Tospo Lighting's Major Move: Divesting Non-Core Businesses and Doubling Down on LED Automotive Lighting

Recently, Tospo Lighting announced that it has signed a share transfer agreement with its controlling shareholder, Hengdian Group Holdings Co., Ltd. (hereinafter referred to as "Hengdian Holdings"), under which it intends to transfer 100% of the equity in its wholly-owned subsidiary, Hengdian Group Tospo Engineering Plastics Co., Ltd. (hereinafter referred to as "Tospo Plastics"), to Hengdian Holdings for RMB 205 million. Upon completion of the transaction, Tospo Lighting will no longer hold any equity in Tospo Plastics.

According to the information, Debon Plastics' business scope includes the manufacturing of modified plastic pellets and products, as well as self-operated import and export business.

Tospo Lighting stated that, in accordance with its strategic development plan, it will focus on its core lighting business, consolidate its position as a leading enterprise in general lighting, and actively develop automotive lighting operations. The transfer of equity in Tospo Plastics, which has low relevance to the main business, is intended to improve operational efficiency and better achieve the goal of strengthening and expanding the core business.

The funds obtained from this equity transfer will be entirely used for the development of the company's core business, namely the lighting industry, which will have a positive impact on the company's asset status and operating results.

The implementation of this transaction is expected to generate a transfer gain of RMB 48.8416 million. The actual impact on the profit for the year 2021 shall be subject to the annual audit report.

To better achieve the company's development goal of becoming a comprehensive lighting industry leader and accelerate the layout of LED automotive lighting products in the complete vehicle supply system, Tospo Lighting disclosed in an announcement that the investment targets of the "Equity Investment Intent Agreement" signed with Xiao Mingcang and Xiao Shangfan are 70% equity interest in Shanghai Liangqin Industrial Co., Ltd. ("Shanghai Liangqin") and 70% equity interest in Wuhan Liangxinpeng Automotive Lighting Co., Ltd. ("Wuhan Liangxinpeng").

The company plans to hold a 70% equity stake in Shanghai Liangqin after capital increase by injecting RMB 91 million, and intends to invest RMB 7 million to acquire a 70% equity stake in Wuhan Liangxinpeng.

Among them, Shanghai Liangqin plans to restructure its existing automotive lighting business, divesting and disposing of assets outside the automotive lighting operations. Therefore, the investment target is a 70% equity stake in Shanghai Liangqin after the business restructuring.

Shanghai Liangqin was established in 1996 with a registered capital of 30 million yuan. Xiao Mingcang holds 95% of the shares and Xiao Shangfan holds 5%. Its business scope includes automotive luminaires, automotive interiors, and mold manufacturing; it engages in development, technical services, and technical consulting in the field of automotive parts testing, as well as road freight transport (general cargo, excluding hazardous chemicals).

The announcement shows that, in order to further improve the company's operational efficiency after investment cooperation, Shanghai Liangqin plans to restructure its existing business, intending to divest and dispose of assets other than those related to the automotive lighting business. It is estimated that the company's net assets before capital increase are approximately RMB 29 million. The company plans to inject RMB 91 million based on a pre-capital increase net asset valuation of RMB 39 million, accounting for 70% of the equity in Shanghai Liangqin after the capital increase. There are still many uncertainties regarding Shanghai Liangqin's restructuring business, and specific data will be subject to subsequent audit reports.

Wuhan Liangxin Peng was established in 2016 with a registered capital of 1 million yuan. Xiao Mingcang holds 100% of the shares. The business scope includes processing and sales of automotive parts, mold manufacturing and sales, and general freight transportation. Net assets are approximately 10 million yuan.

Tospo Lighting stated that this overseas investment aligns with the company's development goals as a leading comprehensive lighting enterprise. It will help secure high-quality automotive luminaire customer resources, expand business scale, further improve product line layout, diversify customer structure, and enhance the company's competitive position in the automotive lighting sector.

In addition, Tospo Lighting announced that the company held the twelfth meeting of the third Board of Directors on December 18, 2020, and reviewed and approved the "Proposal on Changing the Company's Business Scope and Amending the Articles of Association". As the company expands its business areas, it will add R&D, manufacturing, and sales of household appliances. Based on the company's current production and operation status, it plans to change its business scope.

Original business scope: Manufacturing and sales of electronic ballasts, energy-saving lamps, and lighting appliances; manufacturing and sales of electronic products (excluding electronic publications); leasing of lighting production equipment and company premises; self-operated import and export business.

Proposed change to: General items: Manufacturing of lighting fixtures; Sales of lighting fixtures; Manufacturing of electronic components; Sales of electronic components and electromechanical assembly equipment; Research and development of household appliances; Manufacturing of household appliances; Sales of household appliances; Engineering and technical research and experimental development; Technical services, technical development, technical consulting, technical exchange, technology transfer, and technology promotion; Leasing of mechanical equipment; Leasing of non-residential real estate (except for items subject to approval according to law, business activities are carried out independently based on the business license). Licensed items: Import and export of goods; Import and export of technology (business activities can only be carried out after approval by relevant departments in accordance with the law, and specific business items are subject to approval results).