75 Listed Companies Forecast The Risk Of Goodwill Impairment

With the advent of the annual report disclosure season in 2020, A-share market has ushered in another round of thunder storm.

On the evening of January 20, Adil and Jincheng Pharmaceutical Co., Ltd. announced that the company's performance had exploded at the same time. The former was expected to lose 846 million yuan - 950 million yuan, while the latter was expected to lose 450 million yuan - 500 million yuan. The reasons for the explosion were related to the failure of merger and reorganization.

However, in the face of the explosive performance, on January 21, the secondary market showed a completely different trend. The stock price of Adil fell by 9.49%, while the stock price of Jincheng pharmaceutical rose slightly by 0.54%.

"If there is no provision for goodwill, Jincheng pharmaceutical's performance is positive, and after full provision of goodwill, the company can go to battle with light equipment." On January 21, a private equity firm engaged in pharmaceutical investment in South China said.

As a matter of fact, this is just the tip of the iceberg of the current performance explosion. According to wind data, up to now, 1098 listed companies have disclosed the performance express in 2020, of which 16 enterprises have a loss in advance of more than 400 million yuan. The reporters found that most of the enterprises whose performance changed or deteriorated significantly were dragged down by goodwill, leading to performance deterioration.

Several listed companies forecast "thunder"

The "thunder" announcement of Adil, Jincheng pharmaceutical and other companies has triggered a wave of goodwill impairment in 2021.

On the evening of January 20, Adiel released the "performance forecast for 2020", and the company is expected to lose 846 million yuan - 950 million yuan in 2020.

As for the reasons for the company's performance changes, adier said that the company lost effective control over its holding subsidiary Shenzhen Dapan Jewelry Co., Ltd. (hereinafter referred to as "Dapan jewelry") and will not be included in the consolidated statements since April 2020, and it is expected to make full provision for impairment of the investment.

In addition, Aidier said that affected by the epidemic situation, Jiangsu Millennium Jewelry Co., Ltd. (hereinafter referred to as "Millennium jewelry") and Chengdu Shumao diamond Co., Ltd. (hereinafter referred to as "Shumao diamond") are not expected to complete the original performance commitment in 2020, and the company expects to make provision for impairment of goodwill in that year.

In fact, there are signs of this goodwill accrual, and early years of frenzied mergers and acquisitions are gradually bringing down Adil. In 2017, after two years of landing in the capital market, Adil's merger and acquisition heart started. Within one year, it planned to acquire three companies. First, it purchased 51% of the stock rights of large scale jewelry with a cash price of 255 million yuan; then, it purchased 100% equity of Millennium jewelry with a price of 900 million yuan, and acquired 100% equity of Shumao diamond with a price of 700 million yuan.

At the same time, the company also wanted to acquire the shares of Shandong Shijiyuan Jewelry Co., Ltd. and Shenzhen diamond blank Trading Center Co., Ltd. after listing, but it failed in the end.

However, the above three mergers and acquisitions did not significantly improve the performance of Adil. In 2017, the company realized a net profit attributable to shareholders of about 60.34 million yuan, a slight increase of 4.4% over the same period of last year. In 2018, the net profit of attributable shareholders was about 28.15 million yuan, a sharp decrease of 53.35% year-on-year. In 2019, the company's net profit loss of nearly 300 million yuan is due to the large amount of goodwill withdrawn for large jewelry.

And if Adil's forecast finally comes true, the company will be given a risk warning for two consecutive years of losses. As of the third quarter of 2020, the number of shareholders of Adil is 38800, and the top ten circulating shareholders hold 65.6583 million shares, accounting for 27.19% of the total circulating shares.

The same "thunder" scene also happened in Jincheng medicine.

Jincheng pharmaceutical announced that the company is expected to achieve a net profit attributable to shareholders of Listed Companies in 2020, with a loss of 450 million yuan to 500 million yuan, and a profit of 203 million yuan in the same period of last year. According to the preliminary calculation of the company, it is planned to make a total of 740 million yuan of goodwill impairment reserves for Jincheng Taier and Jincheng Suzhi. After the withdrawal, the balance of goodwill of Jincheng Taier and Jincheng Suzhi is 0.

However, with Adil investors one-sided vote with their feet, Jincheng pharmaceutical's share price is slightly red after the announcement.

According to the 21st century economic report, this is not the first time that Jincheng Taier has been withdrawn for impairment loss. As early as 2018, Jincheng Taier was withdrawn with a goodwill impairment reserve of 122 million yuan due to the profit level not meeting the expectation. In 2019, Jincheng Taier's performance declined and its profit did not meet the expectation. Jincheng pharmaceutical made another provision for impairment of goodwill of Jincheng Taier by 286 million yuan. After the provision for impairment of goodwill is withdrawn, the balance of goodwill of Jincheng Taier is 0.

In fact, from a longer-term perspective, the stock price of Jincheng pharmaceutical has been declining for four consecutive months since it reached the peak in the year at the end of July 2020. As of January 21, the stock price of Jincheng pharmaceutical has declined by nearly 50%, nearly cutting back.

The tide of goodwill impairment rises again

In fact, the performance of Jincheng pharmaceutical and Adil is only one part of the boom of goodwill in the disclosure period of the annual report.

According to the statistics of 21st century economic report, 75 enterprises mentioned the loss of goodwill impairment in the announcement of more than 1000 listed companies' performance forecasts.

Among them, * ST Zhongtai is expected to have a loss of 2.2 billion to 3.3 billion yuan due to the large amount of goodwill impairment reserves; the scope of goodwill impairment reserves to be withdrawn by Huatai Heavy Machinery Co., Ltd. is from RMB 700 million to RMB 900 million, and that of gaoweida is expected to be between RMB 645 million and RMB 794 million in 2020; Hekang New Material Co., Ltd. expects that in 2020, the company will make the remaining business from the acquisition of 100% equity of Beijing Huatai Runda Energy Saving Technology Co., Ltd Write down

"After the goodwill impairment of A-share reached a record high in 2018, the market has aroused great concern. In 2019, the pressure on goodwill impairment has been eased, but there is still a high level of goodwill to be further digested. In 2020, the new crown pneumonia epidemic will cause heavy damage to the real economy, and the pressure of goodwill impairment in the 2020 annual report may come again, so we need to be vigilant. " According to an interview with a strategic analyst of a medium-sized securities firm in Shanghai.

According to the reporter's statistics, by the end of the third quarter of 2020, the total amount of goodwill in the A-share market totaled 1.28 trillion, which was also significantly lower than the scale of 1.39 trillion in the third quarter of 2019. However, the goodwill pressure of some listed companies and industry sectors should not be underestimated.

Wind data shows that there are 14 enterprises with a goodwill scale of more than 400 million yuan in A-share market. Among them, Midea Group has the highest goodwill scale, which is 28.928 billion yuan, followed by Weichai Power Group, which is 24.251 billion yuan, and Haier Zhijia, the third largest, has reached 23.344 billion yuan.

From the perspective of the proportion of goodwill to the total market value, as of January 21, the scale of goodwill of three enterprises accounted for more than 100% of the total market value, namely HNA technology, digital technology and Jinhong group, with the proportions of 208.59%, 148.71% and 146.52%, respectively. The scale of goodwill of the three companies was 15.324 billion yuan, 6.186 billion yuan and 1.827 billion yuan respectively.

From the perspective of industry distribution, medical biology, media, computer, electronics and non bank finance are the sectors with the highest goodwill, with the scale reaching 150.819 billion yuan, 122.605 billion yuan, 108.044 billion yuan, 94.263 billion yuan and 87.943 billion yuan respectively.