The real estate industry as a whole is sluggish, and Zhongnan Construction (000961. SZ) remains under pressure. On the evening of April 22, Zhongnan Construction disclosed that its 2023 annual report showed that it achieved an operating income of 68.49 billion yuan and a net profit loss attributable to the parent company of 5.293 billion yuan. So far, the net loss of Zhongnan Construction in 2021-2023 will exceed 17 billion yuan. According to relevant regulations, Zhongnan Construction will be "hatted" from April 24.
On the same day as the release of the annual report, stimulated by the news of the "white knight" rushing to help, Zhongnan Construction walked out of a price limit. However, it has been below 1 yuan for 12 consecutive trading days, and the delisting alarm of the face value has been sounded. In the face of the negative report and the "white knight" rushing to help, it is still unknown whether Zhongnan Construction can win the battle to defend the face value.
Akira was "ST"
Founded in February 1988, Zhongnan Group was formerly a construction contractor team, initially with only 28 employees and 5,000 yuan of capital. Zhongnan Group has a listed company, Zhongnan Construction, forming a "4+1" business layout - Zhongnan Land, Zhongnan Construction, Zhongnan Industrial Investment and Zhongnan Education. In 2009, Zhongnan Construction was listed through the backdoor listing of Dalian Jinniu.
In the 10 years since the backdoor listing, Zhongnan Construction has achieved rapid expansion. In 2020, as the scale of the real estate industry reached its peak, Zhongnan Construction ushered in a highlight moment. This year, the cumulative contracted sales amount of Zhongnan Construction reached 223.8 billion yuan, and Chen Jinshi, the actual controller at that time, ranked 388th in China's "Hurun Report" that year with a net worth of 14 billion yuan.
In recent years, affected by the continuous adjustment of the market, the real estate industry as a whole has been sluggish, and the performance of Zhongnan Construction has fallen off a cliff. According to the annual report, in 2023, Zhongnan Construction will achieve operating income of 68.49 billion yuan, a year-on-year increase of 16%, a net profit loss attributable to the parent company of 5.293 billion yuan, a year-on-year decrease of 42.37%, and a net profit loss of 4.627 billion yuan after deducting non-profits.
In 2023, the contracted sales amount of Zhongnan Construction will be 39.88 billion yuan, and the sales area will be 3.332 million square meters, a year-on-year decrease of 38.6% and 38.7%, respectively, and the total contract value of newly undertaken (bid-wonning) projects in the construction business will be 3.55 billion yuan, an increase of 2.1% year-on-year. Affected by the continuous impact of the non-virtuous cycle of the market, the operating income of the construction business in the current period was 4.61 billion yuan, a year-on-year decrease of 51.3%. The consolidated gross profit margin was -18.51%, a year-on-year decrease of 7.51 percentage points.
According to the 2021, 2022 and 2023 annual reports of Zhongnan Construction, the company's audited net profit attributable to the parent company in 2021, 2022 and 2023 will be -3.382 billion yuan, -9.183 billion yuan and -5.293 billion yuan respectively, and the net profit after deducting non-profits will be -4.036 billion yuan, -9.656 billion yuan and -4.627 billion yuan respectively, and the non-net profit deducted in the last three consecutive fiscal years will be negative. At the same time, the annual audit accounting firm issued an unqualified audit opinion on Zhongnan Construction's 2023 annual financial report with significant uncertainties related to continuing operations.
The annual audit accounting firm pointed out in the audit report that the net loss attributable to the parent company of Zhongnan Construction in 2023 was 5.293 billion yuan, and on December 31, 2023, the current liabilities of Zhongnan Construction Company were higher than the current assets of 6.742 billion yuan, and the balance of interest-bearing liabilities including short-term borrowings and non-current liabilities due within one year totaled 22.727 billion yuan, and the balance of monetary funds at the end of the period was 7.505 billion yuan, including restricted funds of 3.358 billion yuan. At the same time, some creditors such as financial institutions and suppliers recovered overdue debts from the relevant business entities and debtors of Zhongnan Construction Company through judicial procedures, resulting in Zhongnan Construction Company and its subsidiaries falling into a number of debt lawsuits or arbitrations. The audit report noted that these circumstances indicate significant uncertainties that could lead to significant doubts about Zhongnan Construction's ability to continue as a going concern.
According to the relevant regulations of the Shenzhen Stock Exchange, "the company's net profit before and after deducting non-recurring gains and losses in the last three fiscal years is negative, and the audit report of the most recent year shows that there is uncertainty about the company's ability to continue operations", and the Shenzhen Stock Exchange implements other risks in its stock trading. Zhongnan Construction suspended trading for one day on April 23, and from the 24th, it "wore a hat", and the stock abbreviation was changed to "ST Zhongnan".
The "white knight" rushed to help and was questioned
The day before the suspension, some media released an article "Just "Saved Wang Jianlin" PAG Investment Group Has Another Big Move", saying that on the afternoon of April 20, led by the People's Government of Haimen District, Nantong City, Zhongnan Urban Construction, the controlling shareholder of Zhongnan Construction, negotiated debt resolution, equity transactions and other cooperation with PAG, a well-known private equity investment company in Asia, and Jiangsu Asset Management, and Zhongnan Construction also confirmed the above news to the media.
It is understood that the PAG Investment Group that intends to sell this time is the equity investment company that rescued Wanda Commercial Management from fire and water not long ago.
In March this year, PAG Investment Group, together with CITIC Capital and other strategic investments, invested about 60 billion yuan in Dalian Xindameng Commercial Management Co., Ltd., which is the largest single investment in China's private equity market in the past five years.
For example, after Wanda Commercial Management received capital injection, PAG Investment Group and other institutions held a total of 60% of Zhuhai Wanda Commercial Management, while Dalian Wanda Commercial Management's shareholding ratio dropped to 40%, and Wanda Commercial Management's control was also lost.
The above news has attracted the attention of the Shenzhen Stock Exchange. In the letter of concern, the Shenzhen Stock Exchange requested Zhongnan Construction to explain the authenticity of the matters mentioned in the above-mentioned article, explain the specific content, timeline and progress of the cooperation between Zhongnan Urban Construction and PAG, analyze the feasibility of the relevant cooperation, and whether Zhongnan Urban Construction and the actual controller plan to carry out equity transfer, asset restructuring and other matters that have a significant impact on the company.
Stimulated by the news of the "white knight" rushing to help, on April 22, Zhongnan Construction opened with a daily limit and closed at 0.84 yuan.
In this regard, the Shenzhen Stock Exchange requires Zhongnan Construction to explain the situation of media interviews, institutional and individual investor research, and reply to inquiries in the past one month, and verify whether there is any situation of releasing information that has a significant impact on the company's stock trading price or investment decisions through non-statutory information disclosure channels, whether there is any violation of the principle of fairness of information disclosure, whether there is other undisclosed information that should be disclosed, and whether there is any situation of actively catering to the market speculation of the company's stock price.
In addition, Zhongnan Construction should also explain whether the company's fundamentals have undergone major changes in combination with the industry, main business operation, financial situation, etc., and make sufficient risk warnings for large fluctuations in stock prices, and verify the company's controlling shareholders, actual controllers, more than 5% shareholders, directors, supervisors, senior managers and their immediate family members in the latest month of trading of the company's shares.
The reason why the Shenzhen Stock Exchange is concerned about the authenticity of this negotiation is also because Zhongnan Construction is experiencing the problem of delisting at face value. As of April 22, the closing price of Zhongnan Construction shares has been below 1 yuan for 12 consecutive trading days.
According to the rules of the Shenzhen Stock Exchange, after the resumption of trading on April 24, Zhongnan Construction will be limited to 5% per day. Only when the share price of Zhongnan Construction stands above the 1 yuan line in the next 8 trading days can the crisis of delisting at face value be temporarily lifted.
Can PAG help Zhongnan Construction get out of danger this time, and whether Zhongnan Construction can lift the delisting crisis at face value? (This article was first published in Titanium Media APP, author|Liu Fengru)