Hengxin Dongfang has been placed under special treatment (ST) due to accounting fraud. The company received a prior notice of administrative penalty on April 3, 2026, revealing financial misrepresentation in its 2022 annual report, which included inflated revenue of 182 million yuan, accounting for 37.12% of the reported revenue for that period.
According to the notice, the fraud involved two listed companies: Creative Information Technology Co., Ltd. (Creative Information) and NUOBIKAN Artificial Intelligence Technology (Chengdu) Co., Ltd. (NUOBIKAN). In 2022, Hengxin Dongfang engaged in computing power system integration and technical services business with these firms, selling servers and related software to Creative Information and software to NUOBIKAN. However, the company did not maintain control over the goods in these transactions.
Despite being aware of the transaction structure, Hengxin Dongfang improperly used the gross method to recognize revenue, contravening accounting standards. This led to the misstatement in its 2022 annual report.
Notably, Creative Information has also been confirmed to have engaged in similar accounting malpractices. In November 2022, Creative Information conducted sales businesses where it lacked control over the goods but still applied the gross revenue recognition method. This resulted in overstatements of 267.85 million yuan in its 2022 annual report and 124.70 million yuan in its 2023 interim report.
The other counterparty, NUOBIKAN, was listed on the main board of the Hong Kong Stock Exchange on December 23, 2025. The company focuses on applying AI and digital twin technologies in sectors like transportation, energy, and urban governance. From 2021 to 2023, its revenue demonstrated rapid growth, with a compound annual growth rate of 89.8%.
However, NUOBIKAN faces challenges with high accounts receivable and volatile cash flow. Between 2022 and 2024, its revenues were approximately 253 million yuan, 364 million yuan, and 403 million yuan, respectively. During the same period, trade receivables stood at 176 million yuan, 303 million yuan, and 474 million yuan, exceeding 100% of revenue in 2023 and 2024. Net cash flow from operating activities was volatile, recorded at -80.585 million yuan, -99.992 million yuan, and 40.223 million yuan for the respective years.
Regulatory documents indicate that while Hengxin Dongfang acted as an agent in its sales to NUOBIKAN and Creative Information, there is no evidence suggesting these firms participated in the accounting violations.
The Beijing Securities Regulatory Bureau plans to impose penalties on Hengxin Dongfang, including a warning and a fine of 5 million yuan. Four senior executives involved—former Chairman and General Manager Meng Nan, Deputy General Manager Chen Wei, Financial Director Wang Linhai, and Deputy General Manager Li Xiaobo—will also receive warnings and individual fines totaling 12.5 million yuan collectively.
As a result, Hengxin Dongfang's stock will be placed under special treatment. Trading was suspended for one day starting April 7, with resumption on April 8 under the new stock abbreviation "ST Hengxin," while the daily price fluctuation limit remains at 20%. The company stated that it has completed financial restatements and rectifications related to the incident and will apply to have the ST status removed 12 months after the formal penalty decision is issued.
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