As a top company in the field of domestic car dealers, China Grand Automotive Services Group (广汇汽车) is now on the brink of face value delisting. Recently, capital markets have shown a high level of concern for the stock price and convertible bond performance of China Grand Automotive Services Group.

As of June 27th, China Grand Automotive Services Group's stock price has closed lower than 1 yuan for 6 consecutive trading days, with a steep increase in face value delisting risk. As of today's close, China Grand Automotive Services Group's stock price closed at 0.71 yuan/share, with a total market value of 5.846 billion yuan. Compared with its historical high share price of 16.15 yuan/share, China Grand Automotive Services Group's stock price has fallen nearly 96%, and its market value has shrunk by more than 120 billion yuan.

While its stock price sharply plummeted and faces delisting risk, China Grand Automotive Services Group's convertible bonds also suffered a major decline. However, the company's convertible bonds have rebounded strongly after hitting a low of 36.91 yuan in recent days, and rallied strongly yesterday.

According to the financial report, China Grand Automotive Services Group's revenue in 2023 reached as high as 137.998 billion yuan. In addition, in the 2023 Fortune China 500 ranking, China Grand Automotive Services Group still ranks 103rd. As a domestic car dealership giant with annual revenue of over 100 billion yuan and the largest financing leasing provider among passenger car dealers in China, why has China Grand Automotive Services Group come to the brink of delisting?

Performance pressure, heavy short-term debt burden.

Public information shows that China Grand Automotive Services Group was established in 1999 and primarily featured mainstream mid-to-high-end brands such as Toyota, Honda, and General Motors in its early days. In 2016, the company acquired Baixin Motors and Dalian Zunrong, substantially increasing the coverage of deluxe and super deluxe brands. At the same time, the company seized the opportunity of market development and took the lead in laying out passenger car financing leases and second-hand car markets.

According to the company's 2023 annual report, China Grand Automotive Services Group is currently China's largest deluxe passenger car dealership and service group, the leading secondary car dealership and trading agency service entity group, and the largest financing lease provider among passenger car dealers.

According to data from the China Automobile Dealers Association, in 2023, China Grand Automotive Services Group ranked first in the total passenger car sales volume among major dealership groups and second in terms of revenue scale.

Although it occupies a top position in the industry, China Grand Automotive Services Group's profitability is not very strong. Since entering 2018, China Grand Automotive Services Group's performance has reached a plateau and started to decline. It lost more than 2.6 billion yuan in 2022, and although it returned to profitability in 2023, its net profit attributable to shareholders was only 390 million yuan, and its profit-making ability has significantly declined compared to before.

In addition, China Grand Automotive Services Group also faces the problem of excessive debt. As of the end of the first quarter, the company's total liabilities were 69.254 billion yuan, of which short-term borrowings were as high as 30.463 billion yuan, but its monetary capital was only 8.336 billion yuan. During the same period, the company's total assets were 111.737 billion yuan, corresponding to an asset-liability ratio of 61.98%. However, considering that the goodwill on the company's balance sheet is as high as 18.75 billion yuan, there is a possibility of impairment in the future.

On June 19th, Dagong Global Credit Rating Co., Ltd. released a credit rating report on China Grand Automotive Services Group, which pointed out that the company's profit stability was uncertain, the size of its assets had been declining since 2021, its goodwill was relatively large, its restricted asset scale was large with general asset liquidity, and its short-term interest-bearing debt accounted for a high proportion, with heavy short-term debt burden among other risks and challenges.

However, despite these issues, Dagong Global still determined China Grand Automotive Services Group's main credit rating as AA+ and its credit rating outlook for the next 1-2 years as stable. It is expected that the company will maintain stable development in the future.

The company's management has tried to rescue itself, but how can it remove the "face value delisting" warning?

On June 3rd, the stock price of China Grand Automotive Services Group suddenly hit the limit down, and the company disclosed the plan of its controlling shareholder and some senior executives to increase their holdings of company shares that night. China Grand Automotive Services Group's controlling shareholder, Guanghui Group, plans to increase its holdings of company shares within 6 months from the date of the announcement of the plan, with a planned increase amount of not less than 50 million yuan and not more than 100 million yuan. At the same time, some directors, supervisors, and senior executives of the company also plan to increase their holdings of company shares within 6 months from the date of the announcement of the plan, with a total planned increase amount of not less than 1.3 million yuan and not more than 2.3 million yuan.

However, the increase in holdings by China Grand Automotive Services Group's controlling shareholder and some senior executives did not stabilize the stock price. After China Grand Automotive Services Group's stock price rose by limit on ****, it resumed its path of fluctuating decline. In June alone, the company's stock price has fallen by more than 48%.

As a publicly listed company with an annual revenue of over 100 billion, Guanghui Automobile is now on the brink of delisting due to face value reasons. The future of Guanghui Automobile has attracted high market attention and whether the company can survive this delisting crisis also deeply concerns over 100,000 investors who hold the stock.