On October 16, Guangdong Songfa Ceramics Co., Ltd. issued the announcement of “plan for major asset replacement and issuance of shares to purchase assets and raise matching funds”.
Hengli Heavy Industry is listed on the A-share market through a backdoor listing
The announcement disclosed that Guangdong Songfa Ceramics Co., Ltd. (Songfa) intends to purchase 100% of the equity of Hengli Heavy Industry Group Co., Ltd. (Hengli Heavy Industry) held by the counterparty through major asset replacement and issuance of shares to purchase assets, and issue shares to no more than 35 specific investors to raise matching funds.
After the transaction is completed, Songfa will officially withdraw from the daily ceramic products manufacturing industry, and its main business will be changed to the research and development, production and sales of ships and high-end equipments. This move also means that Hengli Group’s shipbuilding business will enter the capital market.
Songfa is mainly engaged in ceramic supplies such as home ceramics, customized ceramics, hotel ceramics, ceramic wine bottles and other ceramic supplies. In recent years, affected by the market downturn and declining demand from major customers, the ceramics business has gradually shrunk and sustained losses. Songfa lost RMB 309 million, RMB 171 million, and RMB 117 million in 2021, 2022, and 2023, respectively; and in the first half of 2024, it lost RMB 34.73 million.
Hengli Heavy Industry was formerly known as STX Dalian Shipbuilding. Hengli Heavy Industry, a subsidiary of Hengli Group, acquired idle assets under the name of STX Dalian Shipbuilding for RMB 2.11 billion in July 2022; in the fourth quarter of 2022, Hengli Heavy Industry officially restarted its shipbuilding business; in April 2024, Hengli Heavy Industry delivered the first ship after restarting its shipbuilding business; in July 2024, Hengli Heavy Industry invested an additional RMB 9.2 billion to start the second phase of the Hengli Heavy Industry Industrial Park, focusing on expanding high-value-added green ships and high-end marine equipment manufacturing businesses such as VLCC, VLGC, large container ships, FPSO, offshore floating wind power, and drilling platforms, with an estimated annual output of 7.1 million deadweight tons. At that time, Hengli Heavy Industry announced an additional investment of RMB 2 billion to simultaneously build the Hengli Heavy Industry (Dalian Changxing Island) supporting industrial park.
The announcement data shows that Hengli Heavy Industry’s operating income in 2022 and 2023 will be RMB 27.92 million and RMB 768 million respectively; the net profit will be RMB -24.64 million and RMB4.05 million respectively; as of December 31, 2023, Hengli Heavy Industry’s total assets are RMB 5.537 billion and its owners’ equity is RMB 479 million.
Songfa Group explained that Hengli Heavy Industries’ profitability was relatively low in the early stage because the scale effect of its shipbuilding business had not yet emerged. As the shipbuilding business gradually gets on track in 2024 and the number of orders for construction increases, Hengli Heavy Industries’ profitability will increase significantly.
According to the announcement, as of the signing date of the plan, Hengli Heavy Industry has confirmed the production of 140 new ships with a cargo value of approximately US$10.8 billion, including bulk carriers, VLCCs, VLOCs and container ships. At the same time, shareholders have increased their capital by RMB 2.5 billion in September 2024 to further support the business development of Hengli Heavy Industry.
Hengli Heavy Industry is committed to building a world-class high-end, intelligent and green shipbuilding and high-end equipment manufacturing company, covering multiple business links such as upstream independent engine production and midstream shipbuilding. It has comprehensive competitive advantages of leading technology, advanced equipment and integrated industrial chain.
At present, Hengli Heavy Industry has the R&D and production capabilities for high-performance ships such as bulk carriers, VLCCs, and container ships. Relying on the industry’s top international R&D team, domestic leading shipbuilding infrastructure, continuously optimized innovative processes and independent production capabilities of marine engines, it is rapidly advancing the demand for high-end green ship and engine construction.