There are thunderstorms year after year, but this year there are a few! Another big thunder has arrived.
Under the constant “explosion” of impairment of goodwill, Zotye Auto's performance forecast has been receiving immediate attention from investors. On the evening of January 20, Zotye Auto still gave 65,000 investors a “big thunderstorm”. The company's net profit in 2019 suffered a sharp loss of 6 billion yuan to 9 billion yuan, including impairment of goodwill of about 6 billion yuan.
Under the cold winter of automobile companies, starting in 2018, the financial chain difficulties of Zhongtai Auto began to appear, and they completely exploded in the 2019 debt collection of suppliers. Zotye Auto's plight has also attracted the attention of the local government. It has also issued 3 billion yuan in financial loans for first aid. Zotye Auto also recently launched a new model, but it is still time to test whether it can get out of the predicament.
65,000 shareholders “stepped on thunder” Zotye
Zotye Auto announced on January 20 that the company expects a net profit loss of about 6 billion yuan to 9 billion yuan in 2019, down 850%-1225% from the same period last year, and a profit of about 800 million yuan for the same period in 2018. It is worth noting that Zotye Auto expects to prepare about 6 billion yuan for impairment of goodwill.
Zhongtai Automobile said that during the reporting period, due to the impact of the macroeconomic situation, the overall prosperity of the automobile industry was not high, and the company's automobile sales fell sharply and did not meet expectations. According to the principle of prudence, it is proposed to plan for large goodwill impairment preparations. It is estimated that the estimated goodwill impairment preparations will be about 6 billion yuan. The exact amount is yet to be determined after evaluation by relevant agencies.
In addition, Zotye Auto also pointed out that due to the sharp decline in sales volume in 2019, the company's operating income fell sharply, and operating costs rose relatively, resulting in large operating losses.
Investors recently paid attention to Zotye's performance forecasts and goodwill issues. On January 13 and 14, investors also interacted with the Shenzhen Stock Exchange to ask related questions. Zotye Auto also responded uniformly, saying, “Please pay attention to the company announcement for the performance forecast. Whether the impairment of goodwill needs to be audited by an accounting firm and a goodwill impairment test before it can be determined.” Immediately after that, the company released a “thunderstorm” of huge performance losses.
Losses exceed 6 billion yuan to 9 billion yuan, and preparations for impairment of goodwill of 6 billion yuan. What kind of concept is this? According to the latest data as of the closing of the market on January 20, Zotye Auto's total market value was 5.840 billion yuan; as of the end of the third quarter of 2019, Zotye Auto's total assets were about 30.852 billion yuan, and net assets were about 16.8 billion yuan; in addition, Zotye Auto went on a backshell listing in March 2017, and the company's net profit in 2017 and 2018 was about 1,256 billion yuan and 900 million yuan respectively. In other words, Zotye Auto's losses in 2019 exceeded the company's total market value, about half of the company's net assets, and at the same time about 4 times the company's total profit since going public behind the shell.
According to the balance sheet of Zotye Auto's third quarter report, as of the end of the third quarter of 2019, the company's goodwill was about 6.259 billion yuan. In addition, Zotye Auto's accounts receivable in projects where asset impairment is more likely to be mentioned also reached 5.399 billion yuan. This data also received attention from some investors.
According to the latest data, as of the end of the third quarter of 2019, Zotye Auto had 65,671 shareholders. Also, in a situation where Zotye Auto is very likely to reveal a loss in performance, the financing capital has clearly increased the position of Zhongtai Auto since December last year. The financing balance has increased from about 70 million yuan in early December to around 100 million yuan at the beginning of January this year. Although there has been a slight decrease recently, the latest data shows that as of January 17, Zotye Auto's financing balance is still 97.52 million yuan.
Funding difficulties
Zotye Auto went public behind the scenes in 2017. At that time, it was also a highlight moment for Zotye, and it was once a very popular “national car.” In 2017, Zotye Auto's sales volume reached 317,000 vehicles, which is comparable to BYD and surpasses established independent brands such as Haima Motor, Jianghuai Automobile, and Dongfeng Fengguang.
At the time of backfiring, Jinma Co., Ltd. acquired Zotye Auto at a high premium of 11.6 billion yuan, but after 2017, the company went downhill, and the capital chain difficulties gradually became apparent in 2019.
Zotye Auto's problems with “debt collection, wage arrears, and majority shareholder equity freeze” have continued since the second half of last year. A reporter from Securities Times e-Company visited Zotye Auto in the midst of the storm at the end of October last year. At the time, the company was faced with a group of more than 60 dealers visiting to collect debts.
According to public information and interviews with Securities Times e-Company reporters, as early as the end of 2018, some auto parts suppliers stopped their supply cooperation with Zotye Auto due to payment arrears. Furthermore, in responses to inquiries from Delun Electronics and ST Bank Yim 2018 last year, they also pointed out problems such as Zotye Auto's financial constraints and overdue payments, etc., and mentioned related bad debt preparations as a result.
Meanwhile, battery supplier BAK Power's plight has completely exposed Zotye Auto's financial situation. Zhongtai Auto was sued in court last year for defaulting on the purchase price of BAK Power Battery of 621 million yuan. The incident also continued to unravel many listed companies.
In addition, the recent “thunderstorm” in the performance forecast of the listed company Beidou Xingtong also involved Zotye Auto. The 2019 accounts receivable of BDS is estimated to have impairment losses of 51 million yuan, of which the estimated impairment losses from Zotye Auto are about 33 million yuan. BDXing said Zotye Auto was in trouble in the second half of 2019, and there was a problem with the capital chain, and Beidouxing.com immediately adopted legal means to recover accounts receivable.
According to public data, as of the end of the third quarter of 2019, Zotye Auto had accounts payable of approximately $4.210 billion and notes payable of $1,999 billion. In the first three quarters of 2019, Zotye Auto achieved total operating income of 5.401 billion yuan, a year-on-year decrease of 59.59%; net profit attributable to shareholders loss of 759 million yuan, a year-on-year decrease of 283.02%; and net profit loss after deduction of 908 million yuan, a year-on-year decrease of 337.69%.
Zotye Auto's business difficulties have also received attention from the local government. According to the spirit of the local government's instructions on Zotye Auto's relief assistance, in late August 2019, the Bank of China, China Construction Bank, and Yongkang Agricultural Commercial Bank jointly issued a capital loan of 3 billion yuan to Zotye Auto. This is also seen as Zotye Auto's life-saving money.
According to recent news from Zotye Auto, the company said that in 2019, Zotye Auto faced unprecedented challenges through the wave economy, international trade friction, etc., and faced unprecedented challenges. However, only innovation and upgrading are the only way to improve quality and increase volume. According to the product plan, Zotye Auto said that within the next three years, it will launch more than 20 smart Chinese models, represented by Zotye TS5 and B21, in due course. In the field of new energy, Zotye also plans to launch more than 10 products in 2020, and recently formally signed a cooperation agreement with France-Air, Liquid-Air to deepen hydrogen fuel cell research and development.
Car companies in the “cold winter”
After China's automobile sales declined for the first time in 20 years in 2018, 2019 was undoubtedly an extremely difficult year for the Chinese automobile industry. Everyone in the car market called for a cold winter, especially for independent brands.
According to data released by the China Automobile Association, Chinese car companies sold 257.69 million vehicles throughout the year, down 8.2% year on year, including passenger car sales of 21.44 million units, down 9.6% year on year. Also, in 2019, the market share of independent brands was less than 40%, while independent brands that exceeded one million had only two seats, and of the two seats, only Great Wall Motor maintained positive growth.
Therefore, among the causes of losses, Zotye Auto also listed the macroeconomic situation and the overall prosperity of the automobile industry as the main reasons.
Zotye isn't the only one in trouble. *ST Haima and Lifan Co., Ltd. The annual sales volume of the two companies fell below 30,000 vehicles. In 2018, Lifan shares guaranteed the company's book profit through continuous asset sales; Haima Auto, which had been losing money for two years, saved itself by selling houses in 2019 in order to “protect the shell”. Furthermore, FAW Xiali also relied on asset sales to “protect” it for many years, and finally sold almost all of its automobile business last year. NIO Auto, a new car builder, was also faced with capital chain difficulties in 2019.
Up to now, a total of 6 passenger car companies, including ST Haima, BYD, SAIC Motor Group, BAIC Blue Valley, Lifan Co., and Zotye Auto, have released their 2019 performance forecasts. Among them, *ST Haima relied on house sales to reverse losses, BAIC Blue Valley and Lifan shares are expected to lose money, and the performance of the rest of the companies has also declined.
Recently, however, from a policy perspective, the automobile industry is on a steady recovery trend. Furthermore, Tesla's strong entry into China has also caused huge waves.
Miao Wei, minister of the Ministry of Industry and Information Technology, said at the press conference of the State Information Office on January 20 that China's automobile industry is in a critical period of stabilizing and building a foundation, and that the Ministry of Industry and Information Technology will do a good job of top-level design and work with relevant departments to study policies and measures to promote automobile consumption. At the previous China Electric Vehicle 100 People's Conference Forum (2020), Miao Wei also responded to the NEV subsidy issue, saying that this year's NEV subsidy policy will remain relatively stable and will not decline drastically.
Wanhe Securities pointed out that the automobile industry's policy stability expectations have been strengthened, and production and sales are expected to be stable, moderate, and positive in 2020. It also analyzed the reasons, saying that stabilizing policies will help restore the profitability of the industrial chain; stock explosions such as Tesla and Aions are expected to further stimulate consumers' desire to buy; traditional car manufacturers (Volkswagen, ABB, etc.) will launch a large number of pure electric models in 2020, which is expected to drive the desire of loyal customers to buy.
Orient Securities also believes that in 2020, stable subsidies will give confidence to the industry, and the policy environment will be relatively relaxed. At the same time, with the help of Tesla+ traditional car companies, the industry will resume high growth.