Jingfeng Mingyuan can borrow mergers and acquisitions “turnaround”?

Since July 2021 to the present, the market value of LED lighting chip company Jingfeng Mingyuan has plummeted by more than 70%; at the same time, the company's performance has remained sluggish. Now, Jingfeng Mingyuan, which has a lot of "acquisition experience," plans to acquire Sichuan Yichong, a wireless charging chip company. This time, can the company reverse the downturn through this move?

Jingfeng Mingyuan has new developments.

On October 21, the STAR Market-listed company Jingfeng Mingyuan announced that it is planning to purchase the control rights of Sichuan Yichong, a wireless charging chip company.

It is understood that Sichuan Yichong once intended to enter the capital market, but there has been no progress since then. Currently, the company has gone through more than ten rounds of financing, and it is estimated that its valuation may exceed 2.6 billion yuan.

For Jingfeng Mingyuan, this plan is of great significance. Since mid-2021, the company's market value has shrunk by 70%, and due to the pressure on its main product, LED lighting chips, its performance has been declining year by year.

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Previously, Jingfeng Mingyuan hoped to create a "second curve" through products such as AC/DC chips, but the current situation still faces a lot of competition. Under these circumstances, Sichuan Yichong has become the company's new "bet" option.

Jingfeng Mingyuan plans to acquire Sichuan Yichong.

Jingfeng Mingyuan makes another acquisition.

On October 21, Jingfeng Mingyuan announced that it is planning to purchase the control rights of Sichuan Yichong through the issuance of shares, the issuance of targeted convertible bonds, and the payment of cash, and plans to raise supporting funds.

The announcement shows that the specific transaction plan is still under discussion. After preliminary calculations, it is expected that this transaction will constitute a significant asset restructuring and a related transaction. Before this transaction, there is no related relationship between Jingfeng Mingyuan and the transaction counterparties.It is reported that the transaction counterparts of Jingfeng Mingyuan include Wei Junsi Investment, Jin Julih, Zhihe Juxin, Zhihe Jucheng, and Zhihe Jude, the five major shareholders of Sichuan Yichong, who respectively hold 16.13%, 6.7%, 10.57%, 1.56%, and 2.68% of the shares. Currently, the five shareholders and the actual controller of Sichuan Yichong are all Pan Siming.

According to the Securities Times, in March 2023, Sichuan Yichong was exposed to be planning to go public on the STAR Market. However, upon reviewing the information after this point, there is very little news about its listing process.

Looking back at history, Pan Siming, who had work experience at Cisco and Apple in his early years, established Sichuan Yichong in 2016. Looking at the company's founding team, most of them are from Tsinghua University, and the core team comes from major European and American companies.

The official website of Sichuan Yichong shows that it is a high-performance analog and mixed-signal IC design company, holding 100% of Yichong Semiconductor, 33.3% of How Wei Analog Integrated Circuit, and 19.86% of Hui Yixin Technology.

In terms of products, Sichuan Yichong is involved in wireless charging chips, protocol chips, AC/DC chips, Chargers and BMS, and analog power supplies. It also produces several automotive products, including in-vehicle front wireless chargers.

Among them, the wireless charging chip is Sichuan Yichong's "signature" and has been adopted by international giants such as Toyota, Google, Microsoft, and Sony. In the process of continuously establishing "prestige" in wireless charging chip products, the company has also continued to gain the favor of investors.

According to the statistics of Qichacha, Sichuan Yichong has conducted a total of 13 rounds of equity financing. On March 4, 2016, the company first obtained investment from Zhongxing Hechuang in the angel round of financing.

After that, Sichuan Yichong successively obtained investments from nearly thirty investors such as CICC, Guoke, Haier, SAIC, Chuan Venture Capital, Shenzhen Venture Capital, CCB Trust, and Geely.

In June and December 2023, Sichuan Yichong respectively raised hundreds of millions of yuan and about ten million yuan in strategic financing. Earlier, in June 2021, Taiwan's wafer foundry World Advanced invested $15 million in the company for strategic investment and obtained 3.7154% of the shares.

At present, Sichuan Yichong has not disclosed its valuation. However, based on the investment situation of World Advanced, the company may have had a valuation of about 2.6 billion yuan in 2021.Market Value Shrinks by Over 70%

The situation of Jingfeng Mingyuan itself is equally intriguing.

Focusing on the stock price level, Jingfeng Mingyuan reached a historical high of 580 yuan per share in July 2021. At that time, the company's total share capital was 62.03 million yuan, corresponding to a total market value of about 36 billion yuan.

Shortly after the market value reached its peak, Jingfeng Mingyuan's stock price plummeted. In February 2024, the company's total market value was once reduced to only about 3.3 billion yuan.

As of the announcement date, Jingfeng Mingyuan's market value has rebounded to 9.2 billion yuan, which is still a shrinkage of over 70% compared to its historical peak.

The sluggish performance of the LED lighting chip business, leading to a "cliff-like" decline in growth rate, is one of the factors causing Jingfeng Mingyuan's stock price to remain sluggish.

Data shows that from 2019 to 2023 and the first half of 2024, LED lighting chips accounted for 93.09%, 93.82%, 92.13%, 83.93%, 70.64%, and 60.27% of Jingfeng Mingyuan's main business income, respectively.

Looking back at history, when Jingfeng Mingyuan went public in 2019, it raised 873 million yuan and mainly invested in the development and industrialization of general LED lighting drive chips and the development and industrialization of intelligent LED lighting chips. It is evident that the company intended to leverage the capital market to expand its LED lighting chip business significantly.

However, after experiencing prosperity from 2020 to 2021, due to reasons such as downstream customers' excessive stockpiling and the weak consumption of the LED lighting market in Europe and America, the industry's prosperity of LED lighting chips continued to be under pressure, and the company's main business was also impacted.Looking back at the years 2022 and 2023, LED lighting chips contributed 140.6 million yuan and 206.9 million yuan in main business profits to Jingfeng Mingyuan, respectively, which is less than one-fifth of the profits in 2021.

During the same period, Jingfeng Mingyuan achieved revenues of 1.079 billion yuan and 1.303 billion yuan, significantly lower than the 2.302 billion yuan in 2021; moreover, the company suffered consecutive years of losses, recording -205.9 million yuan and -91.26 million yuan respectively.

Amidst the unfavorable business trend of LED lighting chips, Jingfeng Mingyuan also began to create a "second curve" through motor control driving chips, AC/DC chips, and DC/DC chips, attempting to stimulate new growth points.

From the results, under the background of rapid mass production, the three collectively contributed 129 million yuan in operating profit to the company in the first half of 2024, accounting for 49.46% of the revenue.

However, the field where the "second curve" is located is highly competitive, and the current prosperity is not high.

Focusing on the AC/DC chip and DC/DC chip industry, the majority of the market share is dominated by foreign manufacturers such as Sanyuan, ON Semiconductor, Infineon, Texas Instruments (TI), and Monolithic Power Systems (MPS), with domestic manufacturers lagging behind.

As domestic peers in AC/DC and DC/DC chips, Jihuaite, BiYi Micro, and Xingpeng Micro achieved net profits attributable to the parent company of -337 million yuan, -10.61 million yuan, and 43.92 million yuan in the first half of 2024, with year-on-year growth rates of -76.62%, 903.45%, and 8.64%, respectively.

Perhaps based on this, Jingfeng Mingyuan plans to "bet" on the wireless charging chip represented by Sichuan Yichong.

Jingfeng Mingyuan's M&A history

Jingfeng Mingyuan is well-known in the industry for its enthusiasm for mergers and acquisitions.The mid-year report indicates that Jingfeng Mingyuan has a total of eight major holding and participating companies. Among them, Shanghai Laishi, Shanghai Xinfei, which it wholly owns, and Lingou Chuangxin, in which it holds 61.61%, were all acquired successively after its listing on the A-share market.

Jingfeng Mingyuan revealed in its 2020 annual report that on January 20 and July 2 of that year, it spent 41.6 million yuan and 66.3 million yuan, respectively, to acquire 100% equity of Shanghai Laishi and 51% equity of Shanghai Xinfei through cash purchase methods.

To further strengthen control over Shanghai Xinfei, on November 11, 2021, Jingfeng Mingyuan agreed with the minority shareholders of the company to acquire 49% equity in cash for a transaction price of 204 million yuan.

After the transaction was completed, Shanghai Xinfei also became a wholly-owned subsidiary of Jingfeng Mingyuan.

Further analysis of the transaction revealed that when Jingfeng Mingyuan acquired Shanghai Xinfei, it paid a premium of about 640% compared to the book net assets. In the end, Shanghai Laishi and Shanghai Xinfei generated goodwill of 26.91 million yuan and 51.59 million yuan, respectively.

At present, the performance of Shanghai Laishi and Shanghai Xinfei among Jingfeng Mingyuan's subsidiaries is far from ideal. As of the first half of 2024, the former suffered a loss of 301,200 yuan, while the latter made a small profit of 2.055 million yuan.

It is worth noting that compared to Shanghai Laishi and Shanghai Xinfei, Lingou Chuangxin has made a much bigger "fuss."

On October 12, 2021, Jingfeng Mingyuan announced its intention to purchase 95.75% equity of Lingou Chuangxin for a total transaction consideration of 613 million yuan through the issuance of shares, payment with its own funds, and fundraising.

At that time, Jingfeng Mingyuan stated that the valuation of Lingou Chuangxin was as high as 640 million yuan, which means its appreciation rate was as high as 1143.45%. At the same time, Lingou Chuangxin had a large amount of uncompensated losses.

As soon as the news was released, Jingfeng Mingyuan quickly received an inquiry letter from the Shanghai Stock Exchange. Under the dual influence of regulatory "close monitoring" and the decline in the company's stock price at that time, this merger and acquisition was once suspended.However, Jingfeng Mingyuan still has a lingering attachment to Lingou Chuangxin.

On March 15, 2023, Jingfeng Mingyuan announced its intention to acquire 38.87% of Lingou Chuangxin's shares for 250 million yuan from Guangfa Xind and Zhoushan Hezhongxin. Moreover, if Lingou Chuangxin's total net profit for the years 2023 to 2025 falls below 184 million yuan, the company's actual controller, Hu Liqiang, voluntarily made a performance compensation commitment.

After the rare case of a buyer making performance commitments for the purchase of assets, the Shanghai Stock Exchange once again sent an inquiry letter to Jingfeng Mingyuan.

In the end, after Jingfeng Mingyuan received regulatory warnings and completed a series of responses to inquiry letters, the company still obtained some of Lingou Chuangxin's shares. However, the controversies left behind cannot be erased.

Overall, the assets acquired by Jingfeng Mingyuan have not shown long-term growth, and the controversies they have sparked are also numerous. This time, whether Jingfeng Mingyuan can successfully acquire Sichuan Yichong to turn around its performance still needs time to verify.