Investing over 25 million yuan! 90% high-growth environmental protection leader plans to acquire a company with zero revenue and losses, hiding a big strategic move involving Daqing Oil Mud.

On the evening of May 11, the listed environmental protection company on the STAR Market, Hengyu Environmental Protection (SH688309, stock price 87.04 yuan, market value 6.91B yuan), disclosed that it plans to invest a total of 25.5877 million yuan through capital increase and equity transfer to acquire a 51% stake in Daqing Youpu Environmental Protection Technology Co., Ltd. (hereinafter referred to as “Daqing Youpu”), achieving absolute control over the target company.

The “Daily Economic News” reporter noted that Daqing Youpu is currently still a “zero revenue, loss-making” enterprise.

As an industry leader that just delivered a remarkable performance in 2025 with over 90% growth in both operating revenue and net profit, why is Hengyu Environmental Protection making a heavy investment against the trend at this time and acquiring a loss-making target located far in Daqing, Heilongjiang?

Proposed investment of over 25 million yuan to control a loss-making company

According to the “Announcement on External Investment” disclosed by Hengyu Environmental Protection on the evening of May 11, the company’s 4th Board of Directors’ 9th meeting has approved this investment proposal.

The announcement detailed that Hengyu Environmental Protection intends to sign the “Capital Increase and Equity Transfer Agreement of Daqing Youpu Environmental Protection Technology Co., Ltd.,” and will use its own funds to invest a total of 25.5877 million yuan in Daqing Youpu. After this investment is completed, Daqing Youpu will officially become a controlling subsidiary of Hengyu Environmental Protection and be included in the company’s consolidated financial statements.

Data shows that Daqing Youpu was established on December 6, 2019, with Chen Haoran as legal representative, registered at No. 10, Xingwujing East Street, Honggang District, Daqing City, Heilongjiang Province. Its current registered capital is 25.34 million yuan. Its business scope covers environmental technology promotion services, technical services for oil sludge treatment, solid waste management, and manufacturing of sludge and wastewater treatment equipment, among other environmentally related businesses.

The “Daily Economic News” reporter observed that this company is currently facing zero revenue and ongoing losses. As of March 31, 2026, Daqing Youpu’s total assets amounted to 26.0426 million yuan, total liabilities 3.4275 million yuan, and owners’ equity 312.5k yuan, with an asset-liability ratio of only 13.16%. However, this company reported zero operating revenue in both 2025 and the first quarter of 2026, with net profits of -1.6096 million yuan in 2025 and -312.5k yuan in the first quarter of 2026.

Hengyu Environmental Protection also issued a clear risk warning in the announcement. The company stated that the future operating income of the target company is uncertain and may involve investment losses or asset impairment risks. Additionally, the transaction includes strict pre-conditions for settlement and performance commitment clauses. Hengyu Environmental Protection explicitly emphasized in the announcement: “Given that the achievement of the performance commitments of the target company is affected by policy environment, market demand, and its own operational conditions, there is a risk that the performance commitments may not be met.”

Despite the potential risks of underperforming performance commitments and settlement breaches, Hengyu Environmental Protection still chooses to enter strongly. Comparing with its 2025 annual report data, Hengyu Environmental Protection achieved an annual operating revenue of 295 million yuan, a year-on-year increase of 90.67%; net profit attributable to the parent was 33.4344 million yuan, up 91.91%.

With abundant cash flow and strong performance backing, Hengyu Environmental Protection’s investment of 25.5877 million yuan to acquire a loss-making target is not blind expansion but points to a broader industrial chain layout.

From equipment sales to project operation, how to reshape the Daqing oil sludge market?

Hengyu Environmental Protection is accelerating its business model transformation and extending into downstream industry chains.

Strategically, based on its dual-wheel drive plan (equipment sales + project operation), “the company will further strengthen the planning and layout of independent operational industrial projects and capacity building, especially focusing on systematic research to improve the quality and expand the application of downstream products of industrial projects, building an industrial ecosystem for high-value utilization of recycled resources through ‘waste source integration, technological R&D, high-end equipment manufacturing, project operation, and downstream cracking product deep processing and sales.’”

Under this strategic guidance, the Daqing oil sludge market has become a testing ground for Hengyu Environmental Protection to achieve an ecological closed loop. The announcement shows that Daqing Oilfield is one of China’s benchmark oil industries, with many oil sludge disposal companies in the area. “Currently, under the background of enhanced national environmental disposal standards and strengthened environmental inspections, there is still significant room for improvement in sludge disposal processes and results.”

As a provider with fully independent intellectual property rights and globally leading technical level, Hengyu Environmental Protection’s core technology advantages will play a “dimensionality reduction” role in this breakthrough.

According to the 2025 annual report, Hengyu Environmental Protection’s self-developed industrial continuous oil sludge pyrolysis production line has significant advantages in oil removal efficiency. The solid products after pyrolysis can have mineral oil content stabilized below 3‰, with a minimum of below 0.5‰, far better than the current standard of 2% in most regions, fully meeting high-standard harmless disposal requirements. The announcement emphasizes: “This project will use the company’s industrial continuous high-end pyrolysis production line, which, under safety, environmental protection, continuous, and high-efficiency comprehensive disposal performance, will better align with industry and regional development trends. Once completed, it will become a benchmark for oil sludge disposal in Daqing.”

Why is Daqing Youpu indispensable? The real answer may lie in its irreplaceable regional channel advantages. As stated in the announcement: “Daqing Youpu’s original shareholders have been engaged in oil sludge treatment in Daqing for many years, possessing rich industry experience and regional resource advantages.”

Hengyu Environmental Protection hopes that through this investment, based on mutual cooperation intentions, it will leverage its comprehensive advantages in oil sludge disposal technology and equipment to efficiently treat local sludge, and through continuous development and maturation of industrial projects, achieve capacity and scale expansion and replication.

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Daily Economic News