The profit from the transfer of a subsidiary accounted for 68.27% of the listed company's net profit for the most recent fiscal year, yet the shareholders' meeting review process was not carried out. As a result, Weilong Shares (002871.SZ) received a regulatory penalty.
On the evening of September 5th, Weilong Shares issued an announcement stating that due to the failure to fulfill the shareholders' meeting review process for the transfer of a subsidiary, the Qingdao Securities Regulatory Bureau decided to take regulatory measures against the company, Chairman Fan Qingwei, then General Manager Li Huijun, and then Secretary of the Board Liu Ke Ping by issuing a warning letter, and to record the action in the securities and futures market integrity file.
The penalty imposed on Weilong Shares originated from a transfer transaction of a subsidiary three years ago.
On December 10, 2021, Weilong Shares held a board meeting and approved the transfer of 49% of the company's shares in Qingdao Ji Ju Mechanical and Electrical Co., Ltd. (referred to as "Ji Ju Mechanical and Electrical") to Lv Renhong for a transfer price of 24.5 million yuan.
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On April 27, 2022, the company held another board meeting and approved the transfer of 11% of the shares in Ji Ju Mechanical and Electrical to Lv Renhong for 5.5 million yuan and 40% of the shares to Gong Xiangkai for 20 million yuan.
This means that, by transferring shares in two separate instances, the company completed the divestment of 100% of the shares in Ji Ju Mechanical and Electrical.
The announcement showed that, as of April 27, 2022, the company recognized an investment income of 41.6412 million yuan, which accounted for 68.27% of the audited net profit of 2021, meeting the standard for review by the shareholders' meeting, but the review process was not carried out.
The 2021 annual report disclosed that the company is actually controlled by father and son Fan Qingwei (the largest shareholder) and Fan Yulong (the third largest shareholder), with the second largest shareholder being the legal person shareholder "Jiangxi Huilong Enterprise Management Co., Ltd." held by Fan Qingwei, and the top three shareholders holding a total of 66.6% of the shares. By mid-2024, the composition of the top three shareholders remained unchanged, but the shareholding ratio decreased to 64.44%, a reduction of 3.2%.
It is worth noting that the subsidiary was transferred less than two years after its establishment.
Public information shows that Ji Ju Mechanical and Electrical was established in January 2020, with business范围包括物流供应链管理服务、物流信息咨询、机械设备租赁、企业管理咨询等. Weilong Shares stated in mid-2020 that "to integrate internal company resources and improve operational efficiency, 'Ji Ju Mechanical and Electrical Co., Ltd.' was established, and the transfer of real estate assets was completed."Weilong Shares stated that after the establishment of Ji Jidian, the main business was to provide logistics and supply chain management services, which included internal logistics and warehousing services for valve-related accessories and external comprehensive warehousing logistics services. As warehousing logistics is not the main direction of the company's development, by the end of 2021, the company planned to dispose of the overall assets of Ji Jidian to obtain sufficient funds and focus on the main business of valves.
According to the "Asset Appraisal Report" issued at that time, as of the appraisal base date of November 30, 2021, the appraised value of the equity of Ji Jidian was 43.743.7 million yuan. Both parties negotiated and determined the transfer price of all equity to be 50 million yuan, with an appreciation rate of approximately 14.30%.
Due to the above-mentioned subsidiary transfer, the company recognized an investment income of 41.641.2 million yuan, which led to a significant increase in net profit in 2022, resulting in a mismatch between the net profit and revenue fluctuations for the period.
The 2022 annual report disclosed that Weilong Shares achieved revenue of 540 million yuan and a net profit of 136 million yuan, representing year-on-year increases of 30.10% and 123.31%, respectively.
The performance growth brought by disposing of peripheral assets is only ephemeral.
The semi-annual report revealed that Weilong Shares experienced a decline in both revenue and net profit in the first half of the year. During the reporting period, the company achieved revenue of 241 million yuan, a year-on-year decrease of 10.32%; the net profit attributable to the parent company was 51.2589 million yuan, a year-on-year decrease of 18.39%. Among them, the valve sales business, as the main source of revenue, accounted for 76.42% and fell by 16.75% year-on-year to 184 million yuan. Faced with the annual main business revenue target of 610 million yuan set at the beginning of the year, the company faces significant pressure to achieve it.
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