To ease the financial pressure, Xinlun Technology plans to transfer 51% equity of Shanghai Hanguang for RMB 75.83 million

On December 11, Xinlun Technology issued an announcement stating that the company plans to transfer its 51% equity interest in Shanghai Hanguang Industrial Co., Ltd. (hereinafter referred to as "Shanghai Hanguang") to Shanghai Gangrui Information Technology Co., Ltd. (hereinafter referred to as "Shanghai Gangrui") for RMB 75.8313 million. After the transfer is completed, the company will still hold 49% of the equity interest in Shanghai Hanguang.

Public information shows that the main business of the target company of this transaction includes: metal product processing, laboratory equipment, furniture, ventilation equipment processing, installation, wholesale, retail, electromechanical installation construction engineering construction, environmental protection construction engineering professional construction, building intelligent construction engineering design and construction, building decoration and renovation construction engineering design and construction, etc. (Except for projects that must be approved according to law, business activities are carried out independently in accordance with the law with a business license).

In recent years, competition in the industries involved in Shanghai Hanguang has intensified, and profitability has declined year by year. As of September 30, 2020, the net profit was -8.9 million yuan.

After the completion of this transaction, Xinlun Technology will lose a wholly-owned subsidiary, Shanghai Hanguang, within its merger scope. According to preliminary estimates by its financial department, total assets will decrease by approximately RMB 158 million, accounting for 1.65% of the total assets of the consolidated financial statements at the end of 2019, and total liabilities will decrease by approximately RMB 59 million, accounting for 1.27% of the total liabilities of the consolidated financial statements at the end of 2019. Due to the existence of goodwill when Shanghai Hanguang was acquired in 2013, this transaction will bring a loss of approximately RMB 97 million to Xinlun Technology in this period.

Xinlun Technology said that in order to highlight its main business and improve its industrial structure, the company decided to concentrate resources and funds to vigorously expand its new materials business and gradually divest non-material businesses starting from 2019. This transaction is in line with the company's long-term strategic planning and current actual operating needs. At the same time, the funds that can be recovered through the sale of equity will help alleviate the company's short-term capital pressure.