Four companies, including Zhejiang Jingsheng Mechanical & Electrical and Baoshan Iron & Steel, terminated the listing of their spun-off subsidiaries tonight. The reasons for termination include market environment, self-development, and capital market operation planning. The performance of the subsidiaries planned for spin-off and listing in the past three years has been mixed.
On the evening of June 14, Four companies announced that they have terminated their plan to spin off their subsidiaries for IPOs. Amongst them, Zhejiang Jingsheng Mechanical & Electrical (300316.SZ) and Baoshan Iron & Steel (600019.SH) terminated the spin-off of their subsidiaries to the Growth, Hisense Visual Technology (600060.SH) terminated the spin-off of its subsidiary to the Star, and Zhejiang Huahai Pharmaceutical (600521.SH) terminated its subsidiary Changxing Pharmaceutical's guidance filing for the BSE.
In explaining the reasons for terminating the spin-off, some companies stated that it was due to "consideration of the current market environment and other factors," while others stated that it was due to "consideration of their overall development and capital market operation planning." Zhejiang Jingsheng Mechanical & Electrical, Baoshan Iron & Steel, and Hisense Visual Technology all promised not to plan for major asset restructurings (including spin-offs) within a month of announcing the termination of the spin-off IPOs.
From a planning perspective, Baoshan Iron & Steel had the longest planning period, with a proposal to spin off its subsidiary Baowu Carbon Industry approved on November 22, 2021. Hisense Visual Technology and Zhejiang Jingsheng Mechanical & Electrical approved proposals to spin off their subsidiaries on January 12, 2023 and April 10, 2023, respectively, while Changxing Pharmaceutical signed a guidance agreement to go public on BSE on December 6, 2022.
According to the prospectus, Baowu Carbon Industry achieved operating revenues of RMB 5.72 billion, RMB 10.63 billion, and RMB 15.287 billion respectively for 2020 to 2022, with net profits of RMB 51.549 million, RMB 530 million, and RMB 528 million respectively. Risks are high for the company due to its high proportion of related transactions, large performance fluctuation, and increasing inventory.
The net profit and non-recurring net profit of Zhejiang Jingsheng Mechanical and Electrical's subsidiary Mejing New Material have increased by more than 100 times over the past two years (2022 and 2023). According to the prospectus, Mejing New Material achieved net profits of RMB 15.2114 million, RMB 301 million, and RMB 1.778 billion from 2021 to 2023, and non-recurring net profits of RMB 15.094 million, RMB 335 million, and RMB 1.67 billion respectively.
Meijing New Material's main revenue comes from quartz crucible products, and the performance level is directly linked to the average selling price of the products. The company also warns that this high-growth, high-margin performance level carries the risk of being unsustainable.
Behind the expansion of its business scale, Meijing New Material has increased its dependence on large customers, with sales revenue from the top five customers exceeding 80% for the first time in 2023.
Changxing Pharmaceutical achieved operating revenues of RMB 468 million and a year-on-year increase of 45.82% in 2023, with a net profit attributable to shareholders of the parent company of RMB 66.9174 million and a year-on-year increase of 10.74%.
According to statistics, 12 companies have terminated their spin-off plans since 2024, including Weichai Power (000338.SZ), Zhengzhou Coal Mining Machinery Group (601717.SH), Goertek Inc. (002241.SZ), and Jiangxi Copper (600362.SH). At the same time, some companies have chosen to change their spin-off destinations to BSE or first list on the National Equities Exchange and Quotations.