"Losses Up to $12B: HFT 'Traps' BYD in Financial Woes"

• 2024-05-23
• News

Heli Tai, which has turned into a negative asset, has disappointed Wang Chuanfu's expectations. In 2023, Heli Tai may suffer a maximum loss of 12 billion yuan. As soon as the news came out, funds frantically withdrew, and Heli Tai's stock price was limited down on the 31st. This undoubtedly "hurt" a group of followers, with BYD being the first to be affected. In 2015, BYD became the second-largest shareholder of Heli Tai, and since then, the former has tried its best to help, while the latter also intends to grow through "buying". However, years of efforts have not been much, and now Heli Tai even has the risk of delisting, which may make BYD's years of companionship in vain.

BYD's eight-year wait has finally become a dream.

On January 31, Heli Tai's stock price was limited down at the opening. In terms of news, on the evening of the 30th, Heli Tai announced that it is expected to have a net loss of 9 billion to 12 billion yuan in 2023. Under the loss of tens of billions, its net assets are expected to be -6.51 billion yuan to -3.51 billion yuan. Based on this, Heli Tai stated that there may be a risk of delisting.

Heli Tai, which is as dangerous as a stack of eggs, also made BYD sweat coldly. As of the end of the third quarter last year, BYD held 346 million shares of Heli Tai. If BYD has not reduced its holdings since the end of September last year, and calculated based on Heli Tai's closing price of 1.85 yuan per share on the 31st, its market value is 640 million yuan.

Advertisement

As early as 2015, the latter became the second-largest shareholder of Heli Tai, and the two have been very close in business over the past eight years. Heli Tai itself also tried to transform through external mergers and acquisitions.

However, at present, the results are obviously not good. Heli Tai's stock price and performance are getting worse and worse, and from the perspective of dividends, there are not many since BYD became a shareholder. Wang Chuanfu's eight-year layout may be a wide-sown and thin-harvested.

BYD's support for Heli Tai has finally ended up in a mess.

On the evening of January 30, Heli Tai released the 2023 performance forecast, pointing out in the announcement that it is expected to have a net loss of 9 billion to 12 billion yuan last year, compared to a loss of 3.466 billion yuan in the same period last year. It is expected that the basic earnings per share will be a loss of 3.8506 yuan per share to 2.8879 yuan per share.

Regarding the significant loss in performance, Heli Tai helplessly stated in the announcement that on the one hand, the average price of touch and photoelectric products in the small and medium-sized display field where it is located is lower than the same period last year, and the market orders for the mobile phone side business did not meet expectations, leading to a year-on-year decline in sales and gross margin in 2023, and the overall gross margin level has not significantly recovered.On the other hand, influenced by the control rights change planned and implemented by Helitai in the first half of last year, its unused financial institution financing credit limit was restricted, leading to financial stress and overdue debts, which in turn affected its ability to take orders and deliver.

It can be said that a variety of complex factors led to Helitai's huge losses, and the loss amount of about ten billion yuan also put its net assets in the red. The announcement shows that last year at the same time, Helitai's net assets were 5.485 billion yuan, and the data as of the end of 2023 is expected to be -6.51 billion yuan to -3.51 billion yuan.

Negative net assets means that Helitai is already in a predicament of insolvency. Based on this, Helitai stated in the announcement that according to relevant regulations, it may be subject to delisting risk warning by the Shenzhen Stock Exchange after the annual report is disclosed.

At the same time, Helitai also received a letter of concern from the Shenzhen Stock Exchange. The letter pointed out that the loss during the reporting period was mainly due to the impact of the main business and asset impairment, and required Helitai to provide a written explanation on the impact of the main business and asset impairment. This includes a quantitative analysis of the reasons for the decline in Helitai's sales and gross profit margin in the reporting period, and an explanation of whether the provision of about 3.3 billion yuan to 4.3 billion yuan for inventory depreciation is reasonable.

A single stone causes a thousand waves, and on the day after the announcement was released, funds fled wildly, and Helitai's stock price fell to a limit down, dropping to 1.85 yuan per share.

And Helitai, which was on fire in the backyard, finally let BYD pay in vain. Data shows that as of the end of September 2023, BYD held 346 million shares of Helitai, with a shareholding ratio of 11.13%, ranking as the second largest shareholder of the listed company.

If calculated based on today's stock price of 1.85 yuan per share of Helitai, BYD's holding market value is 640 million yuan.

BYD, which has invested both money and effort, now sees Helitai being regarded as a worn-out shoe by funds in the secondary market.

Previously, BYD had high hopes for Helitai.In 2015, BYD's Wang Chuanfu took an interest in Holley KingTec. In April of that year, BYD announced the sale of Shenzhen BYD Electronic Components to Holley KingTec, with a transaction value of 2.3 billion yuan.

Simultaneously, according to the previous agreements made by Holley KingTec, 75% of the payment consideration for this transaction was made through the issuance of shares by Holley KingTec, while the remaining 25% was paid in cash. The payment consideration for the transaction was 1.725 billion yuan through share issuance and 575 million yuan in cash.

Looking at the simulated data for BYD Electronic Components in 2014, the net assets at the end of the year were 678 million yuan. Holley KingTec acquired this company at a premium, with a premium rate of over 240%, which demonstrated its determination to transform.

The target company, BYD Electronic Components, is also the only company under BYD that engages in flexible circuit boards and liquid crystal display modules, camera modules. In this regard, BYD explained in the announcement that promoting the group to concentrate resources on developing core businesses is beneficial for the long-term development of the group's new energy vehicle business.

After the above transaction was completed, BYD also became the second-largest shareholder of the listed company.

Subsequently, after Holley KingTec completed the capital increase through capital reserve conversion and the cancellation of 11.89 million shares of BYD's shares to be compensated, the number of shares held was changed to 346 million shares, and there was no reduction during the period.

After being deeply linked with Holley KingTec, BYD has been taking care of it in all aspects, and it and its affiliated companies have been supporting Holley KingTec without sparing any effort.

Last year, on relevant platforms, Holley KingTec stated that its cooperation with BYD was mainly in the field of automotive electronic products such as automotive display screens, cameras, and FPC.

Did BYD's abacus fall through?

In addition to the help from BYD, Holley KingTec also intends to occupy a place in the industry through "buying and buying".In addition to the assets acquired through restructuring and acquisition in 2015, from 2016 to 2017, Helitai also acquired three companies, namely Zhuhai Chenxin Technology, Lanpei New Material Technology, and The Ring.

This made Helitai indeed appear to be thriving. From 2015 to 2018, Helitai achieved operating revenues of 4.953 billion yuan, 11.845 billion yuan, 15.111 billion yuan, and 16.904 billion yuan, with year-on-year increases of 62.22%, 139.14%, 27.57%, and 11.87%, respectively. During the same period, the net profit attributable to the parent company was 218 million yuan, 874 million yuan, 1.179 billion yuan, and 1.315 billion yuan, with year-on-year growth of 48.15%, 300.63%, 34.98%, and 11.17%, respectively. Among them, the net profit after deducting non-recurring gains in 2016 reached 769 million yuan, a year-on-year increase of 5.77 times.

However, starting from 2019, Helitai seemed to be struggling. This was particularly evident in its performance, with net profits of 1.015 billion yuan, -3.082 billion yuan, 110 million yuan, and -3.393 billion yuan from 2019 to 2022.

The hidden bombs sown by the previous crazy acquisitions also began to explode. According to the listed company's annual report for 2020, its asset impairment for that year was nearly 2.4 billion yuan, mainly due to the provision for goodwill impairment and inventory impairment. Its goodwill mainly arose from the purchase of assets through the issuance of shares and raising supporting funds by Helitai Technology Co., Ltd. in 2015.

The performance in 2022 was similar to that in 2020, with asset impairment of about 1.3 billion yuan, also due to the provision for goodwill impairment, inventory impairment, and fixed asset impairment, and its goodwill also originated from the purchase of assets through the issuance of shares and raising supporting funds in 2015.

By the end of 2022, Helitai still had a book goodwill value of 1.677 billion yuan.

The long-term unsatisfactory performance losses were also transmitted to the stock price. From 2020 to January 31 of this year, the fluctuation range of Helitai in the secondary market was -66.51% (pre-adjusted rights).

At the same time, Helitai, which has average self-blood-making ability, is also very stingy in dividends. Data shows that from 2015 to 2020, Helitai has only paid dividends four times, with a total dividend of about 600 million yuan, a relatively small amount. BYD received a dividend of about 70 million yuan. In this case, BYD, which has held shares for 8 years, has not "gained" much benefit.

From the data, according to the analysis of Helitai's annual report, from 2015 to 2019, the amounts involved in the transactions between the two parties were 565 million yuan, 3.734 billion yuan, 3.7 billion yuan, 2.053 billion yuan, and 4.5 billion yuan; from 2021 to 2022, they were 110 million yuan and 125 million yuan, respectively. The content of the related transactions mainly involved Helitai selling products, providing labor services, and purchasing raw materials to BYD.