① It has been discovered that the facts that Fangzheng Electric is suspected of breaking the law include unreasonable accounting estimates of the “three packages” and improper expansion of Shanghai Haineng's goodwill related asset group; ② From 2018 to 2022, Fangzheng Electric had false records for 5 consecutive years, and false records accounted for a large proportion of individual years.
Financial Services Association, January 8 (Reporter Wang Bin) After nearly half a year, Fangzheng Electric (002196.SZ) was investigated by the Securities Regulatory Commission for suspected illegal disclosure of information.
This evening, Fangzheng Electric announced that the company recently received the “Advance Notice of Administrative Penalties” from the Zhejiang Regulatory Bureau. According to the announcement, it was discovered that Fangzheng Electric is suspected of breaking the law, including the unreasonable accounting estimate of the “three packages” and the improper expansion of Shanghai Haineng's goodwill related asset group.
Specifically, since 2015, Shanghai Haineng Automotive Electronics Co., Ltd. (hereinafter referred to as “Shanghai Haineng”), a wholly-owned subsidiary of Fangzheng Electric, has sold products directly or through Guangxi Sanli Technology Development Co., Ltd. (“Guangxi Sanli”) to Guangxi Yuchai Machinery Group Co., Ltd. (hereinafter referred to as “Guangxi Yuchai”), and provided product guarantees to Guangxi Yuchai. According to Guangxi Yuchai's claim, Shanghai Haineng has calculated or confirmed a “three package fee” for product quality. Since the end of 2018, there has been a marked increase in product quality claims initiated by Guangxi Yuchai, but the company has failed to make proper accounting estimates and accounting treatment. According to calculations, the amount of “three packages” that the company should make up from 2018 to 2022 was 25.508 million yuan, 4.237 million yuan, -14.9819 million yuan, -124.04 million yuan, and -2.5641 million yuan respectively, accounting for 5.98%, 22.67%, -2.31%, -148.94%, and -0.77% of the total disclosed profit for the period, respectively, and affected goodwill impairment preparations for the corresponding year.
According to previous announcements, Fangzheng Electric acquired 100% of Shanghai Haineng's shares in 2015, forming a goodwill of 828.612 million yuan. Fangzheng Electric (Vietnam) Co., Ltd. (hereinafter referred to as “Vietnam Fangzheng”) was originally a wholly-owned subsidiary of Fangzheng Electric. In July 2019, Fangzheng Electric transferred 100% of Vietnam's shares to Shanghai Haineng. Since the end of 2019, the company has improperly included Vietnam in Shanghai Haineng's goodwill related asset group to conduct goodwill impairment tests, resulting in inaccurate confirmed goodwill impairment reserves. According to calculations, combined with the unreasonable impact of the “three packages” accounting estimates, the company should additionally confirm that the goodwill impairment reserve amounts from 2018 to 2022 were 52,924,300 yuan, 32.9067 million yuan, 147.17,700 yuan, and -84.412,121 million yuan respectively, accounting for 12.40%, 9.29%, 5.08%, 176.72%, and -25.26% of the total disclosed profit for the period, respectively.
Together, the company's total profit in 2018 inflated by 784.323 million yuan, total profit inflated by 596.45 million yuan in 2019, surged 17.925 million yuan in 2020, total profit surged by 2,313,700 yuan in 2021, and total profit decreased by 86.976 million yuan in 2022, accounting for 18.38%, 31.96%, 27.78%, and 26.03% of the absolute value of total profit disclosed in the current period, respectively.
According to the “Advance Notice of Administrative Penalties”, the Zhejiang Securities Regulatory Bureau plans to decide to order corrections, give a warning, and fine of 4 million yuan; give a warning to the then-director, director, financial director, and deputy general manager Mou Jian, and impose a fine of 1.3 million yuan; give a warning and fine of 800,000 yuan to then-chairman Gu Yifeng.
It is worth mentioning that from 2018 to 2022, there were false records in Fangzheng Electric's annual reports for 5 consecutive years, and false records accounted for a large proportion of individual years. If you just look at non-net profit, the company has been losing money for 5 consecutive years. Among them, in 2022, Fangzheng Electric lost 323 million yuan in net profit to mother, changing from profit to loss year-on-year.
In May 2023, Fangzheng Electric received an inquiry letter for the 2022 report from the Shenzhen Stock Exchange. In response to the sharp loss in performance, the Shenzhen Stock Exchange requested Fangzheng Electric to explain the reasons and rationality of the sharp decline in net profit due to the sharp decline in net profit to mother in the fourth quarter of the previous year and the sharp decline in annual net profit, and whether it carried out a financial “big bath” through asset impairment preparations and/or credit impairment preparations and adjusted profits over time.
A month later, Fangzheng Electric was investigated by the Securities Regulatory Commission for suspected illegal disclosure of information. At the same time, Fangzheng Electric's long-planned fixed increase was also terminated.