[SMM Analysis] 400 Million Yuan Strategic Investment! Two Enterprises Jointly Plan Layout in the Recycling Industry

On December 12, GEM (002340.SZ), a leading enterprise in new energy materials, announced that the company signed an Equity Transfer Contract with Henan Investment Group, intending to acquire a 16.38% equity stake in its wholly-owned subsidiary, Henan Circular Science and Technology Industry Group, for 400 million yuan.

GEM's equity acquisition this time involved using 400 million yuan of its own funds to purchase the 16.38% stake in Henan Circular Group held by Henan Investment Group.

The transaction was determined based on an appraisal reference date of May 31, 2025. According to the appraisal, the total equity value of Henan Circular Group was approximately 2.4 billion yuan. Based on this calculation, the corresponding valuation for the equity stake acquired by GEM was about 393 million yuan. The actual transaction price of 400 million yuan implied a premium rate of approximately 68%. After the transaction, Henan Circular Group will change from a wholly-owned subsidiary of Henan Investment Group to an equity-accounted investee.

This is not the first cooperation between GEM and Henan Circular Group. As early as December 2024, Henan Circular Group had acquired equity stakes in three electronic waste disposal enterprises in Northern China from GEM, increasing its number of electronic waste dismantling enterprises to 13 and making its disposal capacity the highest in the country. More intensive asset integration occurred on October 31 this year, when Henan Circular Group acquired a 100% equity stake in Jiangxi GEM Recycling Materials Co., Ltd., along with related circular economy businesses, from GEM for 962 million yuan.

As a global leading enterprise in new energy materials and resource recycling, GEM possesses 37 core patents in high-value utilization of electronic waste and recycled plastic modification, along with a global market network. Henan Circular Group, as a provincial circular economy implementation platform in Henan Province, has business coverage spanning electronic waste dismantling, end-of-life vehicle recycling, and renewable resource trading, among other areas. The group now has 15 electronic waste dismantling enterprises, with an annual recycled plastic capacity exceeding 300,000 mt.

The cooperation between the two parties is defined as "a good complementarity of advantages between state-owned enterprises and private enterprises." The platform advantages and policy resources of state-owned capital, combined with the technological innovation and market networks of private enterprises, create a unique synergistic effect.