Longxin General's 1 Yuan "Fire Sale" of Subsidiaries Follow-up: 70.31 million yuan in financial assistance overdue, the company states that full impairment provision was made last year

A drone business investment spanning more than a decade ultimately ended with the asset being carved out at a price of 1 yuan, but the aftereffects of the story are still unfolding.

On the evening of March 25, Loncin General (SH603766, share price 14.09 yuan, market cap 28.934 billion yuan) announced that the loans and amounts due between it and its former controlling subsidiary, Zhuhai Longhua Helicopter Technology Co., Ltd. (hereinafter referred to as Zhuhai Longhua), totaling 70.3128 million yuan, have become overdue.

This is only a little over four months since Loncin General “sold off” all of its equity in Zhuhai Longhua at a price of 1 yuan in November 2025. Regarding this overdue situation, Loncin General stated that in the 2025 fiscal year it has made full provision for impairment on this receivable, and therefore it expects that it will not have a significant impact on the company’s profit and loss for 2026.

The reporter learned that Zhuhai Longhua is currently insolvent. As of the end of February 2026, its net assets were -68.2934 million yuan. Loncin General said plainly that there is a risk that the subsequent payments may be difficult to recover.

Financial data of Zhuhai Longhua

From lavishly investing 50 million yuan in 2014 to enter the drone sector with great fanfare, to quietly exiting the market more than ten years later, Zhuhai Longhua’s journey has become a failed attempt by Loncin General in exploring emerging businesses.

According to the company’s recently disclosed performance forecast for 2025, Loncin General expects that last year it achieved a year-on-year increase of more than 47% in net profit attributable to shareholders. The growth momentum comes from the steady growth of the company’s main motorcycle and general machinery businesses, as well as the ongoing optimization of the product structure of its 无极 (Wuji) series.

7031 million yuan owed by Zhuhai Longhua has become overdue

Regarding the overdue situation of the financial assistance, Loncin General’s announcement states that as of the date of disclosure of the announcement, the company’s accumulated creditor claims on its former controlling subsidiary Zhuhai Longhua—consisting of principal and interest on the loans and related amounts due between the parties—totaled 70.3128 million yuan, and the relevant payments are already overdue. This overdue amount mainly consists of two parts: loan principal and interest of 59.0997 million yuan, and amounts due between the parties of 11.2131 million yuan.

In fact, when deciding to sell the equity of Zhuhai Longhua, Loncin General had already indicated the risk of recovering this debt. In the equity transfer announcement disclosed in November last year, the company explicitly reminded that Zhuhai Longhua still owed the company loan principal and interest and related amounts due totaling 69.8952 million yuan, and pointed out that “because Zhuhai Longhua’s commercialization goals were not achieved, its book net assets are negative, it is insolvent, and there is a risk that the above amounts cannot be recovered.”

In the announcement, Loncin General emphasized that it has fully provided for impairment on the loan principal and interest and the amounts due receivable from Zhuhai Longhua in 2025, and it expects this will not form a major impact on the company’s 2026 profit and loss; the specific outcome will be subject to the audit by the annual audit accounting firm. The relevant overdue amount accounts for 0.77% of the company’s most recently audited net assets.

A reporter from The Economic Daily learned that although “making provisions for impairment on the loans and amounts due receivable from Zhuhai Longhua” affected Loncin General’s performance in the fourth quarter of last year, it did not cause a significant impact on the company’s full-year 2025 performance. According to the company’s earlier forecast, the company’s net profit attributable to shareholders in 2025 was expected to be between 1.65 billion yuan and 1.8 billion yuan, representing a year-on-year increase of 47.15% to 60.53%; net profit after excluding non-recurring items was expected to increase year-on-year by 46.03% to 59.72%.

Just a little over four months ago, it “sold off” all of its equity in Zhuhai Longhua for 1 yuan

Taking the timeline back more than ten years, Loncin General once placed hopes on the drone industry. In October 2014, Loncin General announced that it would jointly set up a joint venture company with partners including Wang Haowen and Shenzhen Lihui Venture Capital Co., Ltd. (now renamed Lihui Kechuang Group Co., Ltd.), with a total capital contribution of 100 million yuan, specifically to engage in the research and development, manufacturing, and sales of complete systems and components for unmanned helicopters. Of this, Loncin General invested 50 million yuan and held 50% of the equity in Zhuhai Longhua.

At that time, the company, in its announcement, laid out a broad outlook for the market, believing that China’s unmanned aviation industry was in its early stages, and that future potential and room for growth were substantial. In April 2015, Zhuhai Longhua’s first dedicated agricultural plant protection drone (XV-2) was successfully assembled.

The dream may be perfect, but reality is harsh. The Economic Daily reporter noted that since its establishment, Zhuhai Longhua’s commercialization progress has remained slow and its profitability has been weak. In Loncin General’s reply to the Shanghai Stock Exchange’s regulatory inquiry letter in July 2024, it stated that since Zhuhai Longhua was founded, except for 2017 and 2020 when it achieved slight profits, all other years were loss-making, with total losses exceeding 100 million yuan. Its main product, the agricultural plant protection drone, failed to form bulk orders in the market. Its subsequent shift to special uses such as security and defense was also constrained by technical requirements, remaining for a long time in the stages of product trial production and performance verification, creating a large contrast between high R&D spending and meager operating revenue.

Faced with this long-term loss-making business, Loncin General ultimately chose to “sever the arm.” On November 13, 2025, the company’s board of directors considered and approved a proposal to transfer about 50% of its equity in Zhuhai Longhua to its minority shareholder Li Liangjun at a price of 1 yuan. In the announcement, the company made it clear that this move is to implement its development strategy of “focusing on its core business.” After completion of the divestment, Loncin General would no longer hold shares in Zhuhai Longhua.

As of the end of February this year, Zhuhai Longhua’s total assets had only 20.5961 million yuan remaining, while its total liabilities were as high as 88.8895 million yuan.

The reporter also learned that Loncin General has another subsidiary engaged in drone-related business, namely Chongqing Lingzhi Hang Technology Co., Ltd. In the first half of 2025, this subsidiary’s revenue was only 1.9751 million yuan, and its net profit did not reach 1 million yuan.