The veteran industrial robot company was delisted

Recently, Harbin Institute of Technology Intelligent Technology Co., Ltd. issued an announcement stating that in 2022, the company was issued an "Internal Control Audit Report" with a negative opinion by Jiangsu Tianheng Accounting Firm. Therefore, the Shenzhen Stock Exchange implemented an "other risk warning" for the company's stock, and the stock abbreviation was changed from "Harbin Institute of Technology Intelligent Technology Co., Ltd." to "ST Gongzhi".

The report shows that HGNU Intelligent Technology uses the equity method to account for four companies, including HGNU Growth (Yueyang) Private Equity Fund Enterprise (Limited Partnership), Huzhou Dazhi Industrial Investment Partnership Enterprise (Limited Partnership), Heilongjiang Strict Supply Chain Service Co., Ltd. and Nantong Zhongnan HGNU Intelligent Robot Industry Development Co., Ltd. The total initial investment cost is 650 million yuan, the balance at the end of 2022 is 420 million yuan, and the investment income recognized in this period is -139 million yuan.

The above four companies are all equity investment platform companies, with a large amount of equity investments, large amounts of current accounts and large amounts of capital increase intention funds on their books. Due to the limited audit scope, the accountants believed that they failed to implement necessary audit procedures and could not determine whether Harbin Institute of Technology Intelligent Technology needed to make adjustments to the book value of long-term equity investments, investment income and other items in the financial statements of the above four companies, nor could they determine whether there were any significant related-party financial transactions that had not yet been identified. Tianheng Accounting Firm issued a negative internal control audit report.

It is understood that HGNU Intelligent Technology Co., Ltd. is a high-tech company focusing on high-end intelligent equipment manufacturing and industrial robots . It is one of the veteran companies in China's industrial robot industry. It was successfully listed as early as 1995 and has made significant contributions to promoting the development of China's industrial robot industry.

However, such a company was delisted 18 years after it went public. This really makes people sigh and want to explore the reasons behind it.

Continuous losses and severe cash flow shortage

Harbin Institute of Technology Intelligent's 2022 financial report shows that its revenue during the reporting period was 1.822 billion yuan, a year-on-year increase of 5.80%. Its net profit attributable to the parent was a loss of 740 million yuan, which continued to expand compared with the loss of 588 million yuan in 2021. At the same time, its gross profit margin also fell by 10.54% compared with the same period last year.

In this regard, Harbin Institute of Technology Intelligent Technology stated that during the reporting period, due to many factors such as economic downturn, industry cycle, the Russia-Ukraine war and global supply chain tensions in the first half of the year, the revenue recognition and carry-over progress of Harbin Institute of Technology Intelligent Technology's subordinate sectors, especially the high-end equipment manufacturing sector, was delayed, and the carry-over of some overseas projects was also greatly affected. The situation improved slightly in the second half of the year.

Earlier, from 2017 to 2020, Harbin Institute of Technology Intelligent Technology achieved revenue of 1.572 billion yuan, 2.383 billion yuan, 1.737 billion yuan, and 1.618 billion yuan, respectively, and achieved net profit attributable to shareholders of 90 million yuan, 120 million yuan, 41 million yuan, and 6 million yuan, respectively. It can be seen that since 2018, Harbin Institute of Technology Intelligent Technology's net profit has been declining year by year, and it suffered a substantial loss in 2021.

A big reason for this is that the trade war that started in 2018 and other factors have led to a downturn in the automotive industry. Harbin Institute of Technology Intelligent Technology also stated in its annual report that since the fourth quarter of 2018, the downstream automotive industry has been sluggish, and the fundamentals of the industry have not improved substantially so far. The industry is highly competitive. In addition, the company has focused on expanding new businesses and seizing new market share during this period, which has largely sacrificed profit margins. As a result, the company's projects signed from 2018 to 2021 with carry-over income for this year have low gross profit margins or even losses, which has lowered the overall gross profit margin.

The reason why the impact is so great is that Harbin Institute of Technology Intelligent Technology's customers are too concentrated in the traditional fuel vehicle industry. For example, Baoneng, Qoros, Zhixing and other leading fuel vehicle companies that were glorious in the past are all customers of Harbin Institute of Technology Intelligent Technology. However, with the rise of new energy vehicles, Harbin Institute of Technology Intelligent Technology did not adjust its strategy in time, resulting in a downward trend in performance.

The consequence of continued losses is Harbin Institute of Technology Intelligent Technology's tight cash flow. Since 2019, Harbin Institute of Technology Intelligent Technology's net operating cash flow has turned negative, and it has not improved until now. For this reason, the company has been supplementing its working capital through borrowing all year round. In 2020 and 2021, the company's long-term and short-term loans exceeded 700 million yuan.

In 2022, Harbin Institute of Technology Intelligent's long-term and short-term loans decreased significantly. The main reason was not the improvement in cash flow, but the company divested some subsidiaries with greater financial pressure and changed them to equity participation or full sale, including Shengshi Weisheng, Gongzhe Robotics, Harbin Institute of Technology Kaier, etc.

In December last year, in order to reduce operating risks, raise funds to promote the company's business transformation, reduce the company's dependence on a single industry, and enhance the company's sustainable operating capabilities, Harbin Institute of Technology Intelligent and Suzhou Fuzhen Intelligent Technology Co., Ltd. clarified relevant matters regarding the sale of 100% of the shares held in Tianjin Fuzhen Industrial Equipment Co., Ltd. and signed a "Letter of Intent for Investment".

However, in early May this year, Harbin Institute of Technology Intelligent Technology received the "Notice of Termination of Acquisition Transaction" delivered by Suzhou Fuzhen. Suzhou Fuzhen decided to terminate the acquisition of 100% equity of Tianjin Fuzhen. According to the relevant provisions of the "Letter of Intent to Invest", this transaction was terminated. Harbin Institute of Technology Intelligent Technology's cash flow pressure has not been alleviated. In 2017, Harbin Institute of Technology Intelligent Technology spent 900 million yuan to acquire 100% of the equity of Tianjin Fuzhen, and the transaction premium reached 213.22%.

A 90-degree transformation to improve business conditions

In recent years, HGIT has frequently acquired other companies' equity to enrich its business lines. In 2018, it acquired 15.6977% of Gongda Special Robots for 108 million yuan, 100% of River Electromechanical for 566 million yuan, and 46% of Baokong Intelligent for 46.94 million yuan, aiming to build high-end intelligent manufacturing. In 2021, HGIT plans to acquire 70% of Jiangji Minke for 840 million yuan, and begin its transformation into the military industry.

At the same time, it is accelerating the application layout in the field of new energy vehicles. It is understood that Harbin Institute of Technology Intelligent's industrial robot application business has signed new energy vehicle production line orders with domestic and foreign new energy vehicle manufacturers such as NIO, BYD, Nanning Ningda, Geely PMA, Yutong Automobile, and Hozon New Energy Automobile.

The transformation to new energy and military industry seems to be quite effective. Harbin Institute of Technology Intelligent's first quarter report of 2023 shows that its revenue during the reporting period was 331 million yuan, a year-on-year increase of 68.01%; its net profit attributable to shareholders was approximately 1.05 million yuan, a year-on-year increase of 103.37%. Although a profit of one million yuan is very difficult, it is at least a good sign.

Perhaps having tasted the sweetness of transformation into a popular industry, in February this year, HIG Intelligent Technology Co., Ltd. issued an announcement stating that it plans to acquire 70% of the equity of Dingxing Mining (Dingxing Mining directly holds 51% of the equity of Xingli Technology) and 49% of the equity of Xingli Technology by issuing shares and paying cash. After the transaction is completed, HIG Intelligent Technology Co., Ltd. will directly hold 70% of the equity of Dingxing Mining and directly and indirectly control 100% of the equity of Xingli Technology.

According to the information, Dingxing Mining is mainly engaged in the mining of lithium-containing kaolin ores. It owns the mining rights of the Dongcao Dingxing kaolin mine in Yifeng County. The current resource volume within the mining area exceeds 55 million tons, and the production scale permitted by the mining right certificate is 1.2 million tons/year. Xingli Technology is a wholly-owned subsidiary of Dingxing Mining. It is mainly engaged in the sorting of lithium-containing kaolin ores. Its main products include lithium mica, as well as potassium and sodium feldspar powder, pressed mud, tantalum niobium and tin mixtures, etc., with a production scale of 1.2 million tons/year.