1. Huadong Heavy Machinery has decided to terminate the investment and construction of the Bozhou 10GW N-type solar cell project, which was originally planned to invest 6 billion yuan; 2. The company stated that the overall price of the photovoltaic industry chain has severely declined and continued to decline, and continued investment cannot achieve the business purposes at the time of contract signing; 3. The company is also divesting the CNC machine tool business, showing a strategic contraction as a whole, perhaps to accumulate strength for new cross-border directions such as chips.
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According to the Financial Associated Press, on August 5th, due to its "bold" investment, Huadong Heavy Machinery (002685.SZ) has become the focus of the market among the many cross-border "follow the light" companies in recent years. However, tonight, Huadong Heavy Machinery announced that it decided to abandon its largest construction project - the Bozhou 10GW N-type solar cell factory originally planned to invest 6 billion yuan. Moreover, against the backdrop of economic benefits that are less than expected, the company is accelerating the divestment of other major assets.
Huadong Heavy Machinery explained in the announcement for the reason for terminating the project: During the contract performance by both parties, affected by the overall decline in the price of the photovoltaic industry chain and the continuous low price of the cell, the continued investment cannot achieve the business purposes at the time of contract signing. In order to reduce losses in the photovoltaic business, the company plans to terminate the investment and construction of the Bozhou 10GW N-type high-efficiency solar cell production base project and cancel the project company.
It is reported that after consultation between Huadong Heavy Machinery and the Bozhou Wuhu Modern Industrial Park Management Committee, the Bozhou Wuhu Modern Industrial Park Management Committee agreed to terminate the "Investment Agreement" signed on July 5, 2023.
Financial information shows that since 2023, Huadong Heavy Machinery has invested a total of 8 billion yuan ambitiously to lay out the photovoltaic field: It successively announced in March last year that it will invest 2 billion yuan in Jiangsu Peixian to build a "10GW high-efficiency solar cell production base project"; and in July, it announced that it will invest 6 billion yuan in Bozhou to build an "annual production of 10GW N-type high-efficiency solar cell production base project".
The large-scale investment is probably a burden for the company. According to Huadong Heavy Machinery's first-quarter report, as of the end of March 2024, the company's monetary funds balance was 0.353 billion yuan, the total amount of current assets was 2.321 billion yuan, and the total assets was 3.2 billion yuan.
As of now, the Bozhou project has been under construction for a year. Huadong Heavy Machinery disclosed in this announcement that the company and the project company have cumulatively invested 1.1798 million yuan in the project. Among them, the cost expenditures incurred in 2024 are approximately 0.392 million yuan, which will be included in the current profit and loss according to accounting standards.
Financial information shows that Huadong Energy (Bozhou) has not yet achieved revenue, and the net loss in 2023 was 0.7878 million yuan, and the net loss since 2024 was 0.392 million yuan, and the net assets as of the end of June 2024 was -1.1798 million yuan.
In fact, not long after Huadong Heavy Machinery became involved in the photovoltaic industry, the industry began to experience a "cooling off" trend. In the annual report of last year, Huadong Heavy Machinery did not provide a profit explanation for the photovoltaic cell and components business, stating that in the fourth quarter of 2023, the overall price of the photovoltaic industry chain has severely declined and the price of cell has rapidly declined, and the business sector has not provided performance support, and the profitability has been under short-term pressure.
In addition, Huadong Heavy Machinery is currently divesting another "negative income" asset. According to the stock trading abnormal volatility announcement issued by the company on August 1, the company is implementing a major asset sale and divesting the CNC machine tool business.
The "major asset sale and divestiture of the CNC machine tool business" mentioned by Huadong Heavy Machinery refers to another cross-border investment property - Runxing Technology. From 2020 to 2023, Runxing Technology has been in a state of loss. After several public listings failed to collect any interested transferees, the company intends to transfer 100% equity of Runxing Technology to shareholder Zhou Wenyuan who holds more than 5% of the shares at a price of 0.7 billion yuan.
Other fields are showing a strategic contraction trend, and Huadong Heavy Machinery may be accumulating strength for new cross-border directions. On July 28, the company announced that it plans to acquire Xiamen Ruixintu Chip Technology Co., Ltd., a GPU chip company, valued at no more than 0.3 billion yuan. The announcement also mentioned that the listed company agreed to raise funds for the target company for the development of a new chip project.