Kehua Holdings Responds to the Inquiry Letter on Private Placement: Detailed Explanation of the Actual Controller Change and the Reasonableness of the 321 Million Yuan Fundraising

Ke Hua Holding (Safeguarding Rights) Co., Ltd. (Stock Code: 603161) recently responded to the Shanghai Stock Exchange’s letter of inquiry regarding its application documents for the issuance of shares to specific targets. The company provided a detailed explanation of key issues including the background of the change in its actual controller, the reasonableness of the issue price, and calculations of the fund-raising size, and also disclosed the verification opinions of the relevant intermediary agencies.

According to the announcement, Ke Hua Holding’s private placement of shares to specific targets plans to raise no more than RMB 326.10 million; after deducting issuance expenses, all proceeds will be used to supplement working capital. The subscribers are the company’s current controlling shareholder Lu Hongping and joint actual controller Tu Han. The issue price is RMB 10.87 per share, and the lock-up period is 36 months.

Compliance of the change in actual controller and the issuance targets

The announcement shows that Ke Hua Holding’s former actual controller Chen Hongmin and Chen Xiaoke, based on their own capital needs and considerations for the company’s long-term development, introduced Lu Hongping and Tu Han as the new actual controllers through two agreement-based transfers. The first transfer agreement was signed on August 22, 2025, with a transfer price of RMB 16.46 per share; Lu Hongping and Tu Han collectively acquired 16.18% of the shares. The second transfer agreement was signed on January 8, 2026, with a transfer price of RMB 18.93 per share; Lu Hongping acquired 5.02% of the shares. After the two transfers were completed, Lu Hongping and Tu Han collectively held 24.66% of the shares and became the company’s actual controllers.

The following table shows changes in shareholding and voting rights before and after the change of the company’s actual controller:

The reply letter points out that, as the company’s actual controllers, Lu Hongping and Tu Han comply with the relevant provisions of the Administrative Measures for the Registration of Securities Issuance by Listed Companies regarding issuance targets. Their subscription funds come from their own funds and there is no external fundraising, entrustment, or structured arrangement.

Reasonableness of the difference between the issue price and the agreement transfer price

The issue price for this private placement of RMB 10.87 per share differs from the two agreement transfer prices (RMB 16.46 per share and RMB 18.93 per share). The company explains that this mainly results from differences in business types and pricing rules. The private placement price is based on the pricing benchmark date, which is the date of the board resolution announcement, and it is not lower than 80% of the average price of the previous 20 trading days. Meanwhile, agreement-based transfer is a transaction between shareholders, involving a premium for control, and it must also comply with the Shanghai Stock Exchange’s requirements that the agreement transfer price is not lower than the lower limit of the price range for block trades.

Data shows that compared with the closing price on the day before the signing of the agreement, the two agreement transfer prices represent premiums of 8.86% and 35.80%, respectively. The volume-weighted average price of RMB 17.05 per share is at a premium of 56.85% over the private placement price. The company states that this level of premium is lower than the average premium proportion of 65.23% for similar A-share cases in the market, and is therefore reasonable.

Reasonableness of the fund-raising scale and calculation of the funding shortfall

After calculation, the company’s estimated funding shortfall over the next three years is approximately RMB 556.3240 million, with the specific breakdown as follows:

The company states that the proceeds of RMB 326.0 million raised in this offering will be used entirely to supplement working capital, which will help optimize its capital structure, alleviate short-term debt repayment pressure, and support the company in expanding new businesses such as differential gear case housings, hydraulic products for construction machinery, and battery system components for hydrogen energy, based on its main business in turbocharger components.

Consistency between stock price movement and industry trends

From August 23, 2025 (the pricing benchmark date) to March 6, 2026, the company’s stock price rose from RMB 15.12 per share to RMB 15.89 per share, an increase of 5.09%. This is basically consistent with the Shanghai Composite Index during the same period (7.80%), the Automobile Parts III Index (8.95%), and the average increase of comparable companies (8.57%). Although the company’s revenue and net profit year-on-year declined during January–September 2025, the trend in its stock price movement does not show any significant difference from the overall industry trend.

The sponsor institution and the issuer’s legal counsel believe that the eligibility of the issuance targets, the sources of funds, and the lock-up period all comply with relevant regulations. The difference between the issue price and the agreement transfer price is reasonable, and the fund-raising scale matches the company’s funding needs.

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Editor: Xiaolang Express