It is easy to fight the country, but difficult to guard the country, and even more difficult to inherit.
There are many examples of "second-generation inheritance" of private enterprises. After the death of Zong Qinghou, the founder of Wahaha, his only daughter Zong Fuli took on a heavy burden of 50 billion yuan in March this year. Libai Group, founded by Chen Kaixuan and Chen Kaichen, created a "second-generation collective succession" model. Chen Zebin, the eldest son of Chairman Chen Kaixuan, has become the leader of the second generation of successors in the Chen family. In 2019, as the president of the group, he came to power completely. Other "second generation of Libai", such as Chen Zhansheng, the eldest son of Chen Kaichen, spread all over the major industrial lines of Libai Department in different identities.
The reason why the second generation chose to go to the front stage was that after the creation of the first generation, they gradually became old and could not continue to work. Therefore, it is natural for these two generations to inherit their father's career. However, there are also some second generation people who took over early, which is purely accidental. For example, Wang Xiaosong, the current leader of the former dark horse real estate company Xincheng Holdings, is a real estate company.
After his father Wang Zhenhua was involved in the case of molesting girls, Wang Xiaosong took office in 2018 to help Xincheng Holdings. Qiu Yibo, the current leader of Hengyi Petrochemical, a leading chemical company, is in the same situation as Wang Xiaosong. He was appointed to the core management of Hengyi Petrochemical in 2015 as the vice chairman.
In 2015, Qiu Yibo first appeared on the Hurun Rich List, becoming the youngest millionaire in Hangzhou. You know, Qiu Yibo was only 28 years old this year. His father, Qiu Jianlin, has nine years to go before he retires. Even in 2024, 37 year old Qiu Yibo will still be one of the youngest chemical board chairmen in China.
At present, Qiu Yibo has both joys and sorrows. On April 20, Hengyi Petrochemical disclosed its 2023 annual report, which showed that it had turned losses into profits in the past year. However, Hengyi Petrochemical has liabilities of up to 76.09 billion yuan, asset liability ratio of 70.42%, which is at a high level in the industry, and gross profit rate of sales is only 3.76%, which still faces many challenges.
01. "Pearl cultivation king" finds a new way to make money
The stories of the generation of enterprises creating wealth are basically the counter attacks of small people.
Qiu Jianlin, born in 1963, was born into a poor family in front of Hangzhou Xiaoshan Yamen. He has been a farmer for generations. He has been hardworking since he was young. From the age of 18 to 25, Qiu Jianlin spent seven years to become a well-known "king of pearl cultivation".
At the age of 25, the pearl jewelry factory he founded has become the top three in Hangzhou industry. But a trip to Hangzhou Wanzhou (Hangzhou Universal Joint Factory) changed Qiu Jianlin's life dramatically. Lu Guanqiu, who was then the director of Hang Wan, said, "As soon as the factory gets light, it will make a profit of 10000 yuan", which deeply stimulated Qiu Jianlin.
He decided to look for a new entrepreneurial track. After all, although pearl handicrafts will not disappear, the development space of a sub industry is limited, and it is difficult to achieve the goal of "adding zero in ten years". At that time, the textile industry in Keqiao District, Shaoxing, Zhejiang Province was rising. Qiu Jianlin, aiming at the opportunities, changed his profession into the textile industry.
When his Xiaoshan Craft Cloth Factory became prosperous, Qiu Jianlin was entrusted by the Secretary of the Party Committee of Yaqian Town to take over two town run textile enterprises that were on the verge of bankruptcy. With the business philosophy of "internal and external improvement", the factory revitalized and removed the hat of loss. Qiu Jianlin also transformed from the former "leader of pearl cultivation" to the "director of loss recovery".
One of the textile enterprises is Xiaoshan Yarn Dye Weaving Factory, the predecessor of Hengyi Group. Soon, the South Talk in 1992 set off a wave of economic investment. Qiu Jianlin, deeply aware of the rare opportunity, decided to enter the printing and dyeing and chemical fiber industry, and renamed Xiaoshan Yarn Dyeing Mill "Hangzhou Hengyi Industry".
Seizing this upsurge, Hengyi Industry achieved a breakthrough of 100 million yuan in sales revenue in June of the next year. In 1994, with Hangzhou Hengyi Industrial Corporation as the core, Hengyi Group was established and became one of the first township enterprise groups in Zhejiang Province. When Qiu Jianlin was moving towards the "leading goose" in the printing and dyeing chemical fiber industry, Hengyi Group, which was transformed into a private enterprise, also felt the pain after the 1997 financial crisis.
Faced with the cruel reality that most of Xiaoshan textile enterprises are in production suspension, Qiu Jianlin made another determination: he closed the printing and dyeing business that is still making profits and distributed it to the upstream polyester industry. Qiu Jianlin saw the potential of China's polyester industry: by 1999, China's polyester output had jumped to the first place in the world.
In 2001, Hengyi's first polyester melt direct spinning production line with an annual output of 180000 tons was successfully put into production. In that year, Hengyi's sales revenue rose by leaps and bounds, ranking among the top three of Xiaoshan's top 100 enterprises. This time, Qiu Jianlin succeeded again, but he did not stop.
At that time, the domestic chemical fiber industry set off a wave of production increase and capacity expansion, which triggered a sharp increase in the demand for the main imported raw material PTA (purified terephthalic acid, a bulk chemical raw material), resulting in a tight supply of raw materials, a sharp rise in prices and difficulties for downstream chemical fiber enterprises. In order to change the situation, Qiu Jianlin decided to develop PTA, the upstream raw material of polyester.
After going to the United States to investigate PTA production process, Qiu Jianlin found an ally. He and Li Shuirong, another big boss of Xiaoshan Petrochemical, hit it off and jointly funded the establishment of Yisheng Petrochemical. The first phase of the petrochemical company's 700000 ton PTA production plant was completed and put into operation in 2005; In 2006, the second phase 700000 ton PTA plant of Yisheng Petrochemical was put into operation.
The PTA production capacity of Yisheng Petrochemical has added a lot to the scale growth of Hengyi Group. At the same time, in order to enter the petrochemical industry, Hengyi Group established Zhejiang Hengyi Chemical Fiber Co., Ltd. This company changed its name to Hengyi Petrochemical in 2006, and successfully listed backdoor Guanghua ST in 2011.
In the year when Hengyi Petrochemical was listed, it topped the profit list of Zhejiang listed companies with a net profit of 1.92 billion yuan. However, shortly after Hengyi Petrochemical was listed, Qiu Jianlin faced new challenges. In 2012, the problem of overcapacity in the domestic PTA industry was prominent. If the manufacturing enterprises could not shoulder the three years of winter, they might not see the next spring of the PTA industry.
As far as Qiu Jianlin is concerned, as long as his mind does not decline, there are more ways than difficulties. As a result, Hengyi Petrochemical once again sounded the charge signal, entering the upstream PX from the downstream PTA. After all, PX is the most profitable link in the upstream. Going abroad was Qiu Jianlin's best choice at that time, and Brunei became the first stop of Hengyi Petrochemical.
Although this Southeast Asian country is small in scale, it has rich crude oil and natural gas resources and a loose investment environment. The demands of Brunei and Hengyi Petrochemical are well matched: Hengyi Petrochemical can provide Brunei with PX capacity, while Brunei can supply Hengyi with crude oil. So far, Hengyi Petrochemical has completed the layout of upstream and downstream integration of petrochemical industry.
To everyone's surprise, Qiu Jianlin was involved in the corruption case of Liu Tienan, the former director of the National Energy Administration, when Hengyi Petrochemical was listed among the top 500 Chinese enterprises in the second year. On December 10, 2014, the judgment of the Intermediate People's Court of Langfang, Hebei, said that Liu Tienan received more than 16.49 million yuan from Qiu Jianlin, chairman of Hengyi Group.
Five months after Liu Tienan's fall, Qiu Jianlin resigned as the chairman of Hengyi Petrochemical and served only as the chairman of Hengyi Group in order to dilute his personal influence on the listed company. At the same time, his son Qiu Yibo quickly became a director of Hengyi Petrochemical and served as the vice chairman and vice general manager of the listed company in 2015.
This year, Qiu Yibo was only 28 years old before he came to power.
02. Second generation succession
Qiu Yibo was born with a golden spoon in his mouth. In 1987, the year of his birth, Qiu Jianlin, his 24-year-old father, had become the "leader of pearl cultivation" in the rich side.
Qiu Yibo, who inherited the wisdom gene of his father's generation, also went to the grass-roots level for training like the second generation of other enterprises before taking over the listed company Hengyi Petrochemical. He has successively served as manager of the Investment Management Department of Sinopec Chemical Products Sales Co., Ltd. East China Branch and Hengyi Petrochemical Co., Ltd.
Like his father Qiu Jianlin, Qiu Yibo also holds 26.19% of the equity of Hengyi Group. This part of the equity was given by her mother Zhu Danfeng. Zhu Danfeng and Qiu Jianlin obtained the equity after their divorce in 2009. However, Qiu Yibo and Qiu Jianlin did not act in concert at that time. Qiu Jianlin and his brothers and sisters are the people who act in concert. They have obtained 58.55% control of Hengyi Petrochemical and firmly control Hengyi Petrochemical. It was not until 2018 that Qiu Yibo was added to the list of family members in the Agreement of Concerted Action signed by Qiu Jianlin. As a result, Qiu Jianlin's family holds up to 84.77% of the shares of Hengyi Group, and Qiu Jianlin is still the actual controller of the listed company.
▲ (Hengyi Group's equity structure chart. Data source/public information sorting)
After the second generation came to the front, Hengyi Petrochemical still had many big moves. For example, from 2017 to 2020, in three years, in addition to starting the construction of Brunei Refining and Chemical Phase II, Hengyi Petrochemical also acquired 8 enterprises.
In order to attract professionals to the company, Hengyi Petrochemical took the lead in implementing executive equity incentive in the chemical fiber and textile industry, and it is also one of the first private petrochemical enterprises to launch the employee stock ownership plan. From 2015 to 2018, Hengyi Petrochemical also implemented two equity incentive plans and three employee stock ownership plans. Qiu Jianlin is also one of them.
When his father Qiu Jianlin acted frequently, his son Qiu Yibo kept a low profile, so that it was difficult for the outside world to find more information about this second generation of enterprises in the four years after he came to power. Until 2020. In September of that year, Qiu Yibo officially took the helm and became the chairman of Hengyi Petrochemical.
So far, Qiu Yibo has spent nearly 10 years from being granted the equity of Hengyi Petrochemical to jointly exercising control with the Qiu family and eventually taking over the chairman of the board. According to the industry evaluation, Qiu Yibo's balance, compromise and concession between different sub groups on both sides of his parents finally completed the road of succession, which is not easy.
"Market boundary" sorting found that since Qiu Yibo took over as chairman and president in 2020, Hengyi Petrochemical has carried out four share repurchase plans, and the cumulative repurchase amount has reached about 2.5 billion yuan. In the outside world, Hengyi Petrochemical's stock repurchase is used for equity incentive or employee stock ownership plan.
During Qiu Yibo's share buyback, Hengyi Petrochemical's early investment has made great returns.
Brunei Phase I will be put into full production in 2020, and Hengyi Chemical's revenue will increase significantly, and the overall gross profit margin will also be boosted. In 2021, Hengyi will become one of the top 50 global chemical companies for the first time with chemical sales of 8.858 billion dollars. Up to this year, Hengyi has been listed in the top 500 Chinese enterprises for 18 consecutive years.
However, here is joy and there is sorrow. To Qiu Yibo's disappointment, the share price of Hengyi Petrochemical is getting lower and lower. This made the already fragile market confidence tottering, and some shareholders complained about this, "retail investors in this stock can't hold it, long fall!"
▲ (Hengyi Petrochemical Stock Price Trend Chart. Source/Flush)
Since February 26, 2021, the stock price of Hengyi Petrochemical has reached a historical high of 19.85 yuan per share, and has fallen all the way to below 10 yuan in the middle and late July 2022. In the following more than a year, the stock price of Hengyi Petrochemical has remained at the single digit level. As of April 17, 2024, the share price of Hengyi Petrochemical is 6.75 yuan per share, which is 64% lower than the peak period.
When the stock price kept falling, Hengyi Petrochemical continued to expand its investment scale in order to get through the industrial chain. Taking the polyester industry as an example, since 2016, the total annual production capacity of Hengyi Polyester has increased from more than 2 million tons to 10.4 million tons in July 2021, and the number of employees has increased from more than 7000 to 25000.
A series of production expansion led to the pressure of liabilities of Hengyi Petrochemical under the huge capital expenditure. According to the annual report data, the company's total liabilities in 2017 were 18.14 billion yuan, and by the end of 2023, Hengyi Petrochemical's total liabilities were 76.09 billion yuan.
In fact, Qiu Yibo faces more problems than these.
03. What is the way forward for chemical giants?
Qiu Yibo also has to face the interest disputes of family members and the conflict with his father's business philosophy.
At the same time, since 2020, due to changes in the economic environment, rising costs of raw materials, labor and other factors, the petrochemical industry has become increasingly difficult to do.
In addition, the prospect of Hengyi's old track PTA industry is not optimistic. Hengyi Petrochemical, together with Rongsheng Petrochemical, Hengli Petrochemical and other oligarchs, you have joined us to expand production, and a battle has been in full swing.
Enterprise competition is also an arms race. By the end of 2022, Hengli Petrochemical Phase II, Tongkun Jiaxing Petrochemical and Xinfengming Dushan Project are all fourth generation equipment, while Zhejiang Hengyi's equipment is still the first generation.
This means that it is not easy for Hengyi, the first generation equipment with the lowest degree of integration, to stand firm in this round of shuffle. In 2022, Hengyi Petrochemical lost 1.08 billion yuan of net profit attributable to the parent company, while it also made 3.408 billion yuan of profit in the same period last year.
In 2023, although due to the decline of raw material prices and the recovery of downstream demand, Hengyi Petrochemical successfully turned losses into profits, achieving a net profit of 53.6858 million yuan after deducting non profits, but the net profit margin after deducting non profits was only 0.04%.
A person from the chemical industry told the "market boundary" that Hengyi Petrochemical would face great challenges if it did not have strong financing capacity. After all, large petrochemical enterprises from Shandong, once the second largest among the top 100 enterprises in Shandong, started bankruptcy reorganization in 2018 due to debt ceiling.
As the only large private refining and chemical enterprise whose refinery is located overseas, Hengyi Petrochemical has the largest single investment of private enterprises in Brunei. The Brunei Project Phase I, which has been fully put into operation, has a lower production cost per unit product of the plant, which has a significant late mover advantage.
Brunei Refining and Chemical Project Phase II has been planned and is under construction. Under the background of limited new refining and chemical capacity in Southeast Asian countries, product oil gap in Southeast Asia itself, and continuous tight supply and demand, once Brunei Refining and Chemical Phase II is completed and put into operation, Hengyi Petrochemical's PX capacity of 4 million tons can basically achieve self-sufficiency of PTA supporting PX raw materials.
According to the announcement issued by Hengyi Petrochemical, the construction period of Brunei Refining and Chemical Phase II Project is three years. It is estimated that after completion, the annual average new operating revenue will be 11.045 billion dollars, the annual average new net profit will be 1.716 billion dollars, and the project yield will be 18.67%.
In addition, compared with Hengli Petrochemical and Rongsheng Petrochemical, Hengyi Petrochemical has advantages in regional location, raw material procurement and tax revenue. Tax advantages mainly refer to its projects in Brunei. Hengyi Petrochemical Brunei Project is exempt from corporate income tax for 11 years, and can enjoy preferential tax policies for up to 24 years after the application meets the conditions, covering the whole operation cycle of the project.
Shengang Securities has calculated that, with the average price in 2019 as the reference standard, income tax relief can bring an average annual excess net profit of $80 million for the project, which has obvious advantages over 13% value-added tax, 25% income tax and consumption tax of steam, coal and diesel in China.
In addition, the Brunei project is located at the southern end of the South China Sea, close to Malaysia and close to Singapore. Due to the shortened transportation distance, Shengang Securities estimates that the annual cost of crude oil logistics will be saved more than 20 million dollars.
In fact, in 2023 and even 2024, Qiu Yibo also fought for Hengyi Petrochemical.
In 2023, Hengyi Petrochemical made two moves. One is that in February, Hengyi Petrochemical released the Plan for Non public Issuance of A-shares, saying that the non-public offering of shares to the controlling shareholder Hengyi Group would raise no more than 1.5 billion yuan, all of which would be used to supplement working capital. However, on April 20, 2024, Hengyi Petrochemical announced that the private offering had been terminated.
One is to buy back shares. Although Hengyi Petrochemical also admitted that "the inventory formed in recent years is too much and the debt is too high", Qiu Yibo still proposed to buy back the shares, with the buyback amount of 500 million to 1 billion yuan, and use the company's own funds. For the purpose and purpose of repurchasing shares, Hengyi Petrochemical announced that it is to safeguard the interests of the company and shareholders, and implement employee stock ownership plans or equity incentives.
In 2024, on February 1, Hengyi Petrochemical launched the sixth employee stock ownership plan, which is expected to raise no more than 800 million yuan initially. Part of the funds raised will be used to buy back the shares of the listed company, and part of them will be used to buy the shares of the company through the secondary market.
If the fund raised this time is successful, Hengyi Petrochemical has purchased six employee stock ownership plans since 2016, and the cumulative transaction amount will exceed 5.2 billion yuan.
Unfortunately, Hengyi Petrochemical released an announcement on the evening of April 2, saying that up to now, the company's sixth employee stock ownership plan has not yet purchased the company's shares in the secondary market. This means that the fundraising progress of the sixth employee stock ownership plan is slow.
On April 2, 2019, Qiu Jianlin, who had not appeared for a long time, withdrew from Hengyi Brunei PMB petrochemical project and returned home. Soon after, he announced the new goal of Hengyi Petrochemical to the outside world. "We can run faster and stronger. In 2024, we will achieve an output value of 500 billion yuan, become one of the world's top 500, and become a world-class petrochemical industry group."
Qiu Jianlin has realized his desire to become one of the world's top 500 after a rush. Now, what he left behind for his son Qiu Yibo is the task of realizing an output value of 500 billion yuan in 2024. When can it be realized? It remains to be seen.
Author | Tao Ting
Edit | Sun Chunfang
Operation | Liu Shan
