Tsinghua Unigroup Holdings surged by 50%. Why is the capital of the “Tsinghua Group” so aggressive?

As China's top university, Tsinghua University is naturally far ahead of its peers in terms of investment. Recently, its assets have entered a stage of crazy appreciation. On December 27, Tsinghua Holdings successively raised its stake in two companies, and its own stock price suddenly soared 55.73%, closing at HK$2.99.

Lenovo Holdings, which Tsinghua Unigroup recently bought a large amount of shares, has also surged in recent days. SMIC has also ended its major adjustment in November and started to regain its upward trend in December, even topping the Hong Kong Stock Connect net buying list. Tsinghua Unigroup naturally made huge profits. On the evening of December 27, the person in charge of investor relations of Tsinghua Unigroup Holdings responded to the inquiry of the First Financial reporter and said that it is not clear why the stock price suddenly soared. If the Hong Kong Stock Exchange requires it, there will be a relevant announcement.

An investigation by the First Financial Daily reporter found that Tsinghua Holdings' purchase of Lenovo Holdings and SMIC was indeed based on strong strategic considerations. The "Tsinghua Group" already owns Unigroup Guoxin (002049.SZ), and this time Tsinghua Holdings' purchase of SMIC is believed to be a result of the "Tsinghua Group" having more comprehensive considerations in the semiconductor industry. How to achieve localization of chips is also related to the prospects for my country's industrial transformation and upgrading.

Lenovo Holdings SMIC

Tsinghua Unigroup Holdings' semi-annual report shows that its main business is "design, manufacture and distribution of SMT production and related equipment, as well as financial leasing and factoring business". Tsinghua Unigroup Holdings has been buying Legend Holdings for several consecutive days, and the latter's stock price surge has attracted attention from the outside world. Legend Holdings surged more than 70% in six trading days, and rose another 9.15% on the 27th, with the latest closing price at HK$34.6.

Regarding the surge in Tsinghua Unigroup Holdings and Lenovo Holdings, Broad Capital CEO Wen Tianna told the First Financial reporter that Tsinghua Unigroup Holdings has successively raised its stake in two large companies. It will take time to verify Tsinghua Unigroup Holdings' understanding of the operations of the companies during the increase in holdings, whether the purchase process represents a larger layout for Tsinghua Unigroup, and the stock price performance of related companies.

The company's announcements and other public information show that Tsinghua Unigroup Technology Strategic Investment Co., Ltd., which is actually controlled by Tsinghua University, currently holds 67.82% of Unigroup Holdings; while Lenovo Holdings' 29.04% stake is held by the Chinese Academy of Sciences State-owned Assets Management Co., Ltd. Both Unigroup Holdings and Lenovo Holdings have strong academic and scientific research backgrounds.

In July 2016, Liu Chuanzhi said that the market did not understand the business of Legend Holdings and still only thought of Lenovo Group as an IT company. In fact, Legend Holdings has invested in a large number of financial companies. After Liu Chuanzhi's remarks last year, Legend Holdings started a round of surge, and the surge in the past two weeks was mainly due to the increase in holdings by Tsinghua Unigroup Holdings.

12月23日，在停止增持联想控股的第二天，紫光控股以近5000万港元增持中芯国际。紫光控股对中芯国际采取长线买入，自2016年12月至2017年6月多次买入，直到2017年8月公告构成举牌。而紫光控股背后，由紫光集团董事长赵伟国带领的“紫光系”近年来以在资本市场的大手笔著称。

On the evening of December 22, Tsinghua Unigroup announced that it had purchased 1.59 million shares of Lenovo Holdings at a total price of HK$50.1397 million that day, equivalent to approximately 0.41% of the issued share capital of Lenovo Holdings' H shares. In the previous three days, Tsinghua Unigroup had continuously purchased 2.92 million shares of Lenovo Holdings.

Another reason for the surge in Legend Holdings is the expectation of the pilot company of full circulation of H shares. At the end of June this year, the mainland and Hong Kong signed a new round of "Mainland and Hong Kong Closer Economic Partnership Arrangement" (CEPA), which included the promotion of full circulation of H shares. In addition, media reports said that Big Hit Entertainment, in which Legend Holdings had invested, was interested in an IPO to obtain market capital due to the recent popularity of its BTS. However, Legend Holdings announced that it was not aware of the news of full circulation of H shares and the listing of Korean companies.

On August 2, 2017, Tsinghua Unigroup announced that it had purchased a total of 10.766 million shares of SMIC through a series of transactions between December 2, 2016 and June 30, 2017. Among them, Tsinghua Unigroup purchased 6.545 million shares of SMIC in 7 transactions between February 28, 2017 and June 30, 2017, which did not reach the 5% shareholding threshold, but combined with the previously purchased shares, it has reached the shareholding threshold.

Tsinghua Unigroup Guoxin (002049.SZ), an A-share listed company, is mainly engaged in "integrated circuit chip design, development, sales and technical services; development, production and sales of high-brightness light-emitting diode (LED) substrate materials; production and sales of piezoelectric quartz crystal devices". Tsinghua Unigroup Guoxin is 36.39% owned by Tibet Unigroup Chunhua Investment Co., Ltd. (the actual controller is Tsinghua Unigroup Group and Tsinghua Holdings Co., Ltd.), and Tongfang Co., Ltd. holds 4.76% of Tsinghua Unigroup Guoxin.

Tsinghua Unigroup believes that the purchase of SMIC and Legend Holdings is an attractive investment that will help improve the company's investment returns. Legend Holdings said, "We welcome market investors who recognize the brand and value of Legend Holdings to become our shareholders."

Is the “Ziguang Group” comprehensively deploying semiconductors?

As one of the important components of the "Tsinghua Group" investment map, Tsinghua Holdings, a subsidiary of Tsinghua Unigroup, bought SMIC, which seems to be more than just to increase investment returns. On December 27, SMIC rose 2.66%. Surprisingly, this company with a total market value of only HK$60 billion ranked first in the net purchase of Hong Kong Stock Connect, with net purchases of mainland funds reaching 361 million yuan and a total transaction volume of nearly 800 million yuan, accounting for 73.58% of the total transaction volume on that day.

Chips are also known as "industrial food". They are the core foundation of everything from mobile phones and computers to artificial intelligence, big data, and network security. According to customs statistics, in 2016, China's total chip imports reached 227.1 billion US dollars, equivalent to about 1.5 trillion yuan. As a gathering place for top talents in the country, Tsinghua University is naturally responsible for realizing the localization of chips and industrial transformation and upgrading. Unigroup Guoxin and SMIC are undoubtedly important players in this regard.

Bohai Securities analyst Xu Yong believes that the global semiconductor market has grown rapidly in recent years, but due to the relatively weak strength of Chinese semiconductor companies, this round of high growth has mainly benefited foreign giants. Chinese semiconductor companies are at a competitive disadvantage both in terms of profit margins and absolute values. Most semiconductor companies are still at the end of the industry catching up, and it is difficult to achieve explosive growth.

Tsinghua Unigroup's official website shows: "Zhao Weiguo, chairman of Tsinghua Unigroup, expounded on the important strategic significance of the chip industry to my country's economic development." "Although chips are small, they are one of the biggest supply-side shortcomings that restrict China's economic development. This embarrassing situation has been broken with the completion of this factory under construction. In 2018, my country's first three-dimensional flash memory chip with independent intellectual property rights will be mass-produced here." Zhao Weiguo said: "(Three-dimensional flash memory chip) from scratch, this will not only fill the domestic gap and break the monopoly, but also improve the overall level of China's chip industry, and then rewrite the global chip industry landscape."

Compared with Lenovo Holdings, SMIC is obviously more in line with the development strategy of the "Zhiguang Group". According to SMIC's official website, the company is one of the world's leading integrated circuit wafer foundries and the largest and most technologically advanced integrated circuit wafer foundry in mainland China. SMIC's 2017 interim report shows that its total revenue in the first half of 2017 was approximately US$1.544 billion, a year-on-year increase of 16.6%, and its gross profit was US$415 million, a year-on-year increase of approximately 11.7%.

SMIC previously announced on November 29 that it plans to place approximately 241 million new shares at HK$10.65 per share. The total proceeds from the placement will be approximately HK$2.57 billion, and the net proceeds from the placement (after deducting fees, commissions and expenses) will be approximately HK$2.55 billion. In this placement, the National Integrated Circuit Fund and Datang both have priority subscription. At the same time, SMIC completed the issuance of US$65 million of perpetual subordinated convertible securities.

Bohai Securities analyst Xu Yong believes that mainland China's chip companies have scale and cost advantages, and the overseas orders they attract continue to increase. At present, one phenomenon is that mainland China's chip companies continue to expand production at a high speed to cope with the growing demand. In particular, domestic equipment gradually replaces imported equipment, and domestic chip companies have more advantages in production costs.

In addition to the "Ziguang Group", the "Tsinghua Group" also includes a number of listed companies under the "Tongfang Group" and "Tus Group". Industrial and commercial data show that Tsinghua Holdings and Ziguang Group currently hold 25.42% and 2.35% of Tongfang shares respectively.

Source: China Business News

Related Reading:

Terminal manufacturers are all developing their own chips. What should chip manufacturers do?

Huaqin Communication Completes RMB 870 Million Series A Financing Led by Intel and Huachuang

NB-IoT meter reading also depends on gas, and 5 "big guys" have all entered the market