On the evening of October 19, Shandong Hiking International Co.,Ltd. (SHA: 600735) issued multiple announcements disclosing corrections to prior-period accounting errors and progress on rectification measures ordered by the Qingdao Securities Regulatory Bureau. The company retrospectively adjusted twelve reporting periods of financial statements spanning from 2021 through the third quarter of 2024, involving items such as monetary funds, other receivables, and credit impairment losses, while declaring that all rectification measures had been fully implemented. This brings a compliance-level conclusion to nearly four years of non-operational fund occupation by related parties and false records in financial reports.
However, for Shandong Hiking International Co.,Ltd. (SHA: 600735), which is attempting to shed its ST designation, the crisis triggered by internal control failures is far from over. The biggest uncertainty standing in the way of removing the ST label points to its out-of-control subsidiary Shanghai Lizhi, and the potential chain reaction of a non-standard audit opinion for the 2026 fiscal year that could be triggered as a result.
Risks remain despite multi-period financial restatements
The fund occupation issue at Shandong Hiking International Co.,Ltd. (SHA: 600735) was first publicly revealed at the audit level in April 2025, when Zhongxinghua Certified Public Accountants issued an unqualified internal control audit report with an emphasis of matter paragraph after auditing the company's 2024 internal control effectiveness. The core content of the emphasis of matter paragraph pointed to the fact that "Hiking had funds occupied by its controlling shareholder's parent company, Hiking Group, through related parties on a non-operational basis during 2024."
In fact, the non-operational fund occupation by related parties spanned a longer period. The Administrative Penalty Decision issued by the Qingdao Securities Regulatory Bureau in September this year showed that from November 2021 to August 2025, Shandong Hiking International Co.,Ltd. (SHA: 600735) had non-operational fund occupation by related parties, failed to disclose it in a timely manner, and had major omissions in multiple periodic reports, with false records in periodic reports including the 2023 semi-annual report. Funds flowed from the listed company and its subsidiaries through intermediaries to Hiking Group and its related parties, constituting occupation. Based on these violations, the listed company and relevant responsible persons were fined a total of 17.8 million yuan, and the company was ordered to correct seven affected financial statements.
The rectification announcement shows that the company has verified financial data for the relevant accounting periods and retrospectively adjusted accounting errors related to monetary funds and other receivables. Among these, monetary funds at the end of the third quarter of 2024 were reduced by approximately 239 million yuan, while other receivables were increased by approximately 352 million yuan. The company stated that the retrospective adjustments would not change the profit or loss nature of the relevant reports.
The principal and interest totaling approximately 444 million yuan was finally repaid by Hiking Group and its related parties on April 20 this year. However, the settlement of fund occupation and the correction of financial statements are only the first step in clearing risks. Because Shandong Hiking International Co.,Ltd. (SHA: 600735) was found to have major deficiencies in internal control, Zhongxinghua issued a qualified internal control audit report with an adverse opinion on the company's 2025 financial report internal control. As a result, the company's shares continue to be subject to other risk warnings.
According to regulatory rules, for Shandong Hiking International Co.,Ltd. (SHA: 600735) to remove its other risk warning and shed the ST designation, it must meet the precondition that its 2026 financial report internal control receives a standard unqualified audit opinion. If internal control receives an adverse opinion for two consecutive fiscal years, the company's shares will be subject to delisting risk warnings, and if there is still no improvement thereafter, it could face termination of listing. Shandong Hiking International Co.,Ltd. (SHA: 600735) also stated on the exchange's interactive platform that the type of internal control audit opinion for 2026 will determine whether the company can apply to remove its other risk warning.
Loss of control risk continues to escalate
It is worth noting that whether Shandong Hiking International Co.,Ltd. (SHA: 600735) can remove its other risk warning and achieve "shedding the ST label" in the future depends not only on whether internal control rectification is in place, but also on the actual impact of the Shanghai Lizhi loss-of-control matter on the 2026 internal control audit opinion. The root of this potential risk dates back to an acquisition earn-out arrangement five years ago. When Shandong Hiking International Co.,Ltd. (SHA: 600735) acquired Shanghai Lizhi in 2021, it signed performance commitment agreements with original shareholders Wang Liyang and Ke Yi, stipulating corresponding performance targets for 2021-2023.
According to an announcement published by Shandong Hiking International Co.,Ltd. (SHA: 600735) in July 2024, Shanghai Lizhi failed to meet its performance commitments for 2022 and 2023. The compensation obligors subsequently paid the 2022 performance compensation to the company, but the total compensation of approximately 15.98 million yuan for 2023 has not been paid. According to the announcement, Wang Liyang and Ke Yi initially cited tight working capital as the reason and deferred payment of the performance compensation until June 30, 2025. However, subsequent company announcements showed that Wang Liyang and Ke Yi refused to pay on the grounds that they did not accept the 2023 audit results.
After negotiations failed, Shandong Hiking International Co.,Ltd. (SHA: 600735) filed a lawsuit with the court in August 2025 and applied for property preservation, freezing assets under the other parties' names, escalating the confrontation. In June 2026, directors nominated by Shandong Hiking International Co.,Ltd. (SHA: 600735) passed a temporary board resolution to remove Wang Liyang from his positions as chairman and legal representative and remove Ke Yi from his position as general manager, attempting to regain control at the governance level. However, announcements showed that Wang and Ke refused to cooperate with industrial and commercial registration changes, and the market regulatory authorities declined to process the changes on the grounds of major disputes among shareholders.
Thereafter, Shanghai Lizhi's management refused to provide financial and operational materials to the listed company, citing unresolved disputes as the reason for refusing to fulfill their legal obligations to cooperate with information disclosure and financial report preparation. By August 2026, Shandong Hiking International Co.,Ltd. (SHA: 600735) announced that it had lost substantive control over Shanghai Lizhi and would no longer include it in the consolidated financial statement scope from April 1, 2026. Shanghai Lizhi achieved revenue of 58.37 million yuan in the first quarter of this year, accounting for 16.38% of Shandong Hiking International Co.,Ltd.'s (SHA: 600735) consolidated revenue for the same period. The deconsolidation adjustment directly impacted the company's performance for the period, with first-half revenue declining 9.5% year-on-year. The greater risk lies in the chain risks that the loss-of-control matter poses to the annual audit and internal control evaluation.
The company admitted that due to its inability to obtain complete financial materials from Shanghai Lizhi, its 2026 financial report faces the risk of receiving a non-standard audit opinion. At the same time, the loss of control over the subsidiary will also adversely affect the 2026 internal control evaluation report and internal control audit report, directly impacting the core condition for shedding the ST label. As of August this year, Shandong Hiking International Co.,Ltd. (SHA: 600735) was still pursuing the industrial and commercial registration changes and management handover of Shanghai Lizhi through judicial channels, but the dispute has yet to see any substantive turning point. Whether the loss-of-control determination itself fully complies with enterprise accounting standards also remains uncertain, and this matter could lead to risks of inaccuracy and incompleteness in periodic report disclosures.
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