Zhongnan Culture plans to acquire a 57.30% stake in Sulong Thermal Power

Securities Daily Reporter Cao Weixin

After being suspended for 10 trading days, on the evening of March 8, Zhongnan Hong Culture Group Co., Ltd. (hereinafter referred to as “Zhongnan Culture”) disclosed the “Preliminary Plan for Issuance of Shares and Cash Payment to Purchase Assets and Raise Supporting Funds and Related Party Transactions” (hereinafter referred to as the “Reorganization Plan”).

The announcement shows that Zhongnan Culture plans to issue shares and pay cash to Jiangyin Power Investment Co., Ltd. to purchase its 57.30% stake in Jiangyin Sulong Thermal Power Co., Ltd. (hereinafter referred to as “Sulong Thermal Power”). After the transaction is completed, Sulong Thermal Power will become a controlling subsidiary of Zhongnan Culture. The company’s stock will resume trading starting from the market opening on March 9.

As of the signing date of the plan, the audit and valuation work for Sulong Thermal Power has not been completed, and the valuation of the target assets and the transaction price have not been determined. Based on Sulong Thermal Power’s unaudited financial data, it is preliminarily estimated that this transaction will meet the standards for major asset restructuring as stipulated by the “Administrative Measures for Major Asset Restructuring,” constituting a major asset reorganization of the listed company.

It is understood that Sulong Thermal Power mainly operates power generation businesses, including thermal power and photovoltaic power generation. In addition, it also engages in heat supply and coal trading around its main power generation business, with the capacity for combined heat and power supply, providing integrated energy solutions for customers. Data shows that Sulong Thermal Power’s operating revenue for 2024 and 2025 is expected to be 3.78 billion yuan and 3.095 billion yuan, respectively, with net profits of 621 million yuan and 347 million yuan.

Regarding the impact of this acquisition on the company’s main business, Zhongnan Culture stated in the announcement: “After the completion of the transaction, the company’s business layout in the power energy sector will be expanded. Additionally, the company will further leverage its advantages in manufacturing industrial metal fittings, strengthen sales expansion in the power sector, enhance brand awareness, and increase market share of its products, further growing the company’s machinery manufacturing segment.”

Bai Wenxi, Chairman of Zhonghe Kunlun (Beijing) Asset Management Co., Ltd., told Securities Daily: “This acquisition marks a key step in Zhongnan Culture’s strategic transformation of its main business. As a fundamental industry for people’s livelihood, power energy has characteristics such as stable cash flow and strong resistance to cycles, which can effectively hedge against the volatility risks of Zhongnan Culture’s original industries and optimize its overall business structure and profitability.”

Shen Meng, Partner at Shanghai Yumei Management Consulting Partnership, told Securities Daily: “The proposed acquisition of power assets through issuing shares and paying cash can, to some extent, optimize the company’s asset structure, further stabilize profit expectations, and boost investor confidence. From the data, the injected thermal power assets have relatively stable cash flow, which helps improve the overall asset quality of the listed company.”