Performance under pressure, but still pursuing mergers and acquisitions! Zhongying Technology plans to launch a cash acquisition of related parties. Can this break the cold winter of the industry chain?

On the evening of February 27, Zhong Ying Technology (SZ300936, stock price 44.50 yuan, market value 3.346 billion yuan) announced that the company plans to purchase at least 51% of Changzhou Yingzhong Electric Co., Ltd. (hereinafter referred to as “Yingzhong Electric”) with cash and acquire controlling interest in Yingzhong Electric.

The “Daily Economic News” reporter noted that this business acquisition is an internal family-related transaction—Yingzhong Electric’s actual controller and Zhong Ying Technology’s actual controller are brothers.

It is worth noting that just before this acquisition, Zhong Ying Technology released a performance forecast for 2025. According to the announcement, the company’s net profit attributable to the parent company in 2025 is expected to decrease by over 90% year-on-year, with net profit after deducting non-recurring gains and losses expected to be a few million yuan in loss.

Family internal “asset shifting” aims for cash purchase

In recent years, Zhong Ying Technology’s main business has faced significant downward pressure. The company focuses on the communications sector and semiconductor packaging materials, with core products including high-frequency copper-clad laminates and VC heat sinks. However, as industry competition patterns evolve and technological updates accelerate, the company’s core products face severe challenges.

As early as the 2025 semi-annual report, the company stated that low-cost VC heat spreader technology solutions have already appeared in the market, which raises higher requirements for the cost control capabilities of industry chain enterprises.

Due to changes in product structure and increased costs in main business operations, the company’s profit margins have been severely squeezed.

According to the 2025 semi-annual report, Zhong Ying Technology achieved operating revenue of 97 million yuan in the first half of 2025, a decrease of 26.87% year-on-year; net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was -9.7576 million yuan, down 174.18% year-on-year.

This situation may persist throughout 2025.

The latest performance forecast for 2025 from Zhong Ying Technology shows that the company expects net profit attributable to the parent company to be between 1.8 million and 2.7 million yuan, a decline of 91.47% to 94.31% compared to the same period last year; net profit after deducting non-recurring gains and losses is expected to be a loss of 5 million to 9 million yuan, a decrease of 126.12% to 147.01% year-on-year.

The sluggish main business has prompted Zhong Ying Technology to urgently seek new growth engines.

From a business layout perspective, the company has been actively exploring emerging markets such as new energy. For example, in 2023, Zhong Ying Technology established a holding subsidiary, Jiangsu Jiasen Energy Technology Co., Ltd., engaged in energy storage industry integration.

Against this background, acquiring companies with certain industrial synergy potential has become an option to break the deadlock. According to the announcement on the evening of February 27, Zhong Ying Technology is planning to purchase at least 51% of Yingzhong Electric’s shares with cash and gain control, with the specific acquisition ratio to be determined by a formal agreement. After the transaction is completed, Yingzhong Electric will become a controlling subsidiary of the company and be included in the consolidated financial statements.

Although the transaction is still in the preliminary planning stage, combined with Zhong Ying Technology’s innovative development philosophy of “growing bigger, stronger, expanding the industry chain, and pursuing refined development,” this acquisition may be aimed at integrating related assets in the electrical equipment field to compensate for weaknesses in expanding new businesses, thereby connecting upstream and downstream, achieving industry chain synergy, and finding a breakthrough for its struggling performance.

Mergers and acquisitions under performance pressure, opportunities and risks intertwined

The “Daily Economic News” reporter noted that the most sensitive aspect of this acquisition is its “family-like” related-party transaction characteristic. The announcement clearly states that before this transaction, Yu Yingzhong, Yu Biao, and Zhu Lijuan held 60%, 30%, and 10% of Yingzhong Electric respectively; Yu Yingzhong and Zhu Lijuan are spouses; Yu Biao is the son of Yu Yingzhong and Zhu Lijuan; and Yu Yingzhong is a brother of Yu Weizhong, one of the actual controllers of the listed company. Therefore, this transaction constitutes a related-party transaction.

In the context of Zhong Ying Technology’s expected net loss after deducting non-recurring gains and losses in 2025, the company is utilizing its resources to acquire a company controlled by the actual controller’s relatives, and “this transaction does not involve issuing shares or constitute a reorganization,” meaning the listed company will pay a large amount of cash directly to the family members of the actual controller.

Meanwhile, a cash-only purchase will pose a severe test to Zhong Ying Technology’s already strained cash flow. According to the third quarter 2025 report, the company’s net cash flow from operating activities in the first three quarters of 2025 was only 6.6229 million yuan, down 80.32% year-on-year; operating revenue also decreased by 21.65% to 157 million yuan.

It is noteworthy that the announcement shows that the target company is a professional supplier of insulating fiber materials and their molded products. After years of industry development, its products cover all voltage levels of power transmission and transformation equipment, including medium, low, high, ultra-high, and extra-high voltage direct current.

“If this transaction proceeds smoothly, the company will gain control of the target company, which will be consolidated into the company’s financial statements. This will have a positive impact, help improve asset quality and overall competitiveness, expand business scale and profitability, and create value for all shareholders,” Zhong Ying Technology stated.

However, cross-industry integration and management risks should not be overlooked. Zhong Ying Technology has previously explicitly warned about “scaling management and subsidiary management risks” and “risks of new business development not meeting expectations” in its past financial reports.