In 2025, net profit plummeted by 1014.24%, as Shahe Shares' real estate main business faced heavy losses. The company invested 274 million yuan to acquire Jinghua Electronics to turn the situation around.

Ask AI · Why did Shiga Holdings choose a cross-border acquisition despite huge losses in its real estate core business?

Our reporter Li Beibei from chinatimes.net.cn, Shanghai

On the evening of March 17, Shahe Industrial Co., Ltd. (hereinafter referred to as “Shahe Shares”) (000014.SZ) disclosed that in 2025 (the reporting period), the company’s operating revenue and net profit both declined year over year. The net profit attributable to the parent company suffered a loss of RMB 150 million, plunging 1,014.24% year over year. Its real estate core business fell into deep losses. Against this backdrop, Shahe Shares plans to invest RMB 274 million to acquire 70% of the equity of Shenzhen Jinghua Display Electronics Co., Ltd. (hereinafter referred to as “Jinghua Electronics”) in a cross-industry deal, officially entering the advanced manufacturing track and seeking new profit growth points.

On March 19, regarding key issues that attracted market attention—such as follow-up strategic adjustments to the real estate core business and how the proportions between advanced manufacturing and real estate segments are set—reporters from Huaxia Times called Shahe Shares. The company’s board secretary replied that all information the company can disclose to the public has already been released in its annual report. Regarding arrangements related to the company’s advanced manufacturing segment going forward, the company said it can be found in the reorganization draft it has published, in which the independent financial adviser, CITIC Securities, has provided corresponding explanations: “If there are any new plans or changes in the future, the company will issue a notice in the first instance.”

Core business losses, insufficient land reserves

Public information shows that Shahe Shares was established in 1987 and listed in 1992. It is an established real estate enterprise controlled by the Shenzhen Municipal State-owned Assets Supervision and Administration Commission, under the Shenye Group. In 1993, the company entered the real estate sector, focusing its main business on real estate development and operations, as well as the operation and management of modern service-oriented industrial properties.

With deep adjustments in the real estate industry, the growth engine of the company’s traditional core business has continued to weaken. According to public information, since 2018 Shahe Shares has not added any new land reserves; it mainly relies on developing and operating existing projects, and its performance has also shown a downward trend, with net profit of RMB 16.45 million in 2024.

In 2025, the scale of losses continued to expand. During the reporting period, Shahe Shares recorded operating revenue of RMB 310 million, down 13.35% year over year. Net profit attributable to shareholders of listed companies was -RMB 150 million, down 1,014.24% year over year. Net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was -RMB 150 million, down 992.10% year over year. Since Shahe Shares’ consolidated net profit attributable to shareholders of listed companies in 2025 was a loss of RMB 150 million, and the company did not meet the cash dividend conditions in its Articles of Association, it plans not to distribute cash dividends, not to issue bonus shares, and not to increase share capital through capitalization of reserves.

Behind the massive loss in performance are multiple predicaments facing Shahe Shares’ real estate core business—weak core-business growth, insufficient land reserves, and additional pressure from asset impairment provisions, further aggravating the loss situation.

In its annual report, Shahe Shares explained that the main drivers of the change in performance were adjustments in the industry environment faced by its traditional real estate business. “The second- and third-tier cities where the company focuses its efforts, such as Changsha and Xinxiang, still face challenges including soft demand, high inventory levels, and pricing pressure, which put pressure on the company’s sales conversion efficiency and profitability.”

Asset impairment provisions have become another important factor dragging down the company’s performance. The annual report shows that in 2025, the company recorded a total of RMB 85.2659 million in credit impairment and asset impairment provisions, including credit impairment provisions of -RMB 0.607 million for accounts receivable and other receivables, and inventory write-down provisions of RMB 85.3266 million. This round of provisions reduced net profit attributable to ordinary shareholders of listed companies by RMB 84.9222 million, which accordingly reduced total equity attributable to ordinary shareholders of listed companies by RMB 84.9222 million as of the end of 2025.

In terms of project layout, Shahe Shares has a relatively high concentration of business. Currently sold and planned-to-be-built projects are mainly concentrated in two regions: Changsha in Hunan and Zhengzhou and Xingyang in Henan. Its Shenzhen headquarters holds only a small amount of existing properties; it has no new land reserves, and therefore its business development lacks follow-up support. Among these, as a core development region, Changsha faces significant pressure from adjustments in 2025. Although local authorities introduced multiple policies to support the property market, the rebound effect did not meet expectations. This led to slower sales in the company’s Changsha projects and a longer cash collection cycle. Full-year revenue was RMB 219 million, and net profit loss was RMB 112 million, making Changsha the main segment dragging down overall performance.

For profitability indicators, in 2025 the company’s gross margin was -1.17%, down 52.88 percentage points year over year; net profit margin was -48.24%, down 52.98 percentage points from the same period last year. Looking at single-quarter indicators, in Q4 2025 the company’s gross margin was -2.81%, down 77.21 percentage points year over year and down 8.84 percentage points quarter over quarter. Net profit margin was -40.49%, up 50.44 percentage points from the same period last year and up 162.46 percentage points from the previous quarter.

That said, although performance pressure remained, the company showed positive signals on cash flow, providing funding support for its transformation and reconfiguration. According to the annual report, in 2025 the company’s cash inflow from real estate sales was RMB 357 million, up 127.06% year over year. Combined with the factor that cash dividends had not been distributed, the company’s full-year net increase in cash turned from negative to positive, rising from RMB -200 million in 2024 to RMB 71.2793 million, up 135.58% year over year.

From real estate to advanced manufacturing transformation

Against the backdrop of the sustained downturn in the traditional real estate core business, Shahe Shares in its 2026 business plan clearly defined a “two-pronged approach” strategy for development, treating the transformation as the key to breaking the deadlock and pushing hard to build out its advanced manufacturing business.

On one hand, the company continues to focus deeply on its real estate core business. It plans to invest RMB 33.582 million during the year to drive core business operations, including RMB 274 million for the headquarters, RMB 60.57 million for the Changsha company, and RMB 1.50 million for the Xinxiang company, with funding to be collected through precise marketing, optimizing inventory clearance, disposing of existing assets, and other measures. On the other hand, it will work to fully advance the acquisition of Shenzhen Jinghua Display Electronics Co., Ltd., ensuring that the major asset reorganization is completed smoothly in 2026. “This will be a pivotal step in Shahe Shares’ substantive transformation and upgrading from traditional real estate development to advanced manufacturing,” the annual report said.

According to the earlier announcement, on the evening of February 6 this year, Shahe Shares disclosed a report (draft) on the major asset purchase and related-party transaction. The company plans to use RMB 274 million in cash to acquire 70% of the equity in Jinghua Electronics held by Shenye Pengji (Group) Co., Ltd. (hereinafter referred to as “Shenye Pengji”). After the transaction is completed, Shahe Shares will add an intelligent display controller and liquid crystal display components business, changing the current structure of its single real estate business.

As the core target of this acquisition, market attention has focused on Jinghua Electronics’ profitability performance and industry prospects.

It is understood that Jinghua Electronics is a national “specialized, refined, unique, and innovative” “little giant” enterprise with a solid base for steady profitability. In the first three quarters of 2025, it achieved revenue of RMB 312 million, net profit of RMB 38.5366 million, and operating cash flow of RMB 49.0867 million. Its net profit in the period has already exceeded the 2026 performance commitment (RMB 37.2022 million). From an industry outlook perspective, the intelligent control devices and new display industry in which Jinghua Electronics operates is a core component of the country’s strategic emerging industries. Benefiting from the widespread adoption of technologies such as AIoT, 5G, and Industry 4.0, in 2026 the market size of China’s intelligent controller industry is expected to exceed RMB 4.82 trillion, and the new display industry is expected to exceed RMB 880 billion. With policy support and market growth benefits compounding, this opens up broad space for growth for Shahe Shares after its transformation.

On the necessity of this transformation, Shahe Shares said directly that China’s real estate industry is undergoing a profound transformation. Market resources are accelerating toward leading real estate developers. Some smaller and mid-sized real estate companies are gradually exiting the market due to financing constraints, insufficient land reserves, and weak risk-resilience capabilities. In this environment, the company may face multiple risks in the future, including greater difficulty in project profitability, rising investment risks, and insufficient land reserves. Therefore, the company will push forward the acquisition and merger of Shenzhen Jinghua Display Electronics Co., Ltd. to ensure that the major asset reorganization is completed smoothly in 2026 and to cultivate a new growth engine. In addition, the ultimate controlling parties of both sides of the transaction are both the Shenzhen Municipal State-owned Assets Supervision and Administration Commission, which is also viewed as an important measure within the Shenzhen state-owned assets system for optimizing resource allocation and supporting the transformation of traditional enterprises.

According to relevant announcements, the reorganization has now entered a critical stage. The company completed the reply to the inquiry letters from the Shenzhen Stock Exchange in early March. It also provided detailed explanations on core issues such as whether its own funds are sufficient to cover the payment, whether the valuation of the target is fair (P/E of 15.01x and P/B of 1.41x, which is significantly lower than the industry average), and the sustainability of performance. The independent financial adviser, CITIC Securities, has issued verification opinions, further strengthening the compliance foundation.

Worth mentioning is that Jinghua Electronics had submitted an application for an IPO on the ChiNext board in 2023 and withdrew it proactively in 2024. With Shahe Shares acquiring it this time, it becomes a path for it to achieve asset securitization through an alternative route, and also lays a foundation for coordinated development between both parties.

责任编辑：张蓓 主编：张豫宁