The stock price fell below 1 yuan, six years of financial fraud, and the alarm of Huayi Electric's delisting sounded

Wind power company Huayi Electric (ST Huayi, 600290.SH) has been in trouble recently and is on the verge of delisting.

On the evening of November 28, Huayi Electric announced that the closing price of the day was lower than 1 yuan. Since November 17, the company's share price has continued to fall, closing at 0.96 yuan on the 28th.

According to Article 9.2.1, Paragraph 1, Item 1 of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (Revised in August 2023), if a listed company that only issues A-shares on the Shanghai Stock Exchange has a daily closing price of less than RMB 1 for 20 consecutive trading days, the stock may be terminated from listing and trading by the Shanghai Stock Exchange, which is a mandatory delisting of the trading category.

This is the first termination of listing risk warning announcement that Huayi Electric may trigger the delisting of face value.

The next day, Huayi Electric once again issued an announcement on abnormal fluctuations in stock trading. From November 27th to 29th, the closing price deviated by more than 12% in three consecutive trading days.

Due to the negative audited net assets at the end of Huayi Electric in 2022, the company's shares have been put on delisting risk warning since May 4 this year.

As of the close of noon on November 30, Huayi Electric fell another 5.49% to close at 0.86 yuan per share, with a total market value of only 654 million yuan.

Huayi Electric's problems are not only the decline in stock prices and negative net assets, but also the recent negative information.

On November 21, Huayi Electric received the "Advance Notice of Administrative Punishment" (Zhe Zhi Zi [2023] No. 29) (hereinafter referred to as the "Notice") from the Zhejiang Supervision Bureau of the China Securities Regulatory Commission, and immediately suspended trading for verification.

According to the "Notice", Huayi Electric's 2017-2022 annual report contained false records. In 2017, Huayi Wind Energy Co., Ltd. (hereinafter referred to as Huayi Wind Energy), a wholly-owned subsidiary of Huayi Electric, recognized revenue from the sales of wind turbines that did not meet the conditions for revenue recognition, and carried forward the corresponding costs, involving three projects: Nuomuhong, Luojiashan and Mianchi Phase II.

As a result of the above matters, the consolidated financial statements of Huayi Electric's 2017 annual report were suspected of inflating operating income by 347 million yuan, inflating accounts receivable, and overstating the provision for bad debts of accounts receivable by 8.1258 million yuan, and inflating the total profit by 66.9905 million yuan.

At the same time, the accounts receivable formed by Huayi Electric's inflated fan sales revenue in 2017 have been in existence and bad debt provisions have been made every year, resulting in the total inflated profits in the 2018-2022 annual report, affecting the amounts of 9.5978 million yuan, 37.2913 million yuan, 55.0149 million yuan, 46.0077 million yuan and 62.5811 million yuan respectively.

Huayi Electric said that after calculation, its net profit attributable to the parent company from 2016 to 2019 was negative, which may touch the situation of major illegal forced delisting stipulated in the "Shanghai Stock Exchange Stock Listing Rules", and be subject to major illegal forced delisting.

According to the conclusion of the formal administrative penalty decision, the listing of Huayi Electric shares will also be terminated.

On November 17, Huayi Electric also disclosed the progress announcement on the occupation of funds and illegal guarantees. It stated that there was no latest progress on the capital occupation and illegal guarantee of Huayi Group Co., Ltd. (hereinafter referred to as Huayi Group), the company's former controlling shareholder.

In 2019, Huayi Electric announced that it had found that there were illegal guarantees and the occupation of controlling shareholders' funds, with a total amount of 2.198 billion yuan.

As of November 17 this year, Huayi Electric's balance of funds occupied by Huayi Group and its affiliates was 1.93 billion yuan, and the balance of illegal guarantees was 1.809 billion yuan.

Huayi Group is currently in the stage of bankruptcy liquidation. This means that a series of problems such as Huayi Electric's capital occupation and illegal guarantees may be difficult to resolve. At the same time, with the execution of the guarantee case, there is a risk that the company's liquidity will deteriorate further.

In the past six months, Huayi Electric has frequently disclosed that it has been involved in lawsuits, and that its equity or funds have been frozen.

According to the semi-annual report, as of June 30, 2023, the cumulative amount of Huayi Electric's unfinished sued cases was 2.114 billion yuan, which had a negative impact on its cash flow.

At the same time, due to the shortage of liquidity, Huayi Electric has overdue loans from some financial institutions. As of the end of June, the overdue principal totaled 490 million yuan.

Huayi Electric is the first private enterprise listed on the main board of A-shares in Wenzhou, and its main products involve the power transmission and distribution industry and the wind power industry. Among them, the power transmission and distribution industry began in 1986, mainly involving medium and high voltage power transmission and distribution equipment.

The company set foot in the wind power industry in 2002, focusing on the manufacture of complete machines, and gradually extended to the downstream of the industrial chain such as wind farm operation, operation and maintenance, EPC general contracting, and wind farm project development, and can now mass-produce 780kW-3.XMW series of wind turbine products, which belong to the small megawatt category.

According to the data of the Wind Energy Committee CWEA, in 2015, Huayi Electric added 510 MW of installed capacity, ranking 14th in the country, accounting for 1.66% of the country's new installed capacity that year, which is the best result in its history.

In the first three quarters of this year, the company achieved revenue of 245 million yuan, a year-on-year increase of 24.6%, and a net loss attributable to the parent company of 136 million yuan.