Fangda Carbon Capital Bureau: The cash on the account exceeded 6 billion, and the profit was not distributed for three years, but 4 billion was thrown to buy wealth management products

Titanium Media APP

2024-05-12 13:12Posted on the official account of Beijing Titanium Media APP

On May 11, Fangda Carbon (600516. SH) announced that the company deliberated and passed the relevant proposals, and intends to use its own funds of no more than 4 billion yuan to purchase financial products with high security and good liquidity.

On April 2, the company disclosed that it would use its own funds for securities investment. This move was complained by investors that "your own stocks are not well managed, and you still use funds to invest in other people's stocks, which is really disgusting to you". Nowadays, large investments have attracted widespread attention in the market, especially when the company has not paid cash dividends in the past three years and has as much cash as high as 6.19 billion yuan.

Titanium media APP noticed that looking back on history, the company has always had a tradition of "investment", and has also achieved good returns. The root cause of the company's frequent investment may be due to the actual controller Fang Wei, after all, Fang Wei and the Fang Da Department in his hands are quite fond of investment. For Fang Wei, who stood out from the "reckless era", "gambling" seems to have always been his weapon to pass the test. However, behind Fang Wei's repeated large-scale layouts, it also put pressure on Fang Da's capital chain.

Spending a lot of money to "invest", the company is already a veteran

Looking back, the company has always had a "tradition" of investment, and the amount is not small. From 2019 to 2021, the company announced that it planned to use no more than 6 billion yuan of its own idle funds to purchase wealth management products. In 2023, the company further plans to use no more than 3 billion yuan for wealth management, and no more than 2 billion yuan of funds are planned to be used for securities investment.

Through investment, the company has also achieved relatively good returns. From 2021 to 2023, the company's investment income will be 413 million yuan, 224 million yuan, and 152 million yuan respectively. During the same period, the investment income of the company's trading financial assets during the holding period was 2.8148 million yuan, 4.584 million yuan and 14.53 million yuan respectively. As of the end of 2023, the total financial assets held by the company reached 1.297 billion yuan, including stocks, private equity funds and other types of assets, amounting to 587 million yuan, 309 million yuan and 401 million yuan, respectively. From the perspective of capital, the company does have such a large amount of cash in stock. As of December 31, 2023, the company held monetary funds of 6.19 billion yuan, an increase of 96% year-on-year from the end of the previous year, which was due to the increase in investment funds received by the company.

Although the company is a veteran of investment, there are also cases where the horse stumbles. In 2023, the company's shareholding companies include listed companies such as Linggang Co., Ltd., Jilin Chemical Fiber, Jiujiang Bank, Bohai Leasing, and China Civil Aviation Information Network. Among them, the two investments in Jiujiang Bank and Jilin Chemical Fiber have shrunk to a certain extent during the year.

Titanium Media APP found that behind the company's use of large amounts of funds to purchase wealth management is the gradual withering of its main business.

Fangda Carbon is mainly engaged in the development, production and sales of graphite electrodes, bulk carbon bricks, isostatic graphite, carbon/graphite materials for nuclear power, graphene materials, carbon/carbon composite materials, etc. Due to the favorable influence of the industry, the company's net profit has grown rapidly from 2017 to 2018, and the highest profit of 5.593 billion yuan in 2018 has been achieved. However, after 2018, there has been no such event. From 2019 to 2023, the company's net profit will be 2.016 billion yuan, 547 million yuan, 1.085 billion yuan, 840 million yuan, and 421 million yuan respectively.

From the perspective of gross sales margin, from 2019 to 2022, this indicator will be 45.01%, 28.71%, 33.51%, and 25.88% respectively. In 2023, the company will drop to 19.65%, a year-on-year decrease of 6.8 percentage points, the lowest in the past 10 years.

In recent years, the market demand in the steel industry has been weak, and the prices of upstream raw materials have continued to fluctuate, which has affected the company's performance. UBS Securities believes that the company's current gross profit deterioration may be caused by the decline in electrode graphite prices. In the third quarter of 2023, the average price of electrode graphite fell from 19,603 yuan/ton in the second quarter to 17,551 yuan/ton. With the off-season approaching, there is no signal of recovery in steel demand in the short term.

The actual controller who was born "reckless" is not small in "gambling".

The actual controller of Fangda Carbon is Fang Wei, and the company is a listed company under the "Fangda Department". After inquiry, it was found that most of the companies in the Fangda department prefer investment. For example, Fangda Special Steel, Zhongxing Commercial, and HNA Holdings in the hands of Fang Wei also have certain equity investments.

In addition to the investment of the holding company, Fang Wei personally invested. In August 2022, Fang Wei became the sixth largest shareholder of Juneyao Airlines, and has been dormant ever since. Until the end of 2023, Fang Wei has become the third largest shareholder of Juneyao Airlines, with a shareholding ratio of 2.48%. Since then, Fang Wei still chooses to continue to increase his position, and the first quarter report of 2024 shows that Fang Wei holds 61.97 million shares of Juneyao Airlines, with a shareholding ratio of 2.8%. Further research found that the reason why Fang Wei is keen on investment may be related to his background. For Fang Wei, who stood out from the "reckless era", "gambling" seems to have always been his weapon to pass the test.

According to the data, Fang Wei, who was born in a rural family in Liaoyang in his early years, earned the first pot of gold in his life by collecting scrap iron, at that time, Fushun Xingang owed Fang Wei a lot of money, and finally chose to use an iron mine to pay off the debt, and the price of iron ore soared in the following years, and Fang Wei started from there. Since then, Fang Wei has begun to show his strong talent, not only by leading a series of restructuring and mergers and acquisitions to show his strength in capital operation, but also repeatedly acquiring and leading some distressed state-owned enterprises to reverse the decline in performance. Therefore, Fang Wei was named the title of "state-owned hunter" by the market.

As Fang Wei gradually controlled the control of five listed companies, Fangda Carbon, Fangda Special Steel, Northeast Pharmaceutical, Zhongxing Commercial, and HNA Holdings, its name of "state-owned asset hunter" was completely launched.

It is worth noting that Fang Wei's wealth is huge, which also puts Fang Da under a lot of financial pressure. At present, Fangda Group has pledged its shares in Fangda Carbon, Fangda Special Steel, Northeast Pharmaceutical, HNA Holdings, and ZTE Commercial, with pledge rates of 79.5%, 79.5%, 79.5%, 44%, and 79.5% respectively. Among them, Liaoning Fangda and Jiangxi University pledged 99.95% and 64.31% of the shares of Northeast Pharmaceutical respectively, totaling about 79.5% of the shares.

It is not difficult to find that Fang Wei seems to intend to control the pledge ratio of the shares of listed companies held by Fang Wei to less than 80%, which may be an arrangement to avoid some regulatory requirements. However, for Fang Wei, the excessively high pledge rate still needs to be vigilant against the liquidity pressure caused by excessive funds while "expanding the territory".

Or use the buyback rule to exempt cash dividends

Although Fangda Carbon has more than 6.1 billion on its books, it is not generous in terms of dividends. Judging from the dividend records over the years, since 2021, the company has not paid dividends and shares for three consecutive years. It is worth noting that the company has achieved profitability in each year from 2021 to 2023. In this context, people have to question the rationality of the company's non-dividends. Interestingly, Titanium Media APP also found that the company seems to be using some existing buyback rules to exempt cash dividends.

In 2023, the company will use its own funds to complete a share repurchase of 280 million yuan. According to the relevant guidelines of the exchange, if a listed company uses cash as consideration to repurchase shares by centralized bidding or offer, the amount of share repurchase that has been implemented in the current year shall be regarded as cash dividends and shall be included in the calculation of the relevant proportion of cash dividends in that year.

In this way, Fangda Carbon's cash dividend ratio in 2023 will reach 67.27%, which is calculated based on the company's net profit attributable to shareholders of listed companies in the consolidated statement of 2023 (416 million yuan).

It is worth noting that Fangda Special Steel, which is also a subsidiary of Fangda Group, also does not pay dividends. After the disclosure of the 2023 financial report, Fangda Special Steel has not paid cash dividends for two consecutive years, which led to inquiries from the Shanghai Stock Exchange. Subsequently, Fangda Special Steel quickly put forward a profit distribution plan of "cash dividend of 0.10 yuan per share (tax included)", which was quickly implemented at the end of April.

According to the data of the China Securities Regulatory Commission, in the past five years, A-share listed companies have paid a total of 8.2 trillion yuan in dividends, and the annual dividend amount has begun to exceed the amount of equity financing in the current year. Wind data shows that as of April 22 this year, more than 300 companies have paid a total of 0 yuan in cash dividends since the listing of A-shares, and more than 10 of them have been listed for more than 20 years.

Obviously, the move of the "iron rooster" mentioned above is contrary to the will of regulation. In August 2023, the China Securities Regulatory Commission (CSRC) issued a shareholding restriction policy, linking dividends to shareholding reductions for the first time. In December of the same year, the new regulations on cash dividends of listed companies were implemented, further improving the normalized dividend mechanism of listed companies and improving the level of investor returns.

On April 12, the State Council issued the "Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market" (hereinafter referred to as the "New "National Nine Articles"). The new "National Nine Articles" propose to strengthen the supervision of cash dividends of listed companies in the part of strict supervision of listed companies, and restrict the reduction of major shareholders and implement risk warnings for companies that have not paid dividends for many years or have a low proportion of dividends. (This article was first published on the Titanium Media App, by Zhai Zhichao)

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