Newsletter summary
Evergrande faced a setback and was forced to return 1.9 billion of the local government incentive subsidy, while its subsidiaries are facing major financial challenges and its shares continue to be suspended. According to the company's financial report, the net loss in 2023 was 12 billion yuan, with an asset-liability ratio of 208%.
Text of news flash
[Evergrande faces major adjustment] Hengchi, the carmaker, recently announced that because of the local governmentUnbingoFacing the severe challenge of rescinding the investment agreement and returning about 1.9 billion yuan in subsidies.
The cause of the incident was that Evergrande New Energy Automobile Investment holding Group Co., Ltd., a subsidiary of Evergrande Motor, received a letter from the local administration requesting the termination of the cooperation agreement and the refund of subsidies. Evergrande said that if this requirement is eventually implemented, it will have a serious impact on the financial position and operation of the company and its subsidiaries, and stressed that it will actively seek solutions.
Trading in Evergrande's shares is suspended until further notice. The news came on the evening of May 22, shortly after Evergrande announced its suspension on May 17 and waited for inside information to be released. Evergrande announced that since April 29, 2019, its subsidiaries have signed an investment cooperation agreement with the local government, but the local government intends to rescind the agreement and request the return of the subsidy because it fails to meet its contractual obligations.
According to brokerage China's analysis of Evergrande's annual results, the increase in government subsidies rose significantly after Evergrande announced car-building in 2019, but fell sharply after the debt risk erupted. Data show that from 2018 to 2022, government subsidies will be increased by 0 yuan and 13% respectively.Unbingo.63 billion yuan, 1.194 billion yuan, 409 million yuan, 0 yuan.
In addition, Evergrande said that the relevant subsidiaries planned to send coordination letters to local administrations and acknowledged that if required, it would have a significant negative impact on the financial position and operations of the company or its subsidiaries. The company will further fulfill its disclosure obligations in accordance with the listing rules and require relevant subsidiaries to actively communicate and properly handle them in accordance with the guidelines.
The current situation of Evergrande reflects the multiple challenges it faces. Evergrande shares performed strongly in the Hong Kong stock market on May 17, with Evergrande property up more than 23% and Evergrande Motors soaring more than 70% at one point. However, the difficulties within the company can not be ignored.
Evergrande's Tianjin manufacturing base began mass production of Hengchi 5 models in September 2022, but by the end of 2023, only 1700 models had been produced off the line, far from achieving the expected target. At the same time, due to financial problems, the company has arranged for some employees to have a holiday and the Tianjin factory has suspended production.
Evergrande tried to introduce external capital to activate the auto business, but Newton's $500 million investment in Evergrande in August 2023 was not carried out smoothly due to many uncertainties in Evergrande Group. Subsequently, Evergrande President Liu Yongzhao was criminally detained on suspicion of breaking the law and committing a crime, which further affected the operation of the company.
According to the 2023 financial report, Evergrande's revenue rose to 1.34 billion yuan last year, an increase of 900.04% over the same period last year, with a net loss of 11.995 billion yuan, a loss of 56.64% compared with the same period last year. By the end of the year, the total assets were 34.851 billion yuan and the total liabilities were as high as 72.543 billion yuan.
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