Loss-Making Oil Company Makes Bold Bet on Chips: Hunan Petroleum Tycoon Acquires a Cross-Industry Target through Cross-Border Acquisition at a 821% Premium

(Source: China Electricity News)

Reprinted from: China Electricity News

Heshun Petroleum (603353.SH) has made new progress in its cross-industry acquisition.

On March 18, Heshun Petroleum announced that the company will acquire a 51.11% voting stake in Shanghai Kweichip Integrated Circuit Design Co., Ltd. (hereafter “Kweichip Technology”) through a combination of equity purchase and capital increase, valued at 540 million yuan, to gain control of Kweichip Technology.

To secure control of Kweichip Technology, Heshun Petroleum paid a premium. According to disclosures, the valuation of Kweichip Technology’s equity was increased by 1.208 billion yuan over its book value, an appreciation rate of 821.07%. A reporter from Huaxia Times tried to contact Heshun Petroleum’s Secretary Office but was unable to reach them by phone before press time.

A securities firm advisor told the reporter that Heshun Petroleum’s main business is gas station operations. Entering the chip industry requires very high management standards. The valuation of chip companies in the capital market is definitely higher than that of oil companies, but since the announcement of this cross-industry merger and acquisition, the stock has already experienced a significant increase. Investors should be cautious about chasing the high.

Cross-industry acquisition

According to the announcement, on March 18, the board of directors of Heshun Petroleum approved the relevant equity acquisition plan. At the same time, the listed company, its wholly owned subsidiary, and HeXinWei (Shanghai) Electronics Co., Ltd. (“HeXinWei”) signed a series of agreements including equity transfer and capital increase agreements with Kweichip Technology and some of its shareholders and actual controllers.

Specifically, HeXinWei plans to acquire a 35.1105% stake in Kweichip Technology for 540 million yuan in cash through capital increase and equity transfer, and to exercise voting rights on behalf of other companies holding a total of 16% of Kweichip Technology’s shares, thereby controlling 51.1105% of the voting rights and gaining control of Kweichip Technology.

After the transaction, Kweichip Technology will be consolidated into Heshun Petroleum’s financial statements and become its controlling subsidiary. Heshun Petroleum will appoint two-thirds of the directors of Kweichip Technology. The CFO of Kweichip Technology will be recommended by Heshun Petroleum, which will have decision-making power over its operations, personnel, and financial matters.

Data shows that Kweichip Technology mainly focuses on R&D and licensing of high-speed interface IP, providing Chiplet solutions and high-speed interconnect products, along with one-stop chip customization services. It belongs to the semiconductor IP industry, which involves reusable integrated circuit modules with specific functions that have been pre-verified, serving as the core underlying technology for chip design.

Heshun Petroleum states that its management believes the semiconductor IP industry has good development prospects and significant growth potential. Kweichip Technology’s business model is based on high-value semiconductor IP solutions. Therefore, the company plans to strategically position itself in this industry to seize opportunities for domestic substitution of semiconductor IP, find new growth points, and promote sustainable future development.

Financial data shows that Kweichip Technology is expected to achieve revenue of 159 million yuan and a net loss of 18.4888 million yuan in 2024; revenue is projected to grow to 212 million yuan with a net profit of 20.6405 million yuan in 2025, turning profitable. As of the end of 2025, the company’s total assets are 332 million yuan, with net assets of 84.1092 million yuan.

Main business losses

Unlike Kweichip Technology, which is expected to turn profitable, Heshun Petroleum has reported its first loss since listing.

On January 23, Heshun Petroleum released a forecast for 2025, estimating a net loss attributable to the parent company of between 22 million and 17.6 million yuan; non-recurring net loss between 30.5 million and 25 million yuan, based on preliminary calculations by the finance department.

The company explained that the temporary loss was mainly due to provisions for bad debts related to pre-paid rent and pre-paid goods. These provisions are a cautious, phased accounting measure, as the likelihood of recovery for these receivables is relatively high, and the provisions are meant to strengthen asset quality.

Public information shows that Heshun Petroleum was established in July 2005. Its main businesses include retail chain gas stations, refined oil storage, logistics distribution, and wholesale, forming a complete industrial chain in refined oil circulation. In April 2020, Heshun Petroleum was listed on the Shanghai Stock Exchange Main Board, with founder Zhao Zhong’s family becoming prominent oil tycoons in Hunan. The semi-annual report for 2025 disclosed that Heshun Petroleum operates 35 self-operated gas stations.

In recent years, due to the impact of the new energy industry, the company’s performance has been under pressure. In 2023 and 2024, Heshun Petroleum’s revenue was 3.273 billion yuan and 2.812 billion yuan, respectively, down 18.04% and 14.11% year-on-year; net profits attributable to the parent were 52.23 million yuan and 29.26 million yuan, down 49.66% and 43.97%, respectively.

In response, the company has actively shifted to new energy, focusing on fast-charging business, leveraging existing gas station resources to build charging facilities. As of June 30, 2025, Heshun Petroleum operated 7 ultra-fast charging stations. However, this business has not yet become a major driver of growth; in the first half of 2025, gasoline and diesel sales still contributed over 98% of revenue.

Now, the company is placing hopes for growth on the chip industry, acquiring control of a chip company at a high premium. The announcement shows that, according to the valuation report from an appraisal agency, the total equity value of Kweichip Technology’s shareholders was assessed at 1.3554 billion yuan, an increase of 1.208 billion yuan over its book value, with an appreciation rate of 821.07%.

Renowned tax and finance expert and senior CPA Liu Zhigeng told the reporter that such a high premium of 821.07% is usually seen when the acquirer is highly optimistic about the target’s future technological potential, strategic synergy, or industry trends, and market expectations are very high, even if the current financial performance has not fully reflected that value.

Liu Zhigeng further pointed out that such extreme premiums are not accidental but result from specific conditions, essentially “paying today’s heavy price for tomorrow’s explosion.” Such high premiums reflect strong market expectations for technological potential but also carry significant valuation risks—if future performance falls short, the acquirer could face serious losses.

To ensure transaction safety, Heshun Petroleum has also signed performance compensation agreements with related parties of Kweichip Technology. From 2026 to 2028, Kweichip Technology’s annual revenue must not be less than 450 million, 600 million, and 750 million yuan, respectively, with IP and high-speed interconnect product revenues not less than 210 million, 235 million, and 262.5 million yuan, and each year’s net profit attributable to the parent must be positive.

It should be noted that if performance commitments are not met, the actual controller of Kweichip Technology, Chen Wanyi, and five other parties will compensate Heshun Wei in cash and bear joint liability.

Editor: Jiang Pengxin