Beijing News (Reporter Wang Zhenzhen) On June 15, when the stock price suffered ten consecutive declines, Longzi Co., Ltd. (hereinafter referred to as “Longzi shares”) responded to the letter of concern issued by the Shenzhen Stock Exchange 5 days ago. Since June 2020, the stock price of Longzi shares has reached the abnormal volatility standard 13 times, and has been rising all the way since November of the same year. Since June of this year, Longzi shares have begun to show a downward trend and even once fell to the limit. One of the fuse that triggered the decline in stock prices, that is, the real reason for the clearance and reduction of shares by Shen Bingyun, the father of the actual controller of Longzi shares, has become a hot spot of concern. In response to the previous sharp rise in stock prices and the recent shareholder liquidation and reduction of holdings, Langzi shares, which are on the cusp, finally responded.
The medical beauty business is growing fast, and women’s clothing is still the company’s largest business
Longzi shares three major business segments: fashion women’s clothing, medical beauty and green babies and children. Thanks to the popularity of medical beauty concepts, since 2020, the stock price of Langzi shares has risen by as much as 600% in the last 250 trading days. Langzi shares believes that this is related to the rapid growth of the company’s medical beauty business and the gradual increase in its contribution to the company’s overall profit.
The annual report of Longzi shares shows that in 2020, the company will achieve operating income of 2.876 billion yuan, a decrease of 4.35% from the same period of the previous year; net profit of 142 million yuan, an increase of 141.65% from the same period of the previous year. At a time when the revenue of women’s clothing and other businesses has declined due to the impact of the epidemic, the net profit of the medical beauty business, which is the second largest in revenue, reached 68,867,900 yuan, which contributed nearly half of the net profit of Langzi.
In its reply, Longzi shares stated that as of the end of 2020, the company has 19 medical aesthetics institutions, and the medical aesthetics business sector is also the key development direction in the near future, but it still needs long-term continuous intensive cultivation. The executives of Longzi shares also stated in investor relations activities that medical aesthetics is a long-term, heavy investment industry, and you must be patient with returns. The company will not change its long-term development strategy due to short-term market fluctuations. The development direction and strategic layout of Longzi Medical Beauty is very determined, that is, it adheres to the combination of endogenous growth and extensional expansion to implement the brand expansion plan.
At the same time, Longzi also clearly pointed out that as of the end of the first quarter of 2021, among the company’s three major business segments, women’s clothing is still the company’s largest business segment, and the company’s fundamentals have not undergone major changes.
Purpose of liquidation and reduction of holdings: It is to express the true meaning of supporting the children’s business
The fundamentals of Langzi shares have not undergone major changes. Since June, the stock price has changed its upward trend and has begun to fall, and it has even reached its limit for two consecutive trading days. The fuse that caused the stock price of Langzi to fall into a one-word limit is the company’s controlling shareholder, actual controller Shen Dongri and actual controller Shen Jinhua’s father Shen Bingyun’s clearance plan.
On June 4, Langzi disclosed the “Announcement on the Pre-Disclosure of Shareholding Reduction Plan for Shareholders” (hereinafter referred to as the “Announcement of Shareholding Reduction”), announcing that Shen Bingyun, the third largest shareholder of the company in the past eighty years, was based on his life It is planned to reduce all the shares held for the needs of arrangement and asset planning.
After the two lower limits on June 7 and June 8, the “Announcement on Receipt of Commitment Letters from the Actual Controller and Controlling Shareholders Acting in Concert” (hereinafter referred to as the “Commitment Announcement” According to China, Shen Bingyun promised that after the implementation of its share reduction plan, it will assist the strategic implementation of the medical aesthetics business of Langzi with no less than 500 million yuan through compliance channels and appropriate methods. In the view of the Shenzhen Stock Exchange, Shen Bingyun’s use of funds to reduce holdings is inconsistent.
In its reply, Longzi shares stated that Shen Bingyun confirmed that the real reason for the reduction was due to his advanced age and the needs of his own living arrangements and asset planning. The allocation of no less than 500 million yuan to support the development of the medical beauty business of Langzi shares is based on Shen Bingyun’s careful consideration and confidence in the company’s future development prospects and the development of the company’s medical beauty business, as well as supporting its children’s business. There is no conflict with the reason for the reduction in the real meaning made, and there is no inconsistency.
In the response, Shen Dongri, Shen Jinhua and Shen Bingyun all denied using the “Announcement of Commitment” to maintain the company’s stock price and cooperate with the share reduction.
In addition, in response to some non-compliance statements in the “Commitment Announcement” pointed out by the Shenzhen Stock Exchange, the supplementary announcement issued on June 15 by Longzi shares also clarified the performance method and time. Within 2 years of the expiry of the holding reduction period of this share reduction plan, Shen Bingyun will support the development of the company’s medical beauty business by providing loans and participating in the company’s establishment of a medical beauty industry fund. If after the expiration of the commitment period, Shen Bingyun provides the company with less than 500 million yuan in financial support, Shen Dongri promises to provide the company with the difference in financial support within one month according to the same performance method.
Longzi Medical’s 2020 performance commitment has been changed from “achieved” to “not touched on performance compensation”
In addition to supplementing some of the contents of the “Commitment Announcement”, Longzi shares also issued a correction announcement on the company’s “Expressions on the Performance Commitment of the 2020 Annual Report”.
In August 2019, Longzi shares issued shares to Shen Dongri and 4 other counterparties to purchase the remaining 41.19% of the shares of Longzi Medical and raised funds. Shen Dongri promised that the audited non-net profit of Langzi Medical from 2019 to 2021 shall not be less than 55.7 million yuan, 68.1 million yuan and 70.4 million yuan respectively. If the accumulated net profit achieved by Longzi Medical as of the current year does not reach the cumulative committed net profit as of the current year, the compensation obligation of Shen Dongri will be triggered in the current year.
In the 2020 annual report, the audited non-net profit of Longzi Medical in 2020 is 67,019,300 yuan, and the cumulative net profit from 2019 to 2020 is 133 million yuan, and the cumulative committed net profit is 124 million yuan. Longzi shares call it “Performance commitment has been fulfilled.” In its reply, Longzi changed the above expression to “the cumulative realized net profit is greater than the cumulative committed net profit, and performance compensation has not been touched”.
In addition, in view of the mismatch between the net profit and the net cash flow generated by operating activities in the first to fourth quarters of 2020, the company replied that the main reason was the impact of the epidemic, as well as the company’s women’s clothing business and medical beauty business. It is caused by the time difference between cash flow and operations, which is consistent with the company’s actual operating conditions. In addition, the fourth quarter net profit of Longzi shares was significantly higher than that of the previous three quarters, which was also related to the sales income generated by the sale of 7.14% of L&P’s equity in 2020.
As of the close of June 15th, Langzi shares closed at 45.52 yuan per share, a decrease of 1.11%, and the market value was about 20.1 billion yuan.
Beijing News reporter Wang Zhenzhen
Editor Zheng Yijia proofreads Yang Xuli