Zotye Auto received two regulatory letters in April, and the related problems have not been completely rectified

Zotye Auto has a long way to go to get out of the predicament

"China Science and Technology Investment", Long Min, Liu Meili

On April 23, the Shenzhen Stock Exchange (hereinafter referred to as the "Shenzhen Stock Exchange") made a significant purchase of Zotye Auto (000980. SZ) issued a regulatory letter, according to which Zotye Auto auctioned the equity and real estate of its subsidiaries through the auction platform, and failed to disclose the progress announcement of the major transaction in a timely manner. On April 12, the Shenzhen Stock Exchange also issued a regulatory letter, pointing out that the company has not responded to the investor relations interactive platform (hereinafter referred to as "Interactive Easy") about investors' questions for a long time.

As an automobile company, Zotye Auto's vehicle business recovery in 2022 is not good, and the door business has become an important business to support the company's development.

Received two regulatory letters in half a month

On April 12, the Shenzhen Stock Exchange issued a regulatory letter to Zotye Auto, which pointed out that the consultation telephone number announced by Zotye Auto could not be effectively maintained during working hours, and the company did not reply to the questions of investors for a long time. The reporter logged on to the interactive platform of the Shenzhen Stock Exchange and found that the questions in the Q&A column of Zotye Auto from March 26 to April 17 were not answered, and some questions after April 18 were not answered.

On April 23, the Shenzhen Stock Exchange issued a regulatory letter to Zotye Auto again, pointing out that on November 11, 2023 and January 15, 2024, Zotye Auto successively auctioned the entire equity of its subsidiary Shanghai Feizhong Auto Parts Co., Ltd. (hereinafter referred to as "Shanghai Feizhong") and the real estate of its subsidiary Hangzhou Yiwei Automobile Industry Co., Ltd. (hereinafter referred to as "Hangzhou Yiwei") through the auction platform, with a starting price of 110 million yuan, respectively. 440 million yuan, of which the real estate related to Hangzhou Yiwei was successfully auctioned at a transaction price of 270 million yuan on April 9, 2024, and Zotye Automobile did not disclose the above matters until April 20, 2024 through the "Progress Announcement on the Disposal of Part of the Assets of the Reorganization Plan" (hereinafter referred to as the "Progress Announcement"), and the company did not disclose the progress announcement of the major transaction in a timely manner.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said in an interview with the reporter of "China Science and Technology Investment" that according to the relevant regulations, listed companies need to disclose relevant information in a timely manner after the successful asset auction, specifically, an announcement should be issued within one working day after the successful asset auction, and the details of the auctioned assets should be disclosed within five working days after the successful asset auction.

On April 20, Zotye Auto's "Progress Announcement" pointed out that Zotye Auto's Hangzhou Yiwei-related real estate and Shanghai Feizhong's equity are all properties that have been mortgaged and pledged to creditors before the reorganization, and are secured creditor's rights, and the auction of these assets is conducive to paying off the company's claims and reducing the company's liabilities. The assets of Hangzhou Yiwei auction include 1 land use right, 7 buildings and some structures without property rights certificates and other auxiliary facilities, with a book value and appraised value of 120 million yuan and 439 million yuan respectively, which were finally sold after three public auctions, and the book value and appraised value of 100% equity of Feizhong Auto Parts to be disposed of by the company were 221 million yuan and 110 million yuan respectively, and the auction was finally lost due to no bidder after four auctions.

This decision to dispose of assets relates to the company's bankruptcy reorganization plan a few years ago. In September 2020, due to poor management, Tieniu Group Co., Ltd., the original parent company of Zotye Automobile, filed for bankruptcy reorganization, and Zotye Auto also entered the pre-reorganization procedure. In September 2021, Jiangsu Shenshang Holding Group Co., Ltd. became the investor of Zotye Auto's reorganization, giving the company 2 billion yuan of capital assistance for the reorganization investment. In January 2022, the Company and its subsidiaries announced the completion of the implementation of the reorganization plan. On November 3, 2022, the company's shares withdrew their risk warning, and the next day, the company's shares rose by 23.76%.

Post-restructuring business issues

After the completion of the restructuring plan, Zotye Auto is still facing great operating problems.

The 2022 annual report shows that the company's operating income in 2022 will be 783 million yuan, and the net profit attributable to the parent company will be -909 million yuan. The 2023 performance forecast shows that the company's operating income is 680-800 million yuan, and the net profit loss after deducting non-recurring gains and losses is 8-1 billion yuan. In addition, in 2022, the company's administrative expenses will be 497 million yuan, accounting for 63.47% of the annual revenue, and in the third quarter of 2023, the company's administrative expenses will not decrease but rise, reaching 67.48%, which far exceeds the average level of the automotive industry, according to the research data of Minmetals Securities, the management expense ratio of the automotive industry in the first three quarters of 2023 is 3.8%.

An Guangyong, an expert of the Credit Management Committee of the All-Union M&A Trade Union, said in an interview with the reporter of "China Science and Technology Investment" that the management expenses of Zotye Automobile accounted for more than 60%, which is much higher than the normal level of the automotive industry, which may be caused by factors such as inefficiency of management and excessive administrative expenses.

On the other hand, the company's financial situation remains tight. According to the financial data, the company's cash and cash equivalents at the end of 2022 and the third quarter of 2023 were 116 million yuan and 75 million yuan, respectively, short-term borrowings were 1.216 billion yuan and 1.210 billion yuan, respectively, and the asset-liability ratio was 65.71% and 70.49%, respectively.

At the same time, the company also faces litigation disputes. According to the announcement issued by the company on January 13, 2024, there were a total of 7 lawsuits with large amounts of money incurred by the company and its subsidiaries, involving a total amount of about 363 million yuan, accounting for 14.88% of the absolute value of the company's latest audited net assets. Among them, the total amount of litigation cases involving the company and its subsidiaries as defendants is about 293 million yuan, mainly involving contract disputes and bankruptcy debt confirmation disputes.

Bai Wenxi said that these litigation cases involving contracts and bankruptcy debt confirmation disputes may have some impact on the company's operation and financial condition, and if these disputes cannot be properly resolved, it may affect the company's reputation and financing ability, and then affect its production, operation and investment activities.

Previously, the company has also tried to alleviate the financial pressure through financing activities. On June 11, 2022, the company issued the "2022 Non-public Issuance of A-share Shares Plan", in which the company intends to issue shares with a total non-public offering of no more than 6 billion yuan and a proportion of no more than 30% of the total share capital, which will be mainly used for the development, research and development of new energy vehicles and the construction of channels. However, this financing application failed to pass multiple rounds of inquiries by the Shenzhen Stock Exchange, and on July 13, 2023, the company issued an announcement to terminate the issuance of shares and withdraw the relevant application documents.

From the perspective of main business, in 2022, the revenue of Zotye Auto Door Industry will be 423 million yuan, accounting for 54.03%, contributing 66.45% of the profit. Zotye Auto said in its annual report that it will combine the development trend of the automotive industry and the company's current actual situation in 2023, take market demand as the guide, and electrified products as the main body.

From 2019 to 2022, the company's vehicle business was basically in a state of shutdown, and it was not until the end of 2022 that it gradually resumed operation. On October 20, 2022, the company held a ceremony for the first batch of re-produced traditional fuel SUVT300 models, and in February 2023, the company's first new energy pure electric sedan, Jiangnan U2, was launched.

In 2022, the company sold 502 vehicles, and in the first half of 2023, the company's vehicle sales will only be 652 vehicles. Nowadays, many new car-making forces have emerged, and Zotye Auto will face a more fierce competition in the market.

The reporter sent a letter to Zotye Auto on the Shenzhen Stock Exchange's regulatory letter and business development, but has not received a reply as of press time.