Jinduo Investment's Lightning Increase of Hongli Zhihui Holdings, Luzhou State-Owned Capital Becomes Actual Controller

On the evening of November 12, Hongli Zhihui (300219) announced that Jinduo Investment, the company's largest shareholder, cumulatively increased its holdings by 35.6796 million shares through the secondary market from July 19 to November 9, reaching 5% of the company's total share capital.

Through this equity change, Jinduo Investment has cumulatively held 26.38% of the company's equity. Before this increase, Hongli Zhihui was in a situation with no controlling shareholder and no actual controller. After this increase, Jinduo Investment became the company's controlling shareholder, and the Luzhou Municipal SASAC became the company's actual controller.

From acquiring the equity of Hongli Zhihui's largest shareholder to gradually becoming the controlling shareholder through increases, a series of moves by Jinduo Investment can be described as fast as "lightning".

In July this year, Hongli Zhihui just witnessed a change in its largest shareholder. Li Guoping, the company's former largest shareholder and chairman, and Ma Chengzhang, the second largest shareholder, transferred their respective shareholdings to Jinduo Investment. Thereafter, from June 25 to July 17, Jinduo Investment further increased its holdings through block trades and centralized bidding, accumulating 21.38% of Hongli Zhihui's shares.

On July 19 this year, Jinduo Investment announced its plan to increase its holdings in Hongli Zhihui shares within 12 months starting from July 19, with the increase ratio not less than 1% and not more than 3.5% of the company's total share capital. On the evening of November 4, the company disclosed an announcement stating that Jinduo Investment had completed this shareholding increase plan, during which a cumulative 24.9527 million shares were purchased, accounting for 3.5% of the total share capital, just completing the increase plan at the "maximum" cap. To date, Jinduo Investment's shareholding ratio has risen to 24.88%.

However, Jinduo Investment still seems to consider its shareholding ratio insufficient. On the same day of completing the aforementioned increase, it announced a new phase of shareholding increase plan, intending to continue purchasing 3% to 5.12% of the company's shares within 6 months. Jinduo Investment stated that this additional increase is mainly based on confidence in the company's future business development and recognition of the company's intrinsic value.

Subsequently, within just 5 trading days from November 5 to November 9, Jinduo Investment continuously increased its holdings in Hongli Zhihui by 1.5%, and combined with the previously increased 3.5% shares from July 19 to November 2, this has triggered the 5% "mandatory disclosure" threshold condition.

Business registration data shows that Jinduo Investment is a wholly-owned subsidiary of Luzhou Laojiao (000568) Group, with the ultimate controller being the Luzhou Municipal SASAC. Among them, Luzhou Laojiao Group has under its jurisdiction the well-known brewing enterprise Luzhou Laojiao (000568).

Financial data shows that as of the end of September 2018, Jindo Investment had total assets of 4.896 billion yuan and net assets of 889 million yuan, with a net profit of 212 million yuan achieved from January to September of this year. The Luzhou Laojiao Group achieved revenue of 14.923 billion yuan and net profit of 4.128 billion yuan in 2017, and revenue of 14.610 billion yuan and net profit of 4.021 billion yuan from January to September 2018. As of the end of September 2018, the Luzhou Laojiao Group's total assets were 93.766 billion yuan and net assets were 36.988 billion yuan.

Jindo Investment stated that this share increase is based on its confidence in the future business development of the listed company and its recognition of the intrinsic value of the listed company. Through this share increase, it will acquire control of the listed company and maintain its sustained and stable development. Regarding the shareholding plan for the next 12 months, Jindo Investment said it will continue to complete the previously announced share increase plan of no less than 3% and no more than 5.12%, and indicated that after the completion of the aforementioned share increase, the possibility of further increasing the company's shares is not ruled out.

At the same time, Jindo Investment emphasized that there is no plan to change Hongli Zhihui's main business or to make major adjustments to it. In fact, when it initially took over the company's equity, Jindo Investment stated that it was out of recognition of the company's past achievements and industry position in the LED packaging field, while also expressing agreement with the long-term development plan of the three major business segments formed by the company: LED packaging, LED automotive lighting, and Internet car owner services. It also valued the company's future growth potential and the investment returns it would bring.

From a fundamental perspective, Hongli Zhihui's development is relatively stable. In the first three quarters of this year, the company achieved operating revenue of 2.938 billion yuan, a year-on-year increase of 13.89%; net profit of 353 million yuan, a year-on-year increase of 35.84%.

Recently, various investment institutions have been 'sending warm signals' about Hongli Zhihui. For example, Ping An Securities gave the company a 'Strong Buy' rating in its research report, believing that the company's product structure continues to be optimized to improve gross margins, and that the prospects for its automotive lighting business are worth looking forward to; Pacific Securities believes that the company's third-quarter results slightly exceeded expectations, while its LED vehicle lamp business is progressing smoothly, and the introduction of state-owned capital will also provide strong support for the company's development.

Reflected in the secondary market, the company's stock price has rebounded by more than 33% cumulatively since bottoming out on October 19.