On May 31, Guangdong Sitong Group Co., Ltd. issued the "Announcement on the Transfer of Subsidiary Equity and Related Transactions" and planned to transfer its wholly-owned subsidiary Guangdong Dongwei New Materials Co., Ltd. (hereinafter referred to as "Dongwei New Materials Co., Ltd." "Wei New Materials") 100% equity was transferred to Guangdong Marco Polo Ceramics Co., Ltd. at a price of 380 million yuan. After the completion of this transaction, the company no longer holds equity in Dongwei New Materials.
Guangdong Marco Polo Ceramics
380 million yuan to purchase Dongwei New Materials
On May 31, 2021, Sitong and Marco Polo signed an "Equity Transfer Agreement."
As of April 30, 2021, using the asset-based method, the book value of all equity interests of Dongwei New Materials shareholders was 354.3111 million yuan, the assessed value was 374.0490 million yuan, the value-added amount was 19.7379 million yuan, and the value-added rate was 5.57%.
The transaction price is based on the value of the underlying equity determined in the "Evaluation Report" issued by Beijing Huaya Zhengxin Asset Appraisal Co., Ltd., which is qualified for securities and futures business, and the book value of the net assets of the underlying company as a reference. After negotiation between the two parties, Guangdong Marco Polo Ceramics Co., Ltd. should pay RMB 380,000,000.00 in cash to Guangdong Stone Group Co., Ltd. for the purchase of the subject equity.
What impact will this related transaction have on Stone Shares? The announcement stated that because the company plans to terminate the investment project "8 million square meters of special high-performance ceramic plates with an annual output of 8 million square meters (first phase)" raised by non-public issuance of shares, the implementation entity of the project is Dongwei, a subsidiary of the company that is the subject of this related transaction. After the termination of the new material and subsequent projects, the company and its assets will be idle.
The announcement pointed out that this transaction is a reasonable decision made based on the company's full consideration of changes in the market environment and other factors, combined with the company's current actual operating needs, which will help revitalize the company's assets, optimize resource allocation, and further enhance the company's core competitiveness. Improving profitability is in line with the company's actual operations and future development needs. The transfer of Dongwei New Materials' equity will not have a significant impact on the company's overall business development and financial status. After the completion of this transaction, there will be no creditor-debt relationship between the target company and the listed company.
As of April 30, Guangdong Dongwei
20Sales revenue in 2021 was more than 21.5 million yuan
According to the announcement, Guangdong Sitong Group Co., Ltd. established Guangdong Dongwei New Materials Co., Ltd. on April 19, 2019.
Guangdong Dongwei's main business is the production and sales of slate, and currently has its own brand of Dongwei slate. Since the production base is currently under construction, in order to expand the market, Guangdong Dongwei began to purchase and sell products in the second half of 2020. The main suppliers are related parties, and achieved sales revenue of more than 20 million yuan in the second half of 2020. As of April 30, 2021, Guangdong Dongwei has achieved sales revenue of more than 21.5 million yuan in 2021.
The project under construction in Guangdong Dongwei is the special high-performance ceramic plate project of Guangdong Dongwei New Materials Co., Ltd. The total investment of the project is estimated to be 2 billion yuan, covering an area of 231,739 square meters, with a total construction area of 342,600 square meters, and 4 factories are planned to be built. There are a total of 9 buildings including R&D, dormitories, offices and other supporting facilities. It is expected that after completion, the annual output of special high-performance ceramic plates will be 8 million square meters. The project is constructed in three phases. The first phase has an annual production capacity of 1.6 million square meters. There is no relevant plan for the second and third phases.
The special high-performance ceramic plate project (Phase I) is the first phase of the special high-performance ceramic plate product production line. The main specifications of the ceramic plates produced include 1200×2400mm, 1200×2600mm, 1600×3200mm, etc. The nature of the project is new , the project construction site is located at No. 66, Lisha East Road, Nizhou Village, Shatian Town, Dongguan, Guangdong. The project will acquire a total of 347.6 acres of land, totaling 231,739.00 square meters, and will be constructed in three phases. The first phase is expected to cover an area of 22,750 square meters, with a construction area of 89,169.43 square meters. The total investment in fixed assets is about 850 million yuan. After the project is completed and reaches capacity, it will have an annual output of 1.6 million ㎡ production capacity of special high-performance ceramic plates.
The preparation date for the special high-performance ceramic plate project (first phase) is June 2019, and the expected production date is March 2022. As of the assessment base date, the first phase is still under construction and is expected to be put into production in March 2022. There is no plan for the second and third phases.
The market environment has changed compared with expectations
Stone Co., Ltd. terminates Dongwei New Materials Project
Previously, Sitong Co., Ltd. stated in an announcement: “At present, the market price of rock slabs has dropped significantly compared with the price in the feasibility report (completed in May 2019), resulting in major changes in the feasibility of the project. ”
The specific content is: "Project investment risk: The development of an enterprise will be accompanied by the construction of new investment projects. Any new project will undergo careful market research and rigorous feasibility demonstration before investment. However, due to the time of the investment project itself, Factors such as nature, macro policies, market environment, and technological progress may change at any time, causing uncertainty in the company’s project investment.”
Among them: Guangdong Dongwei New Materials Co., Ltd.’s annual output of 8 million square meters of special high-performance ceramic plates project investment is uncertain.
(1) Affected greatly by changes in the market environment, there were only 7 domestic slate production lines in 2018. Since the second half of 2020, the growth rate has been unexpected. High-speed trend, domestic production capacity is expanding rapidly, the relationship between supply and demand is reversed, and overcapacity is serious.
(2) The price of rock slabs has fallen seriously recently. The decline in rock slab prices has directly affected the project's original planned sales revenue and rate of return, and the project investment risk has increased.
(3) The export market has been hampered by uncertainties in the international environment. Throughout 2020, exports of construction ceramics have declined year-on-year, and exports have decreased, increasing competition in the domestic market.
(4) The construction progress is slow. The projects under construction with raised funds are mainly basic supporting facilities. Other project entities are still in the construction filing and approval stage, and the impact of the early geological assessment is greater than expected, affecting the construction progress and expected benefits. The project was originally scheduled to be an annual output of 8 million square meters of special high-performance ceramic plates, which will help improve the company's product quality, enhance the company's brand effect, optimize the industrial structure, and meet the company's business development needs at that time; as the overall market environment has undergone major changes in the second half of 2020 Changes, and the investment in this project has a long construction period, a large investment amount, and a sharp decline in expected investment returns. Therefore, the investment in the ceramic plate project is not as good as expected.
To sum up, Sitong Co., Ltd. terminated the "8 million square meters of special high-performance ceramic plate project with annual output (Phase 1)" project, mainly due to the impact of the market environment, technological progress led to overcapacity, and the product market price dropped significantly. There is a risk that the implementation of the fundraising project will not achieve the expected benefits and return on investment.
In addition, Sitong's previous announcement stated that in the second half of 2020, the market environment situation will change during the project construction process, mainly as follows:
In response to the enthusiasm for the slate market, some ceramic and stone companies have moved to the slate market, resulting in a surge in the number of slate production lines in the second half of 2020. According to public market data, as of the end of 2020, there were 108 ignition slate production lines nationwide, with new The number of ignition rock plate production lines exceeded the total domestic rock plate production lines in 2017, 2018 and 2019; by May 2021, there were more than 140 ignition rock plate production lines nationwide, and the growth rate seriously exceeded expectations;
Because of the marketSlate production lines have surged, the supply and demand relationship has changed, and the problem of overcapacity has become increasingly prominent. Currently, most of the slate products are still hoarded in the hands of dealers and have not really reached the hands of consumers. Slate is currently only circulated in stone channels and home furnishing channels. , the amount is still very small;
The sales price of rock slabs has fallen seriously. At the end of 2020, the low price of rock slabs was inversely related to the prices of some large-sized glazed tiles. The price of small and medium-sized rock slabs fell from more than 300 yuan/㎡ in 2019 to about 100 yuan/㎡. What's more, it has dropped to around 50 yuan/㎡, a drop of more than 60%.
Technological advancements in the localization of rock slab equipment production lines have led to lower industry thresholds, and new breakthroughs in domestic press technology. In response to the rock slab trend, domestic companies have brought complete sets of rock slab lines such as presses, kilns, and rock slab processing to the industry. Production equipment, replacing the original production lines that mainly relied on imported equipment. At the same time, the current world slate pattern is dominated by Italy, Spain, China, and India. Among them, China's slate production capacity is greater than the combined slate production capacity of Italy, Spain, and India, and the remainder is in Indonesia, Turkey, the United Arab Emirates, Countries such as Iran have sporadic layouts. Currently, slate production capacity is in excess, and slate prices have fallen sharply. At the same time, affected by the COVID-19 epidemic, the international slate market environment is less than expected. For the whole of 2020, the country's total exports of construction ceramics were 436.96 billion, a year-on-year decrease of 7.8%. Therefore, if the company continues to implement the original investment project design plan, the company will inevitably face greater investment risks.
(The article is reproduced from Ceramic Information)
