Four months after announcing its intention to purchase the equity of Qingdao Chemri Electronics Research Institute Co., Ltd. (hereinafter referred to as Pulcra Electronics) by issuing shares and paying cash, on the evening of January 17, SmartGiant (688115. SH, share price 42.99 yuan, market value 2.866 billion yuan) issued a report (draft) on the acquisition of assets.

SmartGiant plans to acquire a 71% stake in Pulcra Electronics for 1.491 billion yuan, of which 591 million yuan will be paid by issuing shares to the counterparty, and at the same time, SmartGiant also plans to raise matching funds (no more than 500 million yuan in total) to pay for the cash consideration and intermediary fees of the transaction.

The reporter of "Daily Economic News" noted that the evaluation results of the income method were selected as the final evaluation conclusion, and the appraisal value of 100% equity of Chemrich Electronics was 2.102 billion yuan, the appraised value was 1.18 billion yuan, and the appreciation rate was 128.10%.

Image source: Screenshot of the announcement

Chemrich Electronics was accepted for an IPO on the GEM in June 2023 and went through two rounds of inquiries, but in April 2024, the Shenzhen Stock Exchange terminated its listing review due to the company's withdrawal of its listing application. The reporter inquired about two rounds of inquiry letters and found that the innovation of Chemri Electronics at the time of IPO was concerned, and at that time, it applied for more invention patents during the reporting period, and the inquiry letter paid attention to whether it had "surprise patent applications". In the reply letter, Chem Electronics explained and denied the above situation.

Image source: Screenshot of the website of the Shenzhen Stock Exchange

SmartGiant had sluggish performance, and its stock price soared after announcing its restructuring

In early September 2024, SmartGiant announced the suspension of trading, the company is planning to purchase the equity of Chemri Electronics by issuing shares and paying cash and raising matching funds at the same time.

The reporter of "Daily Economic News" noticed that within 6 trading days after the announcement of the restructuring and resumption of trading, SmartGiant stock price took off from about 22 yuan / share, and soared to more than 53 yuan / share. As of the close of trading on January 17, 2025, SmartGiant shares closed at 42.99 yuan per share, stable at the "stock price doubled" level.

For the restructuring, SmartGiant said that the listed company mainly produces embedded intelligent instrument modules, while Coolcore Electronics focuses on high-reliability microcircuit modules such as motor drivers, light source drivers, and signal controllers, both of which provide modular and miniaturized electronic components. After the reorganization, the two companies will form a positive complementary relationship in terms of product categories, sales channels, R&D resources, etc., and achieve effective integration of business and technology with the help of their existing R&D achievements and industry positions.

The reporter found that behind the proposed asset restructuring, SmartGiant, which was listed in March 2022, will suffer a sharp decline in performance in 2023. In 2023, the revenue will be 168 million yuan and the net profit will be 8.9844 million yuan, down 30.55% and 83.37% year-on-year, respectively. In addition, in 2023, the company's net profit deducted from the non-attributable parent will only be 2.6274 million yuan, a year-on-year decrease of 94.06%, and the sales to the largest customer will also decrease by 47.47%. In the reply letter, SmartGiant also reminded that in 2023, the company's interest income or investment income from raised funds will total 12.8768 million yuan, accounting for 143.32% of net profit, accounting for a relatively large proportion.

Image source: Screenshot of the announcement

Entering 2024, SmartGiant's performance has improved slightly, but there is still a gap with the peak of the year of listing, and its operating income in the first three quarters of 2024 was 115 million yuan, and the net profit attributable to the parent company was 4.933 million yuan. In addition, in the third quarter of 2024, SmartGiant revenue declined year-on-year, and net profit was in the red.

On December 4, 2024, SmartGiant held a performance briefing, explaining that the company's year-on-year decline in revenue in the third quarter was mainly due to the need for commissioning and acceptance of some products and the delay in some deliveries. The loss was mainly due to the decrease in the scale of income, the impact of fluctuations in foreign exchange rates and the reduction of bank deposit interest rates, and the decrease in interest income from cash management as a result of the investment of funds in fund-raising projects.

Cooler Electronics has fewer invention patents in the early stage

SmartGiant with sluggish performance, if it can acquire Package Electronics, it is expected to have a greater improvement in performance.

The reporter noted that in 2022 and 2023, Chemri Electronics achieved operating income of 272 million yuan and 308 million yuan respectively, and net profit attributable to the parent company of 163 million yuan and 167 million yuan respectively, and its net assets as of the end of 2022 and 2023 were 734 million yuan and 901 million yuan respectively, and the scale of revenue, profitability and net assets have increased.

In addition, according to the performance commitment, the net profit attributable to the parent company (before and after deducting non-recurring profits and losses) under the audited consolidated statements from 2025 to 2028 should reach 90 million yuan, 120 million yuan, 150 million yuan and 180 million yuan respectively, and the cumulative net profit of Coolcore Electronics during the commitment period shall not be less than 540 million yuan.

It should be noted that SmartGiant said that as of the end of August 2024, the goodwill of the listed company after the completion of this transaction was 783 million yuan, and the proportion of goodwill in total assets reached 24.07% and 29.57% in net assets.

Combined with the data of the prospectus and the recent restructuring report, since 2020, Cameri Electronics has maintained good performance growth, and its gross profit margin will remain above 80% from 2020 to 2022, and it will still be 78.73% in 2023.

However, Chemri Electronics, which has broken through the GEM IPO, has attracted the attention of the exchange for its innovation. In the first round of inquiry, the exchange first focused on the company's R&D investment, GEM positioning, core technology sources and advancement.

The reporter found that at the time of the IPO, Pulcra Electronics only disclosed 5 invention patents, of which the patentee of 2 was the actual controller of the company, and although the patentee of 2 was a company, it was also obtained from the actual controller, and only 1 was originally obtained, and the application time was December 30, 2020. In addition, Coolcore Electronics was applying for 12 invention patents at that time (6 of which were filed on December 30, 2020), and most of them have not yet been granted. Therefore, in the second round of inquiry, the exchange once again asked about the company's growth and innovation, and asked Pulcra Electronics to explain whether there was a surprise application for invention patents.

In this regard, Chemri Electronics admitted that the company's awareness of intellectual property protection was insufficient in the early stage, and with the development and growth, the awareness of intellectual property protection has been continuously strengthened, so for mature key technologies and scientific and technological achievements, it is not for the purpose of applying for patents in batches.

The reporter inquired in the draft reorganization that as of August 31, 2024, Chemri Electronics has 7 invention patents, of which 4 were applied for on December 30, 2020 and 1 was applied for on July 20, 2023.

Image source: Screenshot of the announcement

Cover image source: Visual China-VCG211371744882