Tsinghua Unigroup’s debt crisis: why 10 billion bet on tomorrow

After a series of bad financial news, Ziguang Group ushered in good news: Yangtze River Storage, which controls 51% of its shares, entered the Huawei Mate 40 supply chain with 64-layer 3D NAND flash memory. Local forces are united and hand in hand to realize domestic substitution. No matter what the follow-up is, at least the beginning of the story has already stood on the commanding heights of public opinion.

YMTC first produced 64-layer 3D NAND chips at the end of 2019, and launched 128-layer 3D NAND in April this year, and plans to achieve a monthly production capacity of 80,000 pieces by the end of 2021. Together with Ziguang Zhanrui, Ziguang Guowei and Ziguang Co., Ltd., they are both important business drivers of Ziguang Group. The future development of Yangtze River Storage is worth looking forward to. However, can it carry the heavy debt of Ziguang Group? Obviously, the near fire cannot be resolved by the far distance, and the creditors of Ziguang Group will not wait until the end of 2021.

On November 16, according to an announcement by the Bank of Shanghai, the voting on the “17 Ziguang PPN005” extension plan was invalid, and the failure to redeem the principal and interest in full on schedule means that the bond has substantially defaulted. At the same time, Ziguang Group’s rating was also downgraded to BBB. Coincidentally, at the end of 2019, Peking University Founder Group also defaulted on a super short-term financing bill of 2 billion yuan, which triggered a debt crisis and subsequently declared bankruptcy. No wonder some netizens ridicule: Peking University and Tsinghua University, courageous.

　Image source | Nikkei Asian Review

Closer to home, according to an announcement made by Tsinghua Holdings, the parent company of Ziguang Group, at the Shanghai Clearing House, it was confirmed that the news was true and revealed that the current accumulated debt of Ziguang Group is 1.3 billion yuan, that is, there are no other debts due except for the above-mentioned bonds. According to China Chengxin International, as of the end of September this year, Ziguang Group’s total debt was 52.781 billion yuan, of which short-term debt was 32.816 billion yuan, and monetary funds were 4.002 billion yuan.

In order to alleviate the urgent need, Ziguang Chunhua, the controlling shareholder of Ziguang Guowei, a subsidiary of Ziguang Group, pledged 97,917,500 shares of the company (accounting for 49.81% of the shares held by Ziguang Guowei and 16.14% of the company’s total share capital) to become Ziguang Group. The 10 billion yuan credit granted at the beginning of this year provides guarantees. Simply put, if the repayment cannot be made on time, the collateral may be disposed of by the transferee.

As of now, Ziguang Group has 12 existing bonds, with a scale of approximately 17.746 billion yuan. Among them, 17 Ziguang Group PPN005 has defaulted, and the earliest remaining bond is “16 Ziguang 01”. The maturity date is January 14, 2021, with an amount of 295 million yuan; bonds that will mature or face resale in the first half of next year The scale is 5.096 billion yuan.

　　How long can the 10 billion yuan borrowed from the bank through a pledge of shares last? This account is easy to understand.

The financial report shows that in the first half of 2020, Ziguang Group achieved revenue of 35.746 billion yuan and a net loss of 4.544 billion yuan, the first loss in recent years. The total debt was 202.938 billion yuan, and the debt-to-asset ratio narrowed to 68.41%, of which the total interest-bearing debt was 156.691 billion yuan, accounting for 77.21% of the company’s total liabilities, and the total interest-bearing debt due within one year was 81.43 billion yuan.

Image source | scmp.com

Tsinghua Unigroup

Focusing on information technologies such as cloud computing, mobile Internet, and big data processing, revenue in the first three quarters of this year was 41.361 billion, a year-on-year increase of 8.98%; net profit attributable to the parent was 1.296 billion, a year-on-year increase of 4.32%, and non-net profit in the first three quarters was 1.107 billion, a year-on-year increase An increase of 21.6%.

In addition, according to the forecast of GF Securities, from 2020 to 2022, Ziguang’s revenue will be 612.2, 689.5, 78.52 billion yuan, and the net profit attributable to the parent will be 21.5, 27.1, and 3.34 billion yuan, with growth rates of 17% and 26, respectively. %,twenty four%.

Ziguang Guowei

Engaged in the development and production of smart cards and smart terminal security chips, special microprocessors and other components. The revenue in the first three quarters of this year was 2.32 billion yuan, down 6.78% from the same period last year; net profit was 685 million yuan, an increase of nearly 88% year-on-year. In addition, it plans to issue convertible bonds to raise funds of 1.5 billion yuan and invest in research and development projects for new high-end security chips and automotive controller chips.

According to estimates by Oriental Fortune Securities, during 2020-2022, Ziguang Guowei’s 2 operating income will be 33.76/45.48/5803 million yuan, and the net profit attributable to the parent will be 8.81/12.57/1636 billion yuan.

Purple optics

In the first three quarters, income/net profit attributable to the parent/non-net profit deduction was RMB 19.35/0.30/-31 million, a year-on-year decrease of 20.46%/52.46%/156.17%; the growth rate of the net profit attributable to the parent was higher than the deduction of non-net profit mainly due to the government subsidy of 69.99 million.

According to Huaxi Securities’ forecasts, between 2020 and 2022, the net profit attributable to the parent will be adjusted back from 0.74/0.99/179 million yuan to 0.12/0.92/164 million yuan.

Ziguang Zhanrui

As the company is sprinting for an IPO, the specific performance cannot be disclosed, but the company’s CEO Chu Qing revealed during the market summit that this year’s Industrial electronics Division has achieved good performance. Revenue is expected to increase by 150% from last year and is expected to reach US$250 million. .

Ziguang Zhanrui executive vice president and head of the consumer electronics division Zhou Chen revealed that the consumer electronics sector has fully recovered from July this year to the level of the same period last year, and has achieved substantial growth since September over the same period last year.

Yangtze River Storage

According to TrendForce data, the top five global NAND flash memories in 2019: Samsung (35%), Kioxia (19.2%), Western Digital (14.9%), Micron Technology (12.9%) and SK Hynix (10.6%). Yangtze River Storage is currently in the stage of technological ramp-up and large investment in research and development, and it will be difficult to extract teeth from the tiger’s mouth in the short term, bringing strong profit contributions to Ziguang Group.

In addition, what needs to be considered is the possible risks caused by the Sino-US trade conflict. According to Bloomberg News, more than 80% of the Yangtze River storage equipment currently comes from the United States and Japan. Although some Chinese suppliers have made breakthroughs in areas such as etching, cleaning and coating, there are not enough local products in China to replace all products. And the possibility that the Yangtze River Storage, which carries the hope of China’s NAND industry, will be “tracked” by the United States is not small.

As above, summing up the net profit of Ziguang Group’s main business in the next few years is still like a drop in the bucket compared to the short-term debt of 32.816 billion yuan.

Since its establishment in 1988, 32 years of wind and rain, focusing on computer and Electronic semiconductor related industries, Ziguang Group has finally become “the most important instrument of the country.”

Exploring the reasons for Tsinghua Unigroup’s debt is a radical M&A road behind it:

In 2013, it spent US$1.78 billion to acquire Spreadtrum Communications to enter the integrated Circuit chip industry; in 2014, it acquired RDA Microelectronics for US$910 million to expand the Internet of Things chip market; in 2015, it acquired “Xin H3C” for US$2.5 billion.51 % Equity; in 2016, injected capital into Yangtze River Storage, holding 51.04% of its equity, as the controlling shareholder; in 2019, injecting US$55 million into the Suzhou subsidiary of Lite-On Technology to develop storage products including solid state drives.

Hard work, self-confidence and a little bit paranoid, and fruitful, so far, we look forward to seeing what other possibilities Ziguang Group can bring in the future. At the same time, at the crossroads of capital, I believe that Ziguang Group can also take a solid and reasonable next step.