LED main business "emergency", the rectangular group planning and acquisition of educational assets "roads are bumpy"

On the evening of June 28, the Changfang Group announced that it decided to terminate the planning of major issues involving foreign investment in the education industry. The reporter noted that the Changfang Group has planned extensive M&A in the past year and tried to transform the dual main business of “LED+ Education”.

Termination of planning for foreign investment

On May 16, 2017, the Changfang Group issued the “Announcement on Suspension of Company Stocks”, stating that the company is planning major issues involving foreign investment in the education industry. A month and a half later, the Changfang Group announced that it had terminated the planning of this major event.

The announcement issued by the Changfang Group on the evening of June 28 shows that this major event involves foreign investment in the education industry. The company intends to acquire 51% of the equity related to unrelated third-party education by means of equity transfer and capital increase. As the parties to the transaction finally failed to reach an agreement on some key issues.

After carefully listening to the opinions of all parties and investigating and demonstrating, the company believes that the conditions for continuing to promote the project are not yet mature, and the company finally decided to terminate the planning of this foreign investment.

The Changfang Group stated in the announcement that the termination of major events in this plan will not adversely affect the company's future development strategy, business planning and production operations. The company will continue to seek new industry opportunities in light of future development needs, strive for new profit growth points, and maintain stable and sustainable development of the company.

The reporter noted that the Changfang Group announced the termination of the foreign investment and announced a strategic cooperation. The announcement shows that the Changfang Group signed a Strategic Cooperation Agreement with Guangzhou New Brain Education Technology Co., Ltd. (hereinafter referred to as New Brain Power) on June 27.

The Changfang Group stated that it is in consideration of the long-term development strategy of both parties and the two sides decided to join hands to develop cooperation in the field of education. The cooperation includes: comprehensively integrating the high-quality educational resources of both parties and extending the education industry chain; the two sides cooperate to explore the possibility of derivative business operations in the field of children's education; strengthen foreign investment cooperation, and participate in the M&A/incubation of children's industry by leveraging the company's platform resources and financing advantages. Investment, etc.

Transformation "LED + education" dual industry operation

It is understood that the main business of the Changfang Group is the packaging of white LEDs for lighting. It is mainly engaged in the R&D, design, production and sales of LED lighting source devices and LED lighting products, and belongs to the semiconductor optoelectronic device manufacturing industry in the electronic components industry.

The 2016 annual report of the Changfang Group shows that the gross profit margin of most of the company's products has declined. Among them, SMD LED (including high power) is the company's second largest source of revenue products, the product revenue reached 497 million yuan, gross margin was only 6.74%, down 74.58% year-on-year. In addition, the gross profit margin of packaged products was 14.31%, down by 42.82% year-on-year.

In an interview with the reporter of "Daily Economic News", the industry insiders said that the gross profit margin of different packaging companies is not the same. In the past two years, the gross profit margin of the whole industry is generally between 15% and 30%. Some companies may have weaker cost control, and the market competition is fierce, so the gross profit margin is relatively low. For example, in 2015 and 2016, some companies may have a gross margin of less than 10%.

The Changfang Group also said in the 2016 annual report that according to statistics, there were more than 2,000 packaging companies in China in 2016, providing 70% of the global packaging output. However, at present, domestic enterprises are mainly concentrated in the middle and low-end packaging fields. The market concentration is low and the competition situation is fierce. As more capital enters the mainland packaging industry, the industry competition will become more intense.

Under the “emergency” of the main business, the Changfang Group announced that the LED industry has entered the education industry across the border.

The 2016 annual report of Changfang Group shows that in 2017, the company combined with the development status and trend of the LED industry, and continued to consolidate its position in the LED industry with industry experience and technological advantages to consolidate its LED business.

At the same time, we will accelerate the pace of transformation of the education industry. On the basis of implementing the strategy of the early childhood education industry, we will gradually pay attention to and study the development trends of K12 education, higher education institutions, international education and vocational education. The company said that it will strive to become the first-class education group with the most influential domestic quality and quality within five years.

In fact, since June 2016, the Changfang Group has begun to lay out the education industry.

On June 6, 2016, in order to promote the implementation of the company's strategic development planning goals and promote the company's extended development, the company announced that it plans to invest 100 million yuan of its own funds to establish a wholly-owned subsidiary Shenzhen Qianhai Changfang Education Management Co., Ltd. (hereinafter referred to as Rectangular education).

On the same day, the Changfang Group announced that it would jointly invest with Shenzhen Qianhai Yide Capital to set up an education industry investment M&A fund with a fund size of no more than 2 billion yuan.

In the past year, the Changfang Group has repeatedly planned outreach mergers and acquisitions and actively sought transformation. In January 2017, the Changfang Group signed a formal “Investment Agreement” with Beijing Minming, Wu Xinfeng, Zhou Yanni and Shell Yude through its M&A investment fund, investing in Shell Jinbao in the form of equity transfer and capital increase, and finally obtained Shell Jinbao 51. % equity. Shell Jinbao focuses on high-end early childhood education.

On February 9, 2017, the Changfang Group issued the "Announcement on Termination of the Cooperation Framework Agreement", stating that the company had previously planned to acquire 60% of Shenzhen Terei New Education Group Co., Ltd. by way of transfer of equity and capital increase by 600 million yuan. Equity, but the two sides failed to reach an agreement on some specific issues concerning future cooperation. After friendly consultations between the two sides, they agreed to terminate the Cooperation Framework Agreement.

The "Daily Economic News" reporter noted that as of the end of last year, the long-term education has not yet begun operations. Last year, the long-term group realized a net profit attributable to shareholders of the listed company of -62.745 million yuan.

In response to more transformation plans in the future, the reporter tried to contact the Secretary of the Board of Directors of the Changfang Group on June 29, but failed to receive a reply before the press release.


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