After The Change Of Ownership Of AVIC, The Audit Of Its First Annual Report Was Issued With Non-Standard Performance, Which Implied A Deep Crisis

Han Yongxian, researcher of 21st Century Capital Research Institute

The 2020 annual report of AVIC, originally scheduled to be disclosed on April 24, was finally disclosed on schedule on the evening of April 26 after two days' delay. In 2020, the company's revenue was 415 million yuan, with a year-on-year increase of 221.69%, and the net profit attributable to the parent company was 23.81 million yuan.

From a loss of 112 million yuan in 2019 to a profit, AVIC's performance is good, but the news did not significantly improve the secondary market share price of AVIC. On April 27, the company's share price only rose 4% to close at 20.34 yuan / share.

Why is it not warmly sought after by the secondary market? The reporter of 21st century economic report found that CICC seems to be turning losses and making good profits, but what is hidden behind it is that the company is facing a deep-seated business crisis. The performance report has even been directly issued by the Asia Pacific Audit Committee of China audit.

At the same time as the company's annual report in 2020, there are more than 40 announcements about the extension of share pledge of Foshan yuebang investment, the controlling shareholder of AVIC, and the reply to the concern letter of Shenzhen Stock Exchange. Among them, the problems of internal control, operation and finance of China National Aircraft Corporation Limited make investors sweat.

On January 11, AVIC claimed that the company was occupied by the funds of affiliated enterprises controlled by Zhu Shihui, with an accumulated amount of 831 million yuan. Subsequently, the company was ordered to rectify by Heilongjiang Securities Regulatory Bureau on January 21. The news that a huge amount of funds were illegally occupied by the actual controller triggered a sharp drop in the share price of AVIC, with a drop of nearly 30% since the announcement date. According to news, the company may face collective claims from investors. Series of bad luck caused the share price of AVIC under unprecedented pressure, and the company may fall into business crisis again.

It is worth noting that AVIC shares, which landed on the GEM market of Shenzhen Stock Exchange on July 1, 2015, have never had violations such as shareholder's appropriation before. After the company changed its ownership in 2019, many internal control violations suddenly occurred.

After the change of ownership, the company's performance changed

Previously, the main business of AVIC was the R & D, production and sales of high-performance aluminum alloy materials and their processed products. It was a supplier of CNNC and a three-level confidential qualification unit. It was listed on the gem in 2015. According to the prospectus, Yang Zhifeng, Wang Yu and Li niankui respectively held 36.44%, 20.72% and 3.82% of Zhongfei shares at the time of listing, and Yang Zhifeng was the actual controller of the company.

In 2017 and 2018, AVIC's performance plummeted for two consecutive years. In 2018, the net profit was only 1.3821 million yuan, which directly faced the risk of loss. However, the equity held by Yang Zhifeng, the original actual controller, was in a high proportion of pledge state, and it was unable to save the company from failure.

A large investment bank researcher analyzed to the 21st century economic report that the problem of high proportion pledge was more prominent in the first two years. This problem caused a large number of changes in the actual controllers of listed companies, and forced simple change of actual controllers. If there is no high-quality asset support behind, many listed companies will still face development and operation difficulties after equity changes.

In April 2019, Yang Zhifeng, the former controlling shareholder and actual controller of AVIC, signed an agreement with yuebang investment controlled by Zhu Shihui. Yang Zhifeng transferred 6.2 million shares (6.832% of the total capital stock) of the company held by him to yuebang investment, and entrusted the remaining 18.6 million restricted shares (accounting for 20.4959% of the total capital stock at that time) to yuebang investment, Yuebang investment shall exercise all shareholders' rights such as voting rights, nomination rights and proposal rights of the corresponding shares.

In August 2019, after the completion of the share transfer, yuebang investment directly held 6.2 million shares of AVIC and 24.8 million shares of voting shares of the company, accounting for 27.33% of the total share capital of the company, becoming the controlling shareholder of Zhongfei shares and Zhu Shihui becoming the actual controller of the company.

It is worth noting that Zhu Shihui is the chairman of the board of directors of Guangdong Xianfeng thin material Co., Ltd. Our products are mainly used in infrared imaging, semiconductor chip, semiconductor display, radiation detection, 5g communication and other industries. In 2012, leading thin materials had planned to land on the gem, but because the company's sustainable profitability was questioned and other reasons, the impact of listing failed.

Zhu Shihui's accession was thought by the market that it might inject new assets through the shell of AVIC, but it never saw any substantial action. In the year of Zhu Shihui's settlement in 2019, AVIC shares made the first performance loss after listing. In that year, the company realized a revenue of 129 million yuan and a huge loss of 112 million yuan of net profit attributable to its parent company.

At a time when the share price of AVIC is low, Zhu Shihui has put forward a fixed increase plan to further control the equity of AVIC. On February 24, 2020, China National Aircraft Corporation (AVIC) proposed to issue 24302500 shares and 2.9225 million shares to Zhu Shihui and PI Hailing at the price of 18.06 yuan per share, raising 492 million yuan to expand the "infrared optical and laser device industrialization project".

In April 2020, AVIC changed the fixed increase plan and planned to issue 24302500 shares to Zhu Shihui with 18.06 yuan per share, raising 439 million yuan.

In June 2020, AVIC changed the fixed increase plan again, and planned to issue 36.4538 million shares to the actual controller Zhu Shihui at the price of 12.04 yuan per share, raising 439 million yuan. On March 12, 2021, AVIC suddenly announced that the one-year fixed increase plan was terminated.

After Zhu Shihui became the owner of China National Aircraft Corporation, he made a bluff shot with the fixed increase plan. So far, it has not brought substantial changes to the main business of AVIC. The company is still facing the pressure of loss. In 2020, although the profit of Zhongfei shares is 23.81 million yuan, the net profit returned to the parent company after deducting non-profit is only 9.2692 million yuan.

Internal control risk detonating

In the annual report, AVIC said that in 2020, the new industrialization project of "infrared optics and laser devices" will be built, which will optimize the business structure of the company, form a dual business model of high-end aluminum alloy materials, infrared optics and laser devices, and realize the company's profit turning from deficit to profit. In 2020, the company's revenue is 415 million yuan, including 189 million yuan for high-end aluminum alloy materials and 226 million yuan for infrared optics and laser devices.

However, the company's "infrared optical and laser device industrialization project" will only start construction in April 2020, and it is expected that the first phase of the project will realize trial production in the first half of 2021. During the reporting period, the company's revenue of 226 million yuan in infrared optical and laser devices was mainly produced and sold through external entrustment, of which a large proportion was produced by Guangdong forerunner, a related party controlled by the same actual controller.

According to the entrusted processing agreement signed between Anhui Guangzhi, the holding subsidiary of AVIC, and Guangdong Xianxian, the total amount of the entrusted processing products will not exceed 40 tons in 2020, and the total entrusted processing fee will not exceed 25 million yuan. From May 29, 2020 to December 31, 2020, the actual entrusted processing expenses of the two companies will reach 14.0426 million yuan.

In December 2020, the board of directors of AVIC decided that the content of the entrusted processing agreement between Anhui Guangzhi and Guangdong Xianfeng advanced technology Co., Ltd. should be adjusted to no more than 100 tons of metal in the entrusted processing products (the amount of metal shall be subject to the actual entrusted amount), the total amount of entrusted processing fee shall not exceed 50 million yuan, and the Commission period shall be extended to April 19, 2021.

With the production support of related parties, AVIC barely made profits and avoided the risk of being hooded. However, it relied on the infrared optical and laser devices business of the related parties, resulting in a large number of related party transactions, and even exposed internal control problems such as a large amount of funds occupied by the related parties.

According to the self-examination of AVIC, Anhui Guangzhi has been occupying the funds of the listed company by the affiliated enterprises controlled by the actual controller since June 2020.

In the new equipment procurement of AVIC infrared materials and laser devices industrialization project, after Anhui Guangzhi signed the contract with the equipment intermediary, the enterprise controlled by the actual controller signed the purchase and sales agreement with the equipment intermediary again, and the related parties finally implemented the equipment procurement. Zhu Shihui realized the fund occupation by controlling the time difference and amount difference of advance payment in actual external purchase, with an accumulated capital occupied of 509 million yuan.

For the raw material procurement of Anhui Guangzhi's entrusted processing business, when Anhui Guangzhi signs a contract with a third-party supplier (non related party material supplier), the enterprise controlled by the actual controller Zhu Shihui will sign a purchase and sales agreement with the material supplier outside the system of the listed company to indirectly sell its own raw materials to the listed company through a third party, Through material transaction, 283 million yuan of capital was occupied.

In the construction of the infrared materials and laser devices industrialization project, after Anhui Guangzhi signed a contract with the general contractor, the enterprise controlled by the actual controller signed the steel purchase and sales agreement with the builder, using the supply of building materials to the general contractor and collecting the advance steel purchase funds in advance to realize the capital occupation of 39 million yuan.

The total amount of the above occupied funds is as high as 831 million yuan.

According to the rectification plan of AVIC, 480 million yuan and corresponding interest expenses of 8.8291 million yuan have been returned and paid to Anhui Guangzhi by the end of 2020. Anhui Guangzhi indirectly purchased equipment from equipment suppliers and purchased steel products from steel suppliers through related parties, and the related parties did not charge any fees.

Anhui Guangzhi purchased 240 million yuan of raw materials from related parties. The related parties have returned to Anhui Guangzhi and cancelled the purchase transaction of raw materials. The related parties have paid the corresponding interest of 5.9779 million yuan to Anhui Guangzhi.

According to AVIC, the company and its actual controller, Zhu Shihui, were able to actively rectify and rectify on the basis of identifying the responsibility, and did not cause substantial losses to the listed companies, but the actual controller risk exposed by the company has aroused market concerns. After the announcement, the company's share price has dropped by 30%.

It is worth noting that the accounts occupied by the actual controller's affiliated enterprises are not without benefits. In the rectification plan, the interest paid by the related parties to Zhongfei shares is as high as 14.8 million yuan, accounting for more than half of the net profit of China National Aviation Corporation in 2020, which makes Zhongfei share far away from the risk of further loss.

Internal turbulence is hard to be solved

After Zhu Shihui became the owner of the company, it is hard to say that the business of Zhongfei has improved. The news of the change of the actual controller of AVIC only brought a roller coaster to the stock price and accumulated a high amount of liabilities.

In 2020, after the introduction of the fixed increase plan, the company's share price rose sharply, reaching a historical high of 55.53 yuan / share on August 10 of that year. In 2021, affected by bad news such as fund occupation, the stock price continued to decline recently, and the current stock price was only around 20 yuan.

Taking advantage of the high point of the share price, many of the original shareholders of AVIC cash out of the market. On July 6, 2020, Yang Zhifeng, the former controlling shareholder of AVIC, signed a share transfer agreement with yuebang investment, transferring 20.925 million shares, accounting for 15.37% of the company's total share capital, to yuebang investment at a price of 29.55 yuan per share, with a total price of 618 million yuan.

On the same day, Wang Qiang, a shareholder who almost accepted Zhongfei shares with Zhu Shihui, transferred 19.0575 million shares, accounting for 14% of the company's total share capital, to Fuyin Chengtou at a price of 32.33 yuan / share, with a total transfer price of 616 million yuan.

Gong Tao, the shareholder of China National Aircraft Corporation, also took advantage of the situation to reduce its holdings. In September 2020, it has accumulated 120000 shares of the company.

For two years, the transfer of AVIC's controlling shares has not brought much expectation to investors, but the company's debt has risen sharply. By the end of 2019, the debt ratio of AVIC shares was only 28.11%, and the debt ratio in 2020 annual report was as high as 82.36%.

It is worth noting that at present, AVIC shares are once again in the dilemma of high proportion of equity pledge. Taking advantage of the soaring share price of AVIC, the controlling shareholder yuebang investment has pledged the shares of the company for several times. As of August 7, 2020, AVIC announced that the controlling shareholder yuebang investment had pledged 100% of its 37.2 million shares of the company, accounting for 27.33% of the total share capital of the company.

Now, the share price of AVIC has fallen sharply, and yuebang investment has no shares to pledge. If it cannot supplement the pledge, the pledged equity may face the risk of being forced to close down by financial institutions, and Zhongfei shares will also face the risk of changing ownership again.

At the same time, the 21st century economic reporter noticed that before the publication of the annual report in 2020, a number of senior executives of AVIC had left. On March 31, 2020, Zhang Chunbo, deputy general manager of the company, left office; On May 11, 2020, Feng Zhenghai, deputy general manager of the company, will leave his post.

On June 8, 2020, independent director Chen Niannian leaves office; In December 2020, Shi Jun, the director, and Yang Zongxuan, the Secretary of the board, left office successively.

The 21st century economic reporter has called China National Aviation Corporation for many times on its stock pledge and senior executives' resignation, but the company's telephone has never been answered.

(Editor: Zhu Yimin)