AutoBeta(AutoBeta.net)07/24 Report--

On July 22nd, some investors questioned Guanghui Motor. Guanghui Automobile purchased the assets of Guanghui Group, a major shareholder, through a fixed increase of 37.8 billion yuan at a high premium, while the assets purchased included 9.8 billion intangible assets and generated 18.8 billion goodwill assets. is this true?

In response to the above rumors, Guanghui Motor issued a clarification on its official website:

(1) according to public information, Guanghui Automobile injected about 22.8 billion yuan in assets in 2015 to backdoor the listing of "Meiluo Pharmaceutical". Since then, Guanghui Motor has issued a total of 17.37 billion yuan of convertible bonds through non-public offerings and public offerings, including two fixed increases and one convertible bond financing. both are used to support the development of the company's main business: the 6 billion matching funds raised by issuing shares to purchase assets and raising in 2015; 8 billion raised by non-public offerings in 2017; and 3.37 billion raised by public offerings of convertible corporate bonds in 2020. The total financing of the three times is 17.37 billion yuan, rather than the "37.8 billion yuan financing" mentioned in the rumors. This calculation method may misunderstand the asset injection of 22.8 billion yuan, and there is a deviation in understanding.

(2) it is also not true that the rumored "purchase of major shareholder Guanghui Group assets at a high premium, while 9.8 billion of the assets purchased are intangible assets". According to the 2023 annual report, the company's intangible assets are 7.911 billion yuan, including 2.695 billion yuan for land use rights, 5.087 billion yuan for franchise rights, 95.2429 million yuan for software and others. Among them, the land use right is accounted for according to the price actually paid, which belongs to the undervalued asset because of the earlier purchase; the manufacturer's authorized franchise is an intangible asset recognized in the process of business merger. because the Group has undertaken the brand car retail business of the acquired unit and obtained the franchise authorized by the brand manufacturer, it does not belong to the category of "high premium purchase of Guanghui Group assets, a major shareholder."

(3) it is also mentioned that "18.8 billion goodwill assets are also generated at the same time". Goodwill is formed by the difference in the fair value of the net assets of the acquiree when the merger cost is greater than that of the acquiree on the date of purchase when the business merger is not under the same control during the reporting period, and the acquisition of 4S stores by Guanghui Motor in the process of development and growth. it is also not formed by "purchasing the assets of Guanghui Group, a major shareholder." In fact, when the company confirmed goodwill in mergers and acquisitions that year, it did not evaluate the goodwill after the replacement of some of the net assets of the acquisition, and because the core of the net assets of 4S stores was land assets, and the value of land assets has been doubled rapidly, so the land assets were not re-evaluated when the original net assets were identified, resulting in a large part of goodwill being the premium of land value. As a result, the overall goodwill balance of the company is relatively large, in fact, most of them are risk-free land value premium.

Not long ago, Guanghui Motor received a supervision letter from the Shanghai Stock Exchange. as Guanghui Automobile shares closed below 1 yuan for 20 consecutive trading days, Guanghui Automobile shares and convertible corporate bonds have met the conditions for termination of listing and have been suspended since the opening of the market on July 18. As trading delisting does not set a delisting period, if there is no accident, Guanghui Automobile shares will soon be delisted from the Shanghai stock market.

From a fundamental point of view, Guanghui Motor is actually not bad. In 2023, Guanghui Motor turned from loss to profit, with annual revenue of 137.998 billion yuan and net profit of 392 million yuan. According to the annual revenue calculation, Guanghui Automobile ranks second in China, second only to Zhongsheng Group, and is the only dealer group with more than 100 billion in revenue. It is understood that as of December 31, 2023, Guanghui Automobile covers the national automobile distribution network of 28 provinces, autonomous regions and municipalities directly under the Central Government, operating a total of 735 outlets, including 695 4S stores, which is one of the largest dealer groups in China.

After entering 2024, the operation of Guanghui Automobile continued to deteriorate, with total revenue of 27.79 billion yuan in the first quarter, down 11.49% from the same period last year, and net profit of 70.9405 million yuan, down 86.61% from the same period last year. Guanghui Motor issued a forecast of medium-term results a few days ago. the net profit for the first half of 2024 is expected to be-699 million yuan to-583 million yuan.

The plight of Guanghui Automobile is a microcosm of the current situation of dealers. The price war continues to intensify, selling cars at a loss has become a common occurrence for dealers, and profit margins have been swallowed up step by step. In addition to Guanghui Automobile, Zhongsheng Group, Yongda Automobile, Bidley Holdings, Meidong Motor, Zhengtong Motor and other large car dealers also fell into the dilemma of declining profits.

In the past two years, car dealers have long said goodbye to the good days of "lying down and counting money". According to a survey released by the China Automobile Circulation Association, more than 70% of dealers failed to meet their annual targets in 2023, with a loss of 43.5% and a profit of only 37.6%. Under multiple factors, more and more car dealers have to go to the end of withdrawing the net, shutting down or changing car brands. The delisting of Guanghui Automobile, as the leader of the industry, is only one of the footnotes that the traditional dealer model is on the verge of elimination.

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