Changyuan East Valley plans to increase capital to acquire Kanghao Mechanical and Electrical

Securities Times reporter Kang Yin

Changyuan Donggu (603950) announced on the evening of April 7 that the company plans to purchase 100% of the equity of Kanghao Electromechanical from the counterparty it holds through the issuance of shares, and to raise supporting capital by issuing shares to no more than 35 specific investors. According to relevant regulations, Changyuan Donggu’s stock will resume trading starting from the opening of the market on April 8.

As of the date of signing of the preliminary plan, the auditing and valuation work for Kanghao Electromechanical has not yet been completed, and the specific transaction price for this transaction has not yet been determined. Changyuan Donggu said that this transaction constitutes a related-party transaction, is expected to constitute a major asset reorganization, but does not constitute a reorganization for listing, and will not lead to any change in the company’s controlling shareholder or actual controller.

The announcement shows that Kanghao Electromechanical focuses on the R&D, production, and sales of heat exchange systems and integrated diesel power unit technologies. Since 2008, Kanghao Electromechanical has focused on core heat management technologies. Relying on metal processing technology, large-scale production, quality control, R&D innovation, and rapid response capability, it has established deep cooperation with leading domestic and overseas manufacturers such as Cummins Group, Caterpillar, MTU, Guangxi Yuchai, Weichai Power, Sinodrune? (苏美达), and Kotech Power (科泰电源), among others.

Kanghao Electromechanical has two national-level “specialized, refined, distinctive, and new” “little giant” enterprises under it: Wuhan Beiwode Heat Technology Group Co., Ltd. and Xiangyang Langhong Heat Technology Co., Ltd. It has laid out production bases in Beijing, Wuhan, Xi’an, Xiangyang, Hong Kong, and other places for products such as heat exchange systems and electronic speed regulators related to diesel power units. It also has multiple high-performance laboratories.

In terms of performance, in 2024 and 2025, Kanghao Electromechanical achieved operating revenue of RMB 1.45B and RMB 1.64B, respectively; net profit attributable to the parent was RMB 237 million and RMB 278 million, respectively.

The transaction plan shows that this transaction consists of two parts: acquiring assets by issuing shares and raising supporting capital. Changyuan Donggu plans to purchase 100% of Kanghao Electromechanical’s equity held by Xinyuan Power through the issuance of shares. After consultations among the parties to the transaction, the issue price for this offering is RMB 29.87 per share. After the transaction is completed, Kanghao Electromechanical will become a wholly owned subsidiary of Changyuan Donggu.

At the same time, Changyuan Donggu plans to issue shares to raise supporting capital, which will be used to pay fees of intermediaries for this transaction, relevant taxes and duties, and fund the project construction of Kanghao Electromechanical and replenish working capital for the listed company and the target company.

It is understood that Changyuan Donggu’s principal business is the R&D, production, and sales of core components for diesel, natural gas, and gasoline engine powertrains (such as engine blocks, cylinder heads, connecting rods, etc.). After more than 20 years of deep cultivation in the industry, the company’s main customers include Futian Cummins, Dongfeng Cummins, Dongfeng Commercial Vehicles, Guangxi Yuchai, and others. In recent years, it has gradually expanded into the field of new energy hybrid passenger vehicles such as BYD and Seres, with its product categories continuously enriched and optimized.

Changyuan Donggu said that after the completion of this transaction, the company can extend its business to downstream areas of industry chains such as heat exchange systems and integrated diesel power unit technologies, while simultaneously obtaining high-quality customer groups in equipment fields such as diesel power systems, oil and gas fields, and rail transit, as well as R&D resources from high-performance laboratories and professional technical talent from the target company. This will enable the company to extend and strategically deploy from “manufacturing core engine components” to “core supporting systems such as heat exchange systems + integrated diesel power units,” complete the upgrade from a supplier of core components to a supplier of core supporting systems and unit integration, further enrich its product matrix, strengthen collaborative linkage and binding with downstream customers, and continue to consolidate and improve its industry market position.

After the transaction is completed, Kanghao Electromechanical will be included in the consolidated scope of the listed company, which will enhance the company’s level of operating revenue and its ability for sustainable operations, and will help improve the company’s overall operating quality.