Reporter | Zhang Qiaoyu
On May 16, SZSE sent a supervision letter to Sanchuan Wisdom (300066. SZ), Chairman Li Jianlin, General Manager Li Qiangzu and Chief Financial Officer Tong Weimin. The next day, Sanchuan Wisdom received a warning letter from Jiangxi Securities Regulatory Bureau.
This event is caused by the accounting error found in 2023 by Ganzhou Tianhe Permanent Magnet Material Co., Ltd. (hereinafter referred to as "Tianhe Permanent Magnet"), a subsidiary of Sanchuan Zhihui. The self inspection results show that Tianhe Permanent Magnet has a transaction without commercial substance in 2023, and wrongly recognized the revenue of rare earth oxide trade without substantial commodity control by the total amount method.
Therefore, Sanchuan Wisdom corrected accounting errors in its operating revenue from January to September 2023, resulting in a decrease of 221 million yuan in operating revenue, accounting for 12.69% of the current disclosed revenue, and a decrease of 8.2626 million yuan in net profit, accounting for 4.84% of the current disclosed net profit.
Due to inaccurate information disclosure, Sanchuan Wisdom violated relevant laws and regulations, and its chairman, general manager and chief financial officer were identified as the main responsible persons. According to the regulations, Jiangxi Securities Regulatory Bureau has taken the regulatory measures of warning letter to Sanchuan Wisdom, and recorded this into the integrity file of the securities and futures market.
The subsidiary was acquired two years ago
The main business of Sanchuan Wisdom in 2021 includes various water meters, water management application systems, etc. with intelligent water meters, especially Internet of Things water meters as the core products. Sanchuan Wisdom acquired Tianhe Permanent Magnet in 2022. Before the acquisition, Sanchuan Wisdom's revenue had declined for two consecutive years.
For the purpose of improving the operating conditions of listed companies, enhancing the sustainable profitability and development potential of listed companies, and further laying out the rare earth resource recycling industry, Sanchuan Wisdom purchased the 67.00% equity of Tianhe Permanent Magnet jointly held by Chen Jiuchang, Zhou Ganghua and Shu Jincheng with its own funds on June 29, 2022.
Tianhe Permanent Magnet was originally jointly held by Chen Jiuchang, Zhou Ganghua, Shu Jincheng and China Southern Rare Earth Group (hereinafter referred to as "Southern Rare Earth"). After the completion of the transaction, Tianhe Permanent Magnet became a subsidiary of Sanchuan Smart Holdings and was included in the consolidated statements.
According to the asset appraisal report, the total equity value of Tianhe Permanent Magnet, the subject matter appraised by the income method, is 329 million yuan, which is higher than the corresponding net asset appreciation rate of 364.37%. After negotiation, the price of the transaction was determined to be 214 million yuan.
It is worth noting that, The equity transfer agreement has agreed on the performance gambling terms. Chen Jiuchang, Zhou Ganghua and Shu Jincheng promise that Tianhe Permanent Magnet will achieve the audited net profits of no less than 36 million yuan, 41 million yuan and 46 million yuan respectively in 2022, 2023 and 2024, and the accumulated net profits of no less than 123 million yuan in three years. Keep the existing management team of the target company stable during the performance commitment period, Be responsible for the operation and management of Tianhe Permanent Magnet under the authorization of the Board of Directors of the target company.
If Tianhe Permanent Magnet has any net profit in any accounting year that triggers one of the following conditions, the performance commitment party shall assume the obligation to compensate the listed company year by year, that is, the actual net profit in 2022 is less than 90% of the commitment index; The accumulated actual net profit in 2022 and 2023 does not reach 90% of the accumulated committed net profit in two years; The accumulated actual net profit in 2022, 2023 and 2024 does not reach 100% of the accumulated committed net profit.
In addition, the equity transfer agreement also contains relevant provisions on equity repurchase, which stipulates that under certain circumstances, a listed company has the right to require the counterparty to repurchase all of its shares.
Performance commitment not up to standard
Tianhe Permanent Magnet is a high-tech enterprise specializing in the recovery and processing of Nd-Fe-B waste materials and entrusted processing business. It extracts rare earth elements from Nd-Fe-B waste materials by using the oil sludge, leftovers and defective products generated in the production and processing of magnetic materials as production raw materials. Its products include praseodymium neodymium oxide, dysprosium oxide, praseodymium oxide, holmium oxide Gadolinium oxide, terbium oxide and other rare earth oxides.
During the period from 2022 to 2023, the cumulative actual net profit of Tianhe Permanent Magnet is 57111500 yuan, and the achievement rate of performance commitment is only 74.17%, which does not reach 90% of the commitment, triggering the performance compensation clause. At the same time, the achievement rate of performance commitment in 2023 is only 55.80%, and the decline of rare earth oxide market price does not exceed 50% of the previous year, which also triggered the equity repurchase clause.
The main reason is that the price of rare earth oxide will continue to fall in 2023, and the average price of praseodymium and neodymium oxide, the mainstream product, will fall from more than 700000 yuan/ton at the beginning of the year to more than 400000 yuan/ton at the end of the year. Mitsukawa Smart pointed out that this greatly increased the pressure and risk of the target transferor to fulfill its performance commitments.
Photo source: Announcement
In order to improve its performance, Tianhe Permanent Magnet tried to make up for it through rare earth oxide trade business. However, the self inspection shows that the gross profit rate of some trade businesses is abnormal, and there is an association between suppliers and customers, lacking commercial substance. These transactions involve a cumulative purchase amount of 71.7363 million yuan, a sales amount of 87.6602 million yuan, and a gross profit of 15.9239 million yuan.
After the rectification, Zhou Ganghua is no longer the chairman and legal representative of Sanchuan Smart, Chen Jiuchang is no longer the vice chairman of Sanchuan Smart, and Zhou Ganghua and Chen Jiuchang are no longer directly involved in Sanchuan Smart operation and management.
It is worth noting that in the first quarter of 2024, Sanchuan Wisdom and its subsidiary Tianhe Permanent Magnet still suffered losses. The financial report shows that in the first quarter of 2024, Sanchuan Smart will achieve an operating revenue of 349 million yuan, a decrease of 15.56% over the previous year; The net profit attributable to shareholders of the listed company after deducting non recurring profit and loss was -5824600 yuan, which was changed from profit to loss on a year-on-year basis.
Special statement: The above content (including pictures or videos, if any) is uploaded and released by users of "Netease" on our media platform, and this platform only provides information storage services.
Notice: The content above (including the pictures and videos if any) is uploaded and posted by a user of NetEase Hao, which is a social media platform and only provides information storage services.
