Listed companies cross-border lithium battery questioned by Shanghai Stock Exchange

On February 22nd, Tianyu Ecology announced that it plans to invest no more than 610 million yuan in cash in Qinghai Juzhiyuan New Materials Co., Ltd. (referred to as "Qinghai Juzhiyuan"). After the completion of the capital increase, the company holds a 51% stake in Qinghai Juzhiyuan and gains its control.

Data show that Qinghai Juzhiyuan was established in January 2016, specializing in lithium hexafluorophosphate, lithium battery cathode materials, lithium battery ternary materials research and development, production and sales. The product at this stage is lithium hexafluorophosphate, which has been approved by the Management Committee of Chaidamu Circular economy Experimental Zone with an annual output of 6000 tons of high-end lithium hexafluorophosphate construction project. among them, the first phase of lithium hexafluorophosphate production line has been completed in the second half of 2021 and has been approved by Delingha Emergency Management Bureau, but has not yet been formally put into production; the second phase of the annual production line of 4000 tons of lithium hexafluorophosphate is still under construction.

In fact, this acquisition is the "second cross-border" of Tianyu ecology, and the first cross-border is "pig farming".

The main business of Tianyu Ecology is landscape ecological engineering, and its performance is not satisfactory in recent years. The net profit loss in 2020 is 157 million yuan, and the estimated loss in 2021 is between 150 million yuan and 220 million yuan.

On January 4, 2021, Tianyu Ecology announced that the company and its relevant holding subsidiaries planned to sign a "Pig Farm Leasing Service Agreement" in Caidian District of Wuhan City and Panzhou City, Guizhou Province, respectively. However, judging from the performance forecast for 2021, cross-border pig farming has not reversed the losses of Tianyu ecology.

Tianyu Ecology said that the acquisition of Qinghai Juyuan is to achieve the company's strategic layout and improve the company's sustainable profitability. However, the ideal is very plump, the reality is very bony, and Tianyu Ecology's acquisition is also taking a "risk".

On the one hand, with regard to the source of funding for this acquisition, Tianyu Ecology is called the company's own financing, including but not limited to its own funds and M & A loans. However, the current funds of Tianyu Ecology are not abundant, or even very tight. Data show that as of September 30, 2021, Tianyu Ecology has currency funds of only 258 million yuan, short-term loans of 183 million yuan and long-term loans of 190 million yuan. In addition, the company has 198 million yuan of temporarily refunded funds that have not yet been repaid, and another 250 million yuan of bonds are due in June 2022.

On the other hand, Juyuan in Qinghai is also not doing well. In terms of assets, as of December 31, 2021, Qinghai Juzhiyuan has total assets of 882 million yuan, responsible for a total of 790 million yuan, and net assets of only 91.35 million yuan. Moreover, of the acquisition funds of 610 million yuan of Tianyu Ecology, 200 million yuan is specially used to repay the debt of Qinghai Juzhiyuan to natural persons, 100 million yuan to repay the debt of Qinghai Juzhiyuan and to lift the equity pledge guarantee.

In terms of operating conditions, Qinghai Juzhiyuan has a revenue of 0 yuan and a loss of 4.67 million yuan in 2020. In 2021, the revenue was only 3.82 million yuan and the loss was 28.045 million yuan.

Perhaps with this in mind, Tianyu Ecology and Qinghai Juyuan also signed a gambling agreement, requiring Qinghai Juyuan to achieve a net profit of not less than 300 million yuan, 400 million yuan and 500 million yuan from 2022 to 2024, respectively. This means that in 2022, Qinghai Juzhiyuan will not only reverse losses but also achieve a profit of 300 million yuan, which is imaginable.

It is worth noting that Tianyu Ecology received a regulatory inquiry from the Shanghai Stock Exchange on the same day as the announcement of the acquisition. It is required to explain the reason and necessity of acquiring the target company with performance loss again in the light of the current main business operation and profitability, and explain what kind of talent reserve, technology accumulation, business resources, research and development capability of the lithium battery material, as well as the capital and resources needed to enable the target company to achieve normal production.

In recent years, the popularity of the lithium power industry has indeed attracted a number of enterprises to march across the border. Some enterprises have broadened their business structure and greatly improved their profitability, while others have not "made a profit." instead, they have made a coquettish appearance, and finally walked out sadly. At present, it seems that it is very difficult for Tianyu Ecology to succeed in the field of cross-border lithium materials and turn around to sing songs.