AutoBeta(AutoBeta.net)09/27 Report--

FAW car Co., Ltd. issued a notice today, saying that major asset restructuring issues have been approved by the SASAC of the State Council, and agree in principle to the company's overall plan for asset restructuring and supporting financing. FAW car restructuring proposed to buy assets FAW Jiefang 100% equity, the transaction price of 27 billion yuan.

According to the announcement, the State-owned assets Supervision and Administration Commission of the State Council recently received a "reply on issues related to asset restructuring and supporting financing of FAW car Co., Ltd." transferred by China first Automobile Group Co., Ltd. agreed in principle to the company's overall plan for asset restructuring and supporting financing.

In addition, the announcement also said that the major asset restructuring plan still needs to be submitted to the company's general meeting for consideration and approval, and must be approved by the China Securities Regulatory Commission before it can be implemented.

As early as the end of August, FAW issued an announcement revealing the draft restructuring, replacing the limited 100% stake in the car as an asset with the equivalent portion of FAW's 100% stake in FAW Jiefang. Among them, FAW Jiefang 100% equity is priced at 27.009 billion yuan, and the purchased assets are priced at 5.088 billion yuan, with a difference of 21.921 billion yuan, of which 19.921 billion yuan is paid by FAW cars in the form of 6.68 yuan per share, and the rest is paid in cash. At the same time, FAW cars will raise no more than 3.5 billion yuan at the same time.

After this transaction, it means that the main business of FAW cars will be changed to commercial vehicle production and sales. Some people in the industry said that the transfer of FAW Jiefang, a high-quality asset of FAW shares, to FAW cars will improve the profitability of FAW cars, and the profitability of FAW cars will be greatly enhanced. FAW cars will no longer undertake the task of production and sales of passenger cars.

In fact, FAW car performance has been declining for many years in a row. According to the first half annual report released by FAW car, the operating income of FAW car was about 10.701 billion yuan, down 18.28% from the same period last year; the net profit belonging to shareholders of listed companies was about 9.6404 million yuan, down 88.09% from the same period last year; the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was about-95.1988 million yuan, down 52.37% compared with the same period last year.

The monthly sales of FAW Mazda have fallen for 16 consecutive months compared with the same period last year. Data show that FAW Mazda sold 7716 vehicles in August, down 18% from a year earlier, while cumulative sales in the first eight months were 53900, down 29.26% from a year earlier.

According to figures released by its FAW Pentium, cumulative sales reached 10039 vehicles in August, up 96 per cent from a year earlier. In the first eight months of 2019, FAW Pentium sold 65000 vehicles, up 20 per cent from a year earlier. Sales are still considerable, but they are not as good as they used to be.

On the contrary, FAW Jiefang is China's leading domestic commercial vehicle brand with strong profitability in recent years. Data show that FAW achieved operating income of 76.031 billion yuan and 76.985 billion yuan in 2017 and 2018 respectively, and net profit of 2.518 billion yuan and 2.37 billion yuan respectively.

In the first half of this year, the sales volume of the domestic passenger car market declined seriously, the competition in the automobile market continued to intensify, and FAW cars were also greatly affected. However, the inclusion of FAW shares in FAW Liberation will not only optimize the allocation of resources, but also boost the poor performance of FAW cars.

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