“Investors Network” Jordan

Recently, Huawei's concept stock Jierong Technology (002855.SZ) announced a major investment plan to invest 3 billion yuan to build wind power projects.

In recent years, due to the impact of the sluggish consumer electronics market, the company's performance continued to lose money. Facing market challenges and pressures, enter the wind power sector, lay out the new energy market, or seek new breakthroughs for the company.

At the same time, Jierong Technology also fell into a wave of layoffs, and some employees were given a six-month vacation. This news attracted widespread attention and discussion, and put a lot of pressure on public opinion. The company faced considerable market pressure and operating difficulties.

In terms of market capitalization performance, Jierong Technology was once brilliant with the support of the Huawei concept. On September 28, 2023, the company's market capitalization soared to 12.9 billion yuan. However, due to sharp market fluctuations, the company's market value had fallen to 7.37 billion yuan as of January 24, 2024.

The number of employees continues to decline

Jierong Technology is an enterprise that has been deeply involved in the field of precision structural parts for many years. Its main products include precision molds, precision structural parts and hardware components with high appearance requirements, which are widely used in various electronic products, especially in the field of smartphones and smartwatches. In addition, Jierong Technology also has a rich product layout in the fields of wireless charging, AR/VR technology, and smart homes, such as wireless chargers, PC wireless holster keyboards, AR/VR chargers, PC trackpads, and key core components.

According to the annual report, Jierong Technology has established stable cooperative relationships with world-renowned mobile phone manufacturers such as Huawei, OPPO, Samsung, TCL, GOOGLE, SONY, and LG. However, since 2020, the company has not mentioned specific customer information in its annual report. On the investor interactive platform, some investors were concerned about the company's partnership with Huawei, and the company responded based on the announcement.

The global consumer electronics market has undergone tremendous changes in recent years. According to IDC data, shipments in the global mobile phone market reached 1.36 billion units in 2021, up 5.7% year-on-year, and close to 1.37 billion units in 2019. However, by 2022, global smartphone market shipments fell 3.2% year on year to 1.17 billion units, a record low for 10 years. The market remained sluggish in 2023, with shipments falling 3.2% year over year to 1.17 billion units.

This market change has had a huge impact on Jierong Technology's business performance. From 2021 to the first three quarters of 2023, the company lost 245 million yuan, 126 million yuan and 54 million yuan in net profit, respectively. Behind the financial data are market pressures and challenges faced by the company.

Meanwhile, Jierong Technology is also mired in a wave of layoffs. According to a recent report by the Financial Services Association, some employees of the company have recently been given up to 6 months of vacation, and some employees have even been stopped from work. The annual report shows that the number of employees in the company decreased by more than 2,500 from 2019 to 2022.

Investing in the field of wind power

In the face of declining main business performance, Jierong Technology actively explores development opportunities in other fields. Recently, the company issued an announcement announcing its entry into the field of wind power.

On January 19, Jierong Technology officially announced that it plans to invest 3 billion yuan in the construction of distributed wind power projects in Zhenba County, Shaanxi Province.

This decision is based on Jierong Technology's long-term plan for the new energy market. According to the announcement, its subsidiary Shenzhen Jierong Energy Technology Co., Ltd. (hereinafter referred to as “Jierong Energy”) signed a “Green Energy Project Framework Cooperation Agreement” with the Zhenba County Industrial Park Management Committee. Jierong Energy invests in distributed wind power projects in Zhenba County, Hanzhong City, Shaanxi Province. The construction scale is planned to be 300 megawatts. At the same time, the Zhenba County Industrial Park Management Committee designated the town office to develop wind power projects in stages. The specific business scale of cooperation is based on the specific project cooperation agreement signed later.

Regarding this new cooperation project, Jierong Technology clearly stated in the announcement that the cooperation with the Zhenba County Government is based on the respective advantages and development needs of both parties. This cooperation will not only meet the company's needs for business development, but will also promote the development of the company's new energy business, thereby promoting the company's long-term sustainable development.

Jierong Technology's layout in the field of wind power is deepening, and the company has previously signed strategic cooperation framework agreements for new energy projects with other partners.

On December 9, 2023, Jierong Technology revealed that the company signed a “New Energy Project Strategic Cooperation Framework Agreement” with China Power Construction New Energy Group Co., Ltd. and plans to cooperate in the development and construction of 6GW new energy power generation projects in Guangdong Province, including offshore wind power projects and centralized photovoltaic projects. Regarding this framework cooperation, the company stated that it is beneficial to promote the development of the company's new energy business. Up to now, the “New Energy Project Strategic Cooperation Framework Agreement” is being implemented.

However, investing in wind power projects requires significant capital investment. As of the end of September 2023, Jierong Technology's book capital was only 182 million yuan, which could not cover the funds required for the above projects. The cash flow situation is also not optimistic. From 2021 to the first three quarters of 2023, the company's net operating cash flow fell from 191 million yuan to -73 million yuan.

As for the specific source of funding, Jierong Technology did not disclose in detail in the announcement. However, the company also issued a risk warning in the announcement, indicating that there is some uncertainty about the execution of the agreement. There is a risk that both parties to the transaction or the business project will not be able to fulfill the contract due to changes in business conditions, market environment, industry policies, or other reasons. If the project does not make substantial progress within 6 months, the agreement will automatically be terminated.

However, Jierong Technology also stated in the announcement that Jierong Group, the controlling shareholder of the company, and Sichuan Development Securities Investment Fund Management Co., Ltd. signed a “share conversion agreement” to transfer 1.91 million shares of Jierong Technology, accounting for 8.08% of the company's total share capital. However, the company did not clearly disclose in the announcement whether this strategic cooperation will provide more resources and support for the above projects. (Produced by Thinking Finance) ■