Yankuang Energy (600188.SH) recently announced that its wholly-owned subsidiary plans to acquire a 100% stake in Shandong Energy Equipment Group High-End Support Manufacturing Co., Ltd. (hereinafter referred to as "High-End Support Co.") for approximately 345 million yuan in cash.
As both High-End Support Co.'s sole shareholder, Shandong Energy Heavy Equipment Manufacturing (Group) Co., Ltd. (hereinafter referred to as "Shaneng Equipment"), and Yankuang Energy are subsidiaries of Shandong Energy Group Co., Ltd. (hereinafter referred to as "Shaneng Group"), this transaction constitutes a connected transaction.
**Target Company's Liabilities Surge by 774 Million Yuan** According to the announcement, Yankuang Energy intends to acquire the 100% stake in High-End Support Co. from Shaneng Equipment through its wholly-owned subsidiary, Yankuang Donghua Heavy Industry Co., Ltd. (hereinafter referred to as "Donghua Heavy Industry"). The transaction consideration of 345 million yuan will be paid in full on the equity transfer date.
Yankuang Energy explained that the acquisition aims to resolve business competition between High-End Support Co. and Donghua Heavy Industry, promote integration in equipment manufacturing, and support intelligent coal mine construction. The move is expected to enhance mining safety, efficiency, and high-quality development while reducing connected transactions and improving overall efficiency.
High-End Support Co. was established in December 2022, engaging in mining machinery, general equipment manufacturing and maintenance, and specialized equipment design and sales. Shaneng Equipment holds a 100% stake in High-End Support Co., while Shaneng Group owns 64.189% of Shaneng Equipment, making this an intra-group acquisition.
Financial data shows that as of the end of 2024, High-End Support Co. reported total assets of 998 million yuan, total liabilities of 696 million yuan, and a debt-to-asset ratio of 69.74%. Its annual revenue stood at 551 million yuan, with a net profit of 13.36 million yuan.
By the end of Q3 2025, High-End Support Co.'s total assets surged to 1.781 billion yuan, up 78.46% from the end of 2024, while total liabilities skyrocketed to 1.469 billion yuan, a 111.06% increase, pushing the debt-to-asset ratio to 82.48%.
Notably, Yankuang Energy did not disclose the assessed value of "factories, equipment, and land" in the announcement, only revealing the appreciation amounts. The company reported a 22.8536 million yuan appreciation in buildings (3.92%), a 14.2047 million yuan appreciation in equipment (8.02%), and a 3.3392 million yuan appreciation in land use rights (2.28%).
**Reasons Behind the Liability Surge** In just three quarters, High-End Support Co.'s liabilities increased by 773 million yuan. When contacted, Yankuang Energy's securities department attributed the surge to loans taken for acquiring factories, equipment, and land. However, the company declined to disclose the source or assessed value of these assets.
With the acquisition, these 700 million yuan in liabilities will now be transferred to Yankuang Energy.
**Declining Profitability** In the first three quarters of 2025, High-End Support Co. generated 544 million yuan in revenue but recorded a net profit of only 271,200 yuan, a sharp decline from 2024. Yankuang Energy attributed the profit drop to falling hydraulic support prices and rising financial costs.
The valuation report showed that High-End Support Co.'s equity had a book value of 302 million yuan, with an assessed value of 345 million yuan under the asset-based approach, reflecting a 14.15% appreciation.
Beijing Huaya Zhengxin Asset Appraisal Co., Ltd. noted that due to High-End Support Co.'s short operating history and reliance on procurement from Shaneng Group affiliates, its profitability is heavily influenced by related-party performance.
**Insolvent Counterparty** Shaneng Equipment, the seller in this transaction, is currently insolvent, with a net loss exceeding 1.2 billion yuan over seven quarters. As of September 30, 2025, Shaneng Equipment reported total assets of 10.955 billion yuan but liabilities of 12.145 billion yuan, resulting in negative equity of 1.19 billion yuan.
In Q1-Q3 2025, the company posted revenue of 1.661 billion yuan and a net loss of 604 million yuan, following a 6.34 billion yuan net loss in 2024.
Of its 12.145 billion yuan in liabilities, 2.676 billion yuan were short-term loans, 468 million yuan were non-current liabilities due within a year, 1.5 billion yuan were long-term loans, 1 billion yuan were bonds payable, and 2.54 billion yuan were long-term payables—totaling 8.184 billion yuan in interest-bearing debt.
Shaneng Equipment paid 242 million yuan in interest expenses in Q1-Q3 2025 and 305 million yuan in 2024.
**Frequent Connected Transactions** Yankuang Energy reported revenue of 104.957 billion yuan in Q1-Q3 2025, down 11.64% year-on-year, with net profit attributable to shareholders falling 39.15% to 7.12 billion yuan. Operating cash flow also declined by 12.17% to 19.6 billion yuan, primarily due to lower coal prices.
Despite weak performance, Yankuang Energy engaged in five connected transactions with Shaneng Group and its subsidiaries over the past 12 months, totaling 15.515 billion yuan. Two undisclosed transactions amounted to 357 million yuan.
The largest transaction occurred in April 2025, when Yankuang Energy announced plans to acquire a 51% stake in Shandong Energy Group Northwest Mining Co., Ltd. for 14.066 billion yuan in cash, including a 4.748 billion yuan equity transfer and a 9.318 billion yuan capital injection. The deal was completed in July 2025, with Northwest Mining consolidated into Yankuang Energy's financial statements.
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