Zhe Jiang Kangsheng plans to 'revitalize' the new energy commercial vehicle business that was 'cut off at the waist' last year by introducing strategic investors. However, the prerequisite for this transaction is that the strategic investor must first successfully finance themselves.
On June 26, Cailian Press (Reporter Zeng Chuchu Liu Yue) reported that Kangsheng Shares (002418.SZ) introduced strategic investors to "revitalize" last year's new energy commercial vehicle business, with the prerequisite for the transaction being that the strategic investor will first successfully obtain financing.
Kangsheng Shares announced tonight that Zhongzhi Yike, a wholly-owned subsidiary, plans to introduce strategic investors Shanghai Xizhong New Energy Automobile Co., Ltd. (referred to as "Shanghai Xizhong") and Zhengzhou Lvgang Commerce and Trade Co., Ltd. (referred to as "Zhengzhou Lvgang") through equity transfer and capital increase and share expansion. After the transaction is completed, the company will hold a 45% stake in Zhongzhi Yike, still the largest shareholder and occupying the majority of the seats on the board of directors of Zhongzhi Yike.
According to the strategic planning and business development needs of Zhongzhi Yike, Kangsheng Shares intends to transfer 55% of Zhongzhi Yike's equity and increase capital and share expansion by introducing strategic investors Shanghai Xizhong and Zhengzhou Lvgang, while conducting proportional capital increase through debt-to-equity conversion. After the equity transfer is completed, Kangsheng Shares, Shanghai Xizhong, and Zhengzhou Lvgang will hold 45%, 40%, and 15% of Zhongzhi Yike, respectively.
After the above-mentioned equity transfer and capital increase and share expansion are completed, Kangsheng Shares will increase capital to Zhongzhi Yike with Shanghai Xizhong and Zhengzhou Lvgang, both by comparable proportions, through the means of debt-to-equity conversion and cash contributions, with a total of RMB 398 million.
Zhongzhi Yike is a wholly-owned subsidiary of Kangsheng Shares, focusing on the research and development of new energy commercial vehicle technology and complete vehicle manufacturing, including new energy commercial vehicles such as pure electric and hydrogen fuel city buses, intercity coaches, and special vehicles. As of May 31 of this year, Zhongzhi Yike's net assets were RMB 60.596 million, with operating income of RMB 7.3495 million and a net loss of RMB -7.1067 million from January to May of this year.
According to the disclosed agreement in the announcement, Shanghai Xizhong will appoint the general manager of Zhongzhi Yike and sign a "Performance Commitment Agreement" with Zhongzhi Yike, promising that Zhongzhi Yike will achieve the following business goals from June 1, 2024, to December 31, 2025: deducting the impacts of the current period's receivable national and local subsidies and deposit-related current profits and losses, the annual net profit will be positive (the net profit for 2024, deducting the losses incurred before the start of the performance commitment period).
If Zhongzhi Yike fails to achieve the performance target, it has the right to require cash compensation from Shanghai Xizhong. The cash compensation amount = the current profit and loss of the previous period's receivable national and local subsidies and deposit (positive for income and negative for loss) - the current net profit.
Judging from the introduction of strategic investments and the performance commitment agreement, Kangsheng Shares seems to be counting on Shanghai Xizhong to "revitalize" its new energy commercial vehicle business sector. According to the announcement, Shanghai Xizhong is a technology company dedicated to the research and development of new energy technology and the development of new energy commercial vehicle products.
In addition to buying equity and increasing capital, Shanghai Xizhong is also willing to lend money. The announcement mentioned that, under the condition that the transaction is completed, Shanghai Xizhong agrees to lend not less than RMB 180 million to Zhongzhi Yike at an annual interest rate of "LPR * (1 + 15%)" to purchase fixed assets and supplement working capital.
Although it is willing to lend money, one of the prerequisites for the implementation of the above-mentioned transaction is that Shanghai Xizhong itself first successfully obtains financing. According to the announcement, the prerequisite for the implementation of this transaction is that the total amount of the equity financing of the above-mentioned increase in capital and share expansion by Shanghai Xizhong banked shall not be less than RMB 150 million (including the principal), and Chengdu Major Industrialization Project Phase I Equity Investment Fund Co., Ltd. and/or Chengdu Economic Development Area Equity Investment Fund (Limited Partnership) and/or Chengdu Jiaozi Economic Development New Energy Automobile Equity Investment Fund Partnership Enterprise (Limited Partnership) intend to participate in the capital increase and share expansion of Shanghai Xizhong.
The main business of zhe jiang kangsheng is the research and development, production and sales of refrigeration pipelines and their extended products, and the revenue of refrigeration pipelines and accessories and auto sales accounted for 93.7% and 3.17% respectively in the company's 2023 annual report. In 2022, the company's auto business revenue was 946 million yuan, accounting for 30.01% of the year's revenue. The company also disclosed in the 2023 annual report that the sharp decline in sales of electric vehicles in 2023 was due to the fact that the main orders for the automotive sector in the same year came from the Longquan Bus Order, which accounted for 76 vehicles, as compared to 825 vehicles from the Chengdu Bus Order in the same period of the previous year.
It is worth noting that, in the above equity transfer and capital increase and share expansion proposal, the proposal was passed with 1 opposing vote, 8 in favor, and 0 abstentions at the board of directors meeting of zhe jiang kangsheng.