On May 16, Guangdong Songfa Ceramics Co., Ltd. (*ST Songfa) announced that it had received the “Approval on the Registration of Guangdong Songfa Ceramics Co., Ltd. to Issue Shares to Purchase Assets and Raise Supporting Funds” issued by the China Securities Regulatory Commission. The receipt of this approval marks a key progress in the listing process of the private shipyard Hengli Heavy Industroes on the A-share market.
Specifically, *ST Songfa proposes to purchase 100% of the equity of Hengli Heavy Industries held by Suzhou Zhongkun Investment Co., Ltd., Suzhou Hengneng Supply Chain Management Co., Ltd., Hengneng Investment (Dalian) Co., Ltd. and Chen Jianhua through major asset replacement and issuance of shares to purchase assets. The valuation of Hengli Heavy Industries is RMB 8 billion (approximately US$1.11 billion); and issue shares to no more than 35 specific investors to raise supporting funds of no more than RMB 4 billion (approximately US$555 million).
Upon completion of the issuance of shares for asset acquisition, Zhongkun Investment will hold 39.86% of the listed company’s shares, Heneng Investment will hold 15.24%, Suzhou Heneng will hold 15.24%, Chen Jianhua will hold 15.24%, and Hengli Group will hold 4.34%. Collectively, the aforesaid entities will hold 89.93% of the listed company’s shares. The controlling shareholder of the listed company will be changed to Zhongkun Investment, while the actual controllers will remain the couple of Chen Jianhua and Fan Hongwei.
According to the announcement, before this transaction, the listed company was mainly engaged in the research and development, production and sales of daily-use ceramic products, and its main products included daily-use porcelain, fine porcelain and ceramic wine bottles. Through this transaction, the listed company will strategically withdraw from the daily-use ceramic products manufacturing industry, and Hengli Heavy Industries will become a wholly-owned subsidiary of the listed company. The main business of the listed company in the future will be the research and development, production and sales of ships and high-end equipment.
The announcement highlights geopolitical risks: in January 2025, the Office of the U.S. Trade Representative announced the launch of a 301 investigation into China’s shipping, logistics and shipbuilding industries; in April 2025, the U.S. announced reciprocal tariff-related policies. Due to frequent changes in international policies, there is still some uncertainty about the impact on China’s shipbuilding industry. Geopolitical risks are likely to affect the market demand for the Subject Company’s shipbuilding business, which in turn may directly affect the Subject Company’s shipbuilding orders on hand translating into less-than-expected revenue.
It is worth mentioning that the announcement disclosed that among the RMB 4 billion supporting funds to be raised, RMB 3.5 billion will be used for the green high-end equipment manufacturing project of Hengli Shipbuilding (Dalian) Co., Ltd. and RMB 0.5 billion will be used for the project of internationalized ship research, development and design center (Phase I) of Hengli Heavy Industry Group Co.
It is understood that the first and second phases of Hengli Heavy Industries are named “Ocean Factory” and “Future Factory” respectively. In July 2024, Hengli Heavy Industries announced an additional investment of RMB 9.2 billion to start the second phase of Hengli Heavy Industries Industrial Park, and increased investment by RMB 2 billion to build Hengli Heavy Industries (Dalian Changxing Island) supporting industrial park; on August 15, Hengli Heavy Industries’ “Future Factory” started construction. In just 5 months, Hengli Heavy Industries Phase II was officially put into production on January 15, 2025.
The “Future Factory” focuses on high value-added green ships and high-end offshore engineering equipment manufacturing businesses, such as very large oil tankers, very large liquefied gas carriers, very large container ships, offshore floating production storage and offloading vessels, offshore floating wind power and drilling platforms. After full production capacity is reached, Hengli Heavy Industries will be able to achieve an annual processing volume of 2.3 million tons of steel and an annual production of 180 engines.
As a new shipyard established for just over 2 years, Hengli Heavy Industries has advanced rapidly. According to data released by Clarksons, in 2024, Hengli Heavy Industries ranked among the top 10 global shipyards, securing the 4th position on the list with an order volume of 56 ships and 2.68 million compensated gross tonnages.