Book Value Only 68 Million Yuan Yet Spending Over 1.1 Billion Yuan on M&A! Can Han Jian River Mountain's High-Leverage Cross-Border Gamble Pay Off?

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Everyday Economic News reporter | Peng Fei Everyday Editor | Bi Luming

On the evening of March 16, Han Jian Heshan (SH603616, stock price 6.79 yuan, market value 2.657 billion yuan) disclosed the inquiry letter reply announcement regarding the pre-disclosure of the share issuance and cash payment purchase plan. Previously, due to the need for additional and improved responses to some questions, the company repeatedly applied for extensions to reply to the Shanghai Stock Exchange.

In this transaction, Han Jian Heshan plans to issue shares and pay cash to 25 counterparties including Chen Xuhui, acquiring 99.9978% of the equity of Liaoning Xingfu New Materials Co., Ltd. (hereinafter “Xingfu New Material,” “Target Company”), focusing on PEEK new materials.

According to the Daily Economic News, as of the end of Q3 2025, Han Jian Heshan’s cash on hand was only 67.94 million yuan, while the total valuation of this acquisition is about 1.12 billion yuan, with a cash consideration of approximately 147 million yuan.

Notably, Xingfu New Material’s revenue has declined for three consecutive years, with net profit showing volatile “roller coaster” fluctuations. Han Jian Heshan’s stock price also hit the daily limit before the suspension of restructuring.

Can Han Jian Heshan successfully swallow this “hard bone” given the huge funding gap, controversial profitability of the target, and insider trading suspicions?

According to the disclosed plan, Xingfu New Material’s financial data shows obvious instability.

From 2022 to 2025, Xingfu New Material’s operating revenues were 777 million yuan, 609 million yuan, 401 million yuan, and 386 million yuan, respectively, showing a clear downward trend year by year. In terms of net profit, the performance was even more like a “roller coaster,” with net profits attributable to parent company of 101 million yuan, 136 million yuan, a loss of 7.367 million yuan, and 100.6 million yuan in 2024, with a loss in that year.

The overall performance volatility and decline have directly raised deep concerns from the Shanghai Stock Exchange about its sustainable profitability. In response, Han Jian Heshan provided detailed business logic explanations.

On the revenue side, in 2022, the demand for PEEK was strong. Additionally, due to longer international trade and transportation delays and higher transportation uncertainties, the target company’s overseas clients made large-scale purchases, resulting in high inventory reserves. After 2023, due to declining end-market demand and inventory digestion, the main customers’ procurement volumes decreased, leading to a drop in sales of the target company’s PEEK intermediates. Meanwhile, as downstream customers reduced their procurement, the target company adopted active price competition strategies to maintain its industry position, lowering market prices.

On the profit side, the performance decline was not only due to gross profit margin compression but also significantly affected by external investments. The inquiry reply shows that in 2020, Xingfu New Material invested 32.5 million yuan in Panjin Weiying High-Performance Materials Co., Ltd. (later renamed VIGOS (Panjin) High-Performance Materials Co., Ltd., hereinafter “Panjin VIGOS”), and lent 65 million yuan to it by the end of 2025. Since Panjin VIGOS has not yet fully started production, Xingfu New Material’s investment income (loss) and credit impairment losses are among the main reasons for its performance fluctuations.

Meanwhile, to verify the reasonableness of the performance fluctuations, Han Jian Heshan cited the case of industry peer Xinhai New Materials (301076.SZ). Data shows that in 2024, Xinhai New Materials’ PEEK intermediate revenue also declined by 31.32%, consistent with Xingfu New Material’s trend.

Additionally, the customer concentration issue of the target company is also noteworthy. From 2023 to 2025, the top five customers’ revenue accounted for 78.11%, 55.07%, and 68.12% of the main business income, respectively. Its major clients include Victrex Manufacturing Ltd., Bayer Vapi Private Limited, Evonik High-Performance Materials (Jilin Changchun), and Jilin Zhongyan Polymer Materials Co., Ltd., among well-known domestic and international chemical giants.

Han Jian Heshan explained that this is mainly due to the concentration of downstream niche industries, which is common in the specialty chemical industry. The company emphasizes that the target company has long-term, high-sticky cooperation with major clients, and there is no dependence on a single customer exceeding 50%, so the risk of customer loss is small.

Based on preliminary estimates, the overall valuation of Xingfu New Material in this transaction is about 1.12 billion yuan. The listed company plans to pay the consideration through a combination of share issuance and cash payment. For the equity consideration held by Chen Xuhui, Gao Xanghai, Guo Zhenwei, and Fuxing Tongchuang, the company intends to pay 75% via share issuance and 25% via cash; for other counterparties, the company will pay 100% via share issuance.

According to these assumptions, the cash consideration in this transaction is about 147 million yuan. However, as of September 30, 2025, Han Jian Heshan’s cash on hand was only 67.94 million yuan.

Faced with a funding gap of several hundred million yuan, how will the company proceed if fundraising falls short? Han Jian Heshan stated in its reply that, considering the minimum cash reserve needed for operations, the company will use part of its funds to purchase equity. It will also seek debt financing such as bank loans to cover some of the funds. The company has no bad credit records and maintains good relationships with multiple banks and financial institutions, ensuring the ability to pay the cash consideration.

Although Han Jian Heshan emphasizes that it currently has no bad credit records and that its debt ratio will decrease from the high level of 85.30% due to the restructuring, this “small horse pulling a big cart” style of financing undoubtedly tests the company’s financing capacity and financial resilience.

Regarding control stability, the parties involved in this transaction, Chen Xuhui, Gao Xanghai, and Guo Zhenwei, had previously signed a “Concerted Action Agreement” in 2019. Regulators have focused on whether the large issuance might threaten the original major shareholder’s position.

Through thorough due diligence and calculations, Han Jian Heshan pointed out that, excluding supporting financing, after the transaction, the controlling shareholder Han Jian Group will still hold 21.79% of the shares. Chen Xuhui and his spouse Gao Xanghai are expected to hold a combined 10.75%, and Guo Zhenwei and his controlled Fuxing Tongchuang are expected to hold a combined 5.66%. Even combined, these holdings total 16.41%, which is still 5.38% less than Han Jian Group’s stake, so Han Jian Group remains the controlling shareholder, and control of the listed company remains unchanged. Han Jian Heshan confirmed that this transaction will not lead to a change in actual control or constitute a restructuring listing.

More sensitive is the fact that, just before the suspension of this restructuring, Han Jian Heshan’s stock price surged significantly. Timeline shows that the due diligence and consultation with the merger parties began on November 17, 2025. By January 20, 2026, multiple offline and online communications took place to negotiate transaction details and decide on suspension. On that day, the stock price hit the daily limit, and the company announced suspension the next day.

This abnormal fluctuation immediately drew regulatory attention, requiring a comprehensive investigation into insider trading. After screening by China Securities Depository and Clearing Co., Ltd., four individuals (Zhao Shumian, Bai Fushan, Chen Yang, Chen Yingying) were found to have bought or sold the company’s stock during the self-inspection period (July 20, 2025, to January 20, 2026).

In response to the inquiries, these individuals provided self-inspection reports and statements, claiming their trading occurred before they learned of the major asset restructuring, based on their own judgment of market conditions, and was purely personal investment behavior unrelated to the restructuring. They denied any use of inside information to trade Han Jian Heshan’s stock.

Cover image source: Zhu Yu