555 employees, of which 24.32% were R&D personnel. Based on the market, industry and Zoomlion's own related situation, the follow-up income has great uncertainty, and the compound growth rate of net profit in the first five years of the forecast period reached 24.64%, which has fully considered the growth potential of Zoomlion and is reasonable.
China Construction Machinery Industry Association pointed out last year that in recent years, with the rapid development of the aerial work platform industry, many problems that have occurred in the leasing market of other construction machinery products have followed, on the one hand, the rapid expansion of product application fields, on the other hand, rental prices have fallen year by year, the leasing industry has fallen into the quagmire of vicious competition, safety management needs to be improved, manufacturers continue to increase production capacity, rent collection difficulties and other problems are becoming increasingly prominent.
Compared with domestic counterparts such as XCMG Machinery, Zhejiang Dingli, Lingong Heavy Machinery, Xingbang Intelligent and other companies, how Zoomlion can complete the overtaking from the fifth place in the industry in 2020 to the leading domestic revenue in 2022 in many uncertainties may be further answered by Luchang Technology in the reply to the second round of inquiries.
Related-party sales and overseas business are in focus
At the same time, the growth of Zoomlion's business segments has also attracted much attention, and from the content of the inquiry letter of the Shenzhen Stock Exchange, the two major revenues of Zoomlion's related sales and overseas business have also been inquired.
The first is affiliate selling. According to the second round of inquiry letters from the Shenzhen Stock Exchange, in each period of the reporting period from 2020 to January to August 2023, the proportion of Zoomlion's revenue through affiliated financial leasing companies to the business income of the financial leasing model was 100%, 100%, 71.42% and 34.09% respectively. Among them, in 2020 and 2021, the balance of current accounts in other payables of Zoomlion High Machinery will be 10.2674 million yuan and 858.9143 million yuan, including "net accounting and operating transactions with Zoomlion" - 92.0935 million yuan and -1031.1972 million yuan respectively.
The above-mentioned transaction report of Luchang Technology disclosed that the main customer of Zoomlion is the equipment leasing company. From 2020 to 2022, the financial leasing settlement model accounted for about 60% of Zoomlion's main business, and it will drop rapidly to 24.68% after 2023.
As for the net operating transactions with Zoomlion, the transaction report said: "The net operating transactions with Zoomlion are the sales receipts that Zoomlion and its subsidiaries should pay to Zoomlion, and the purchase money that Zoomlion should pay to Zoomlion and its subsidiaries. ”
Nandu reporters combed the top ten customers in each period of the reporting period under the financial leasing settlement mode of Zoomlion and found that Shanghai Fangsha Industrial Co., Ltd., which ranked third, was established in 2021 with zero social security payers, Xuzhou Guoming Yongxin Machinery Leasing Co., Ltd., which ranked sixth, was established in 2022 with 3 social security payers, and Zhuhai Benjie Logistics Equipment Co., Ltd., which ranked seventh, was established in 2019 with 6 social security payers.
Another fast-growing business that continues to rise in revenue is the overseas business. During the reporting period, the overseas sales ratio of Zoomlion was 6.87%, 5.17%, 17.43% and 23.89% respectively, and the overseas gross profit margin of the underlying assets increased from -3.22% to 27.62%. For the growth of overseas gross profit margin, the report explained that it was mainly due to the small initial sales and large apportionment of Zoomlion in the overseas market, and the gradual increase in overseas gross profit margin with the increase in the scale of the underlying assets.
It is reported that during the reporting period, the related sales of the underlying assets mainly include the sales through the affiliated financial leasing companies, the export declaration of the parent company and the overseas related sales generated by the assistance services of the airport service providers in the Zoomlion system.
In the first round of review inquiry letters, the Shenzhen Stock Exchange required Luchang Technology to explain the reasonableness and business logic of related party sales, and whether there was a situation of high school performance through related party sales. In the second round of review and inquiry letters, it is required to disclose the basis and fairness of the determination of the export fees and entrepot trade service rates during the reporting period, and whether it constitutes a tilt to the interests of the controlling shareholder.
Regarding whether Zoomlion has inflated its own valuation by inflating its income, Zoomlion responded to a reporter from Nandu, saying: "The appraisal agency hired by this exchange is independent, the evaluation assumptions are reasonable, and the evaluation method is related to the purpose of evaluation. ”
Recently, the China Securities Regulatory Commission (CSRC) has clearly proposed to strengthen the supervision of restructuring and listing. The follow-up progress of the merger and reorganization of Luchang Technology, as well as the specific reasons for the revenue growth rate of Zoomlion, the change in the number of customers, and the change in market share are higher than the industry level, and the reporter will continue to pay attention to them.
Written by: Nandu reporter Yu Dian from Shanghai