Jinyu Car City Debt Default Lawsuits, Shell Achievement Changes Drag

In October 15th, Jinyu car city released the first three quarters of 2019 performance notice. From January to September 2019, it is estimated that the net profit attributable to the parent will be - 60 million yuan to - 70 million yuan, and the net profit attributable to the parent in the same period of last year will be - 8.4678 million yuan. Compared with the half year report of 2019, the third quarter will continue to lose - 10.3834 million yuan to - 20.3834 million yuan.

At present, Jinyu car city liquidity is tight, causing multiple debt default. Their own hematopoiesis capacity is poor, new and old businesses are in a state of decline. Moreover, due to the fact that its wholly-owned subsidiary Nanchong Jinyu real estate didn't handle the property right certificate according to the agreed time, there were contract disputes and other reasons, it was sued in court.

In addition, in 2017, Chi Lin Electric Co., Ltd., which was purchased in 2017, is still unable to complete its performance commitments in 2019. This is the second consecutive year that it failed to achieve its expected performance after failing to complete its performance commitments in 2018.

Shell achievement is a drag on performance.

Jinyu car city company is a listed company with new energy and electrical equipment manufacturing, sales, automobile trade and market services, real estate development, and silk trade as its main business. From 2010 to 2016, the company's main business was in a downturn. After 2013, the operating revenue declined year after year, and the operating revenue in 2016 decreased from 177 million yuan in 2013 to 73 million yuan. In addition, due to the loss in 2015, 2016 and two consecutive years, Jinyu Auto City was warned of delisting risk and put on the st hat.

In order to avoid the fate of three consecutive years of losses, the so-called Jinyu car city acquired 55% stake in Chi Lin Electric Company in 383 million of cash in 2017. At that time, the total value of shareholders' rights and interests of Chi Lin Electric Company was 645 million yuan, and the net assets appreciation rate was 490.12%. The value of shareholders' rights and interests calculated by the asset based approach was 195 million yuan, and the difference between them was 450 million yuan. After negotiation, the overall equity price of Zhilin Electric is RMB 750 million, which is about RMB 100 million floating on the basis of the equity method evaluation price. According to the 2017 net profit of 65816400 yuan of Zhilin electric, the PE multiple of acquisition is 11.4.

In the takeover announcement, Jin Yu Che Cheng said that after the completion of the transaction, it would help the company to optimize its business structure, promote the transformation and development of its main business, and enter the field of electrical machinery and equipment manufacturing with broader prospects. After becoming a subsidiary of a listed company, Zhilin Electric will be included in the scope of consolidation, which is conducive to improving the business scale and profitability.

According to the investment agreement, Chi Lin Electric promise made the net profit from 2017 to 2019 after the audit was not less than RMB 60 million yuan, 90 million yuan and 120 million yuan, and agreed that the compensation would be made according to the agreement if the actual net profit was not enough.

The effect of buying a company's thickening profit is immediate. In the year of acquisition in 2017, Jinyu Auto City achieved an operating revenue of 299 million yuan, a year-on-year increase of 309.90%; realized a net profit of 39 million yuan, and successfully turned the loss into profit. Among them, the new business new energy electrical equipment realized revenue of 105 million yuan, accounting for 34.94% of the total revenue.

But the day failed, and in 2018 the introduction of the 531 photovoltaic policy made Chi Lin's electric business suffer heavy losses, and the cliffs fell. In 2018, the actual performance of Zhilin electric dropped from RMB 64.7886 million in 2017 to RMB 369600 in 2018, far lower than the performance commitment of RMB 90 million. In 2018, Jinyu Auto City realized a net profit of 6.4196 million yuan, with a net profit of - 197 million yuan after deducting the non parent company.

In 2018, Jinyu car city Ji Ji Lin Electric related goodwill allowance was 187 million yuan. It is worth noting that this is based on the fact that in 2019, Zhilin electric can independently fulfill its performance commitment.

At present, Jinyu Che Cheng expects that in 2019, Chi Lin can achieve net profit of about about 13000000 after deducting non profits, which is quite different from its performance promise 120 million. In 2019, we will continue to accrue goodwill impairment provision for Zhilin electric, which will become an event of approximate rate.

Debt default

Lawsuits

As of June 30, 2019, the balance of money in Jin Yu Che city was only 11 million 169 thousand and 200 yuan, while its long-term borrowing amount was 44 million 500 thousand yuan in one year, and the short-term loan balance was 151 million yuan. Up to the end of the reporting period, there was a 34 million 500 thousand yuan bank loan overdue.

A total of 83 litigation cases were disclosed and the amount involved was as high as 343 million yuan. Among them, the "champs spring" project, a subsidiary of Jinyu real estate development, was collectively charged by 503 owners for breach of contract. Zhilin electric also has pending lawsuits due to several contract disputes.

Among the numerous lawsuits, the following points deserve our attention.

1. According to the eye of heaven, there were many lawsuits concerning private lending in 2019. Most of the loans are borrowed by individuals to Jinyu car city or its subsidiaries for capital turnover. After the loan is due, Jinyu car city or its subsidiaries can not repay the principal and interest on schedule, resulting in debt default.

2, according to the April 2019 announcement, Jinyu car city, a listed company, intends to take its original controlling shareholder Jinyu holdings to court. The reason for the accusation is that in the real estate disputes between the listed company and Chengdu Lvyuan industry and Trade Co., Ltd. and Chengdu West Auto City Co., Ltd., the former controlling shareholder Jinyu holdings abused its control position and caused serious damage to the interests of the company through related party transactions, malicious disposal of assets, disclosure of false information, etc. Among them, Chengdu Xiqi is also a holding subsidiary of Jinyu holding, with a shareholding ratio of 60%. However, due to the failure of Jinyu car city to pay the litigation fee, the case has been withdrawn. In the litigation announcement disclosed by the listed company in August 2019, Jinyu automobile city only filed a lawsuit against Chengdu industry and trade and Chengdu Xiqi, and the former controlling shareholder Jinyu holding is no longer among the defendants.

3, the shares held by Jin Yu holding company are 30 million 26 thousand shares. In October 16th, the announcement of Jin Yu's car city said that all shares of the listed company held by Jin Yu holding company would be auctioned off because of the default of the share pledge. The latest announcement on October 17 said the auction was suspended due to changes in the circumstances of the case.

A number of financial indicators slide

Jinyu car city only achieved 11 million 272 thousand and 900 yuan in operating income in the first half of 2019, and realized net profit of -6076.32 million yuan, compared with the same period in 2018.

From the operational point of view, inventory turnover days in the first half of 2019 reached 2620.09 days, and accounts receivable turnover days reached 4871.81 days.

In terms of liabilities, the asset liability ratio of Jinyu car city has remained high in the past three years. In 2017 H1 to 2019, the asset liability ratio of H1 was 93.08%, 87.89% and 89.53% respectively, and the current ratio of H1 in 2017 H1 to 2019 was less than 1, 0.44, 0.54 and 0.60 respectively, and the debt paying pressure was prominent.