Due to a "sale" announcement, Huaxi Village, the "No. 1 Village in the world", has once again attracted market attention.

Huaxi shares (000936.SZ) announced on the evening of July 20 that the actual controller of the listed company intends to change. The Village Committee of Huaxi Xinshi Village, Huashi Town, Jiangyin City (hereinafter referred to as "Huaxi Village") intends to transfer 80% of the equity of Jiangsu Huaxi Group Co., Ltd. (hereinafter referred to as "Huaxi Group") to Jiangyin Lianhua Optimization and Adjustment Industrial Investment Partnership (Limited Partnership) (hereinafter referred to as "Lianhua Fund").

The parties to the transaction took the conclusion of the appraisal report issued by the appraisal agency as a reference and finally determined the transfer price of the subject equity at $1.

Huaxi Group is the controlling shareholder of Huaxi. According to Huaxi's quarterly report, Huaxi Group held 29.34 percent of the shares at the end of the first quarter of 2023. If calculated according to the market value of 9.241 billion yuan at the close of Huaxi shares on July 21, the market value of the listed company corresponding to the trading price of 1 yuan is about 2.169 billion yuan.

Huaxi shares announcement explained that the purpose of this transaction is to support the rescue of key enterprises in Jiangyin City, promote the resolution of the debt crisis of the controlling shareholder of the listed company, maintain the stable development of the listed company, and jointly seek industrial cooperation and technical coordination. Huaxi shares also stated that the transaction still needs to be filed with the Jiangyin State-owned Assets Office and approved by the anti-monopoly authority.

Regarding the debt crisis of the controlling shareholder Huaxi Group, the Secretary of the Board of Directors of Huaxi Co., Ltd. replied to the Times Weekly reporter on July 21, "I don't know the specific situation, and the relevant content is subject to the listing announcement."

on July 21, huaxi shares fell 1.04 to close at 10.43 yuan per share.

huaxi village, source: huaxi monthly official micro

Controlling shareholders in debt crisis

According to the official website of Huaxi Village, Huaxi shares were established in May 1999 and listed on the Shenzhen Stock Exchange in August of the same year. It is "the first share in rural China" and the first village-level listed company in China.

If the equity transfer is completed, Huaxi Group will still be the controlling shareholder of the company, but the actual controller of the company will be changed from Huaxi Village Committee to Jiangyin State-owned Assets Office. The change of the actual controller of Huaxi shares also marks the temporary end of the unique management mode of "village collective holding" of Huaxi shares.

but the change of the actual controller does not mean that Huaxi shares have nothing to do with Huaxi village. After the completion of the transaction, Huaxi Village still holds a 19.9 per cent stake in Huaxi Group and another 0.1 per cent stake is held by Jiangyin Huaxi Community Service Center.

In recent years, the scenery of Huaxi Village has ceased, and the liquidity problems of Huaxi Group have frequently attracted market attention.

According to media reports, in March 2019, a notice of the meeting "Report on the Relief of Huaxi Group's Liquidity Difficulties" was circulated online. Subsequently, Wu Xieen responded to the media that the outside world had misunderstood the theme of the meeting, and Huaxi Group did not have liquidity difficulties. Huaxi Group stated in the announcement that the group's main business has good operating efficiency, sufficient operating cash flow, and has repaid all due claims and interest on bank loans on time, without any bad credit records.

according to the financial report of Huaxi Group for the third quarter of 2018 disclosed by Shanghai Clearing House, as of the end of the third quarter of 2018, Huaxi Group's monetary capital was 7.592 billion yuan, the total assets were 54.762 billion yuan, and the total liabilities were 36.934 billion yuan. According to this calculation, the asset liability ratio of Huaxi Group was 67.44. This is also the last financial report disclosed by Huaxi Group in Shanghai Clearing House.

and in this transaction announcement, did not disclose the assets and liabilities of Huaxi Group. Lianhua Fund also stated that there is no clear plan to change the main business of listed companies or make major adjustments to the main business of listed companies within the next year.

After years of transformation and reform, Huaxi's main business has changed from the initial textile, chemical, clothing and other industries to today's polyester chemical fiber research and development, production and sales, petrochemical warehousing and logistics services.

According to Huaxi's 2022 annual report, Huaxi's 2022 revenue was 2.927 billion yuan, up 21.07 percent year-on-year, and its net profit was 0.209 billion yuan, down 38.83 percent year-on-year. The company explained that due to the main polyester staple fiber raw material PTA prices and other factors, compressed the product's gross margin space.

huaxi village, source: huaxi monthly official micro

Share Price Doubles by Investing in AI

in the case of weak growth in the traditional main business, Huaxi group and Huaxi shares have long shifted their revenue thinking to venture capital, and have made a lot of profits from investing in a number of new energy and AI enterprises.

According to the 2022 annual report of Huaxi, the invested enterprises include Yunnan Pingbian Huaxi Village Mining Co., Ltd., Yicun Capital Co., Ltd. (hereinafter referred to as "Yicun Capital"), Federal Reserve Securities Co., Ltd., Jiangyin Huaxi Shipping Co., Ltd. Among them, One Village Capital announced a cash dividend or profit of 40.9242 million yuan in 2022. The ending balance (book value) of the investment enterprise in 2022 is 3.605 billion yuan. By the end of 2022, Huaxi Group held a 40.924 per cent stake in Yicun Capital.

According to the official website of Huaxi Village, Yicun Capital was initiated and established by Huaxi in 2015. It is positioned as an asset management platform with "M & A + Venture Capital" as its main business and is also an integral part of the financial sector of Huaxi. According to the official website of One Village Capital, the investment cases of One Village Capital include Ningde Times (300750.SZ), Lanqi Technology (688008.SH), Meirui Medical (300760.SZ), Huada Zhizao (688114.SH) and so on. By the end of 2022, the asset management scale of one village platform has exceeded 26 billion yuan.

Tang Weiqing, Chairman of Yicun Capital, served as Vice President of China Merchants Securities (600999.SH) and Chairman of China Merchants Capital Management Co., Ltd. In 2015, Tang Weiqing was introduced by Huaxi Village as a high-end talent, and successively served as chairman of Huaxi Co., Ltd. and deputy general manager of Huaxi Group. In an interview with the media, Tang Weiqing once said that the industrial investment of Yicun Capital is mainly concentrated in the fields of TMT, education and new economy, big health, semiconductors, new energy and intelligent manufacturing.

Around 2019, One Village Capital introduced a number of state-owned investors, including Wuxi Guolian Investment, whose real controller is Wuxi SASAC, and Anhui Traffic Control Industry Development Fund, whose real controller is Anhui SASAC.

and driven by a village of capital, Huaxi shares have invested in a number of AI projects, so they have also been hotly speculated by capital in the AI boom in 2023. In the first half of 2023, Huaxi's share price rose 174.85 per cent. As of July 21, Huaxi's share price rose as high as 106.06 percent during the year.

previously, huaxi shares also said that the company holds about 7% of the shares of GTI, an artificial intelligence chip company. GTI's main business is the design and development of artificial intelligence convolutional neural chips. its subsidiary, yicun capital, indirectly holds about 11% of the shares of longitudinal huixin light. longitudinal huixin light mainly develops and produces VCSEL chips, devices, modules and other products.

on June 15, huaxi shares said on the investor interaction platform that up to now, the company holds 28.17 per cent of sols optoelectronics through Shanghai qilan. Soles Optoelectronics 800G optical modules have been delivered in small quantities. According to Tianyan, Shanghai Qilan is 99.3 per cent owned by Huaxi, while Shanghai Yicun Anshi Enterprise Management Company, as the executive partner, holds 0.7 per cent.