When China Tobacco Hunan set off an anti-corruption storm, Zhu Linyao, the actual controller of Huabao Co., Ltd. (300741) (300741.SZ), an important tobacco flavor supplier of China Tobacco Hunan, was also investigated.
On the morning of January 24, Huabao Co., Ltd. announced that the company has recently received a notice of filing a case from the Leiyang City Supervisory Committee of Hunan Province, and it has decided to file a case for investigation into the violation of the company’s actual controller, Zhu Linyao. Affected by this, on the 24th, Huabao shares fell by the limit, and the stock price fell by 20%; while the stock price of Huabao International (00336, HK), the parent company of Huabao shares, opened lower and crashed, falling more than 65%.
“Zhu Linyao was investigated, there have been rumors before, or it may involve bribes to the tobacco system.” An industry insider revealed to the “Daily Economic News” reporter. What impact will Zhu Linyao’s investigation have on the operation of Huabao? In this regard, the relevant person of Huabao shares said that the specific impact depends on the development of the situation.
It is worth mentioning that on January 24, Hunan China Tobacco announced the procurement and service project 1 (January 2022-December 2023) of tobacco flavors and fragrances (flavors and flavors) among the winning candidates, a subsidiary of Huabao Co., Ltd. Still in it, the review score is 87.57 points, ranking first.
According to the disclosure of Huabao International, at present, the company has not obtained any details about the suspected illegal matters that Zhu Linyao is under investigation, and the company’s operations remain normal. Huabao shares said that Zhu Linyao did not hold any position in the company, nor did he participate in the company’s operation and management, and the above matters would not have a significant impact on the company’s daily production and operation activities.
Why was Zhu Linyao investigated? According to media reports, Zhu Linyao was investigated or related to Liu Jianfu, a member of the Hunan China Tobacco Party Group and deputy general manager last year. In August 2021, the Hunan Provincial Commission for Discipline Inspection announced that Liu Jianfu was suspected of serious violations of discipline and law, voluntarily surrendered and was under investigation.
Before Liu Jianfu, in October 2020, the Hunan Provincial Commission for Discipline Inspection and Supervision announced that Lu Ping, Secretary of the Party Leadership Group and General Manager of Hunan China Tobacco, was investigated for serious violations of discipline and law, along with the former director of Hunan China Tobacco Logistics Service Department Cao Lifang. At present, Hunan China Tobacco is setting off an anti-corruption storm.
Before Zhu Linyao was investigated, Hunan China Tobacco had close ties with Huabao. According to the prospectus disclosed by Huabao, from 2015 to 2017, Hunan China Tobacco ranked the second largest customer of Huabao all year round, accounting for about 15% of the company’s revenue.
In addition to the close cooperation with Hunan China Tobacco, Huabao has also cooperated with Yunnan China Tobacco for many years. China Tobacco Yunnan ranks among the largest customers of Huabao for many years. According to Huabao’s prospectus, from 2015 to 2017, China Tobacco Yunnan basically contributed about 23% to 28% of the company’s revenue.
Recently, officials from China Tobacco Yunnan have also been investigated. On January 24, 2022, the website of the Central Commission for Discipline Inspection and State Supervision Commission announced that Zhou Tao, deputy secretary and general manager of the Party Group of China Tobacco Yunnan, was suspected of serious violations of discipline and law and voluntarily surrendered to the case, and is currently under investigation.
The Shenzhen Stock Exchange quickly sent a letter to ask, what is the impact?
Zhu Linyao was investigated, how much does it affect? This is the most concerned issue of the outside world. On the evening of January 24, the Shenzhen Stock Exchange also quickly issued a letter of inquiry to Huabao, requesting to explain, so far, the company has the information on the specific matters that the Leiyang Municipal Supervisory Committee has filed for the investigation of Zhu Linyao’s illegal issue, whether it involves Corporate responsibility, whether it affects the stability of corporate control, etc.
When the Shenzhen Stock Exchange inquired about Huabao, on the afternoon of January 24th, a reporter from “Daily Economic News” also came to Huabao. The company did not seem to be affected and is still operating normally. Vehicles come in and out from time to time. Occasionally people come and go.
The reporter tried to understand the situation from the staff of Huabao, but did not get a substantive response. A staff member of Huabao Co., Ltd. said that he had never seen Zhu Linyao since he worked in Huabao Co., Ltd. for half a year, and he only learned about it through the announcement today.
“At present, what the company knows is the same as what investors know. What should be disclosed, the company has disclosed according to laws and regulations, and the content of the announcement is all the company knows.” personnel told reporters.
“I rarely see Mr. Zhu (Lin Yao), but never at all,” an employee of Huabao told reporters. A person close to Huabao told reporters that Zhu Linyao spent more time in Hong Kong and rarely returned to the mainland.
In the announcement on the morning of the 24th, Huabao described the impact of the incident on the company as follows: the company has a continuously improved governance structure and internal control mechanism, and its current production and operation are normal. Up to now, Zhu Linyao has not held any positions in the company and has not participated in the operation and management of the company.
Industry analysts generally believe that Zhu Linyao was investigated or involved in corruption incidents in the tobacco system such as bribery.
“If you pay bribes in the tobacco field, you are likely to be blocked by the tobacco system.” An industry insider revealed that a listed company had paid bribes to its largest customer, Hunan China Tobacco System. , not only Hunan Province, but also other provinces’ tobacco system bidding is also affected.
However, on January 24, Hunan China Tobacco announced the procurement and service project 1 (January 2022-December 2023) of tobacco flavors and fragrances (flavors and flavors), and the bid-winning candidates were announced, and the holding subsidiary of Huabao Co., Ltd. Guangzhou Huafang Tobacco Flavor Co., Ltd. is still among the winning candidates.
Zhu Linyao is quite mysterious and was once known as the “Pumping Queen”
Zhu Linyao is quite mysterious, and he almost never accepts media interviews, leaving only a vague impression of words to the outside world.
Zhu Linyao was born in Sichuan in 1970. After graduating from university, he went to sea to do business. At the age of 20, Zhu Linyao established his first flavor and fragrance trading company in Beijing, and started his career. In 2004, she established Huabao International and was listed on the Hong Kong Stock Exchange.
Huabao International started its fortune in tobacco flavors, and then gradually expanded to the fields of edible flavors and daily chemical flavors, but tobacco flavors are still the company’s most important business. At present, China‘s top ten cigarette companies are all customers of Huabao International, and these customers contribute more than 80% of the company’s revenue. Huabao Co., Ltd. is known as “The King of Tobacco Flavor in China“.
As the largest manufacturer of flavors and fragrances in China, Huabao International currently has production bases in Shanghai, Yunnan, Jiangsu, Shandong and other places. Wind data shows that from 2018 to 2020, Huabao International achieved net profits of 1.018 billion yuan, 1.112 billion yuan and 418 million yuan respectively.
The tobacco industry is a typical monopoly industry, and it is not easy to enter the supplier system of domestic tobacco companies. And Huabao shares not only successfully entered into a number of domestic provincial tobacco companies, but also has a super high net interest rate. According to Huabao shares, in the first three quarters of 2021, the company’s net profit margin was as high as 56.46%; in contrast, the net profit margin of Kweichow Moutai (600519) was 53.02% in the same period.
Regarding Zhu Linyao, there are still some places that are criticized by the outside world. He is known as the “Queen of Pumping” in the capital market. On the one hand, Huabao International had previously landed in Hong Kong stocks, and Zhu Linyao reduced his holdings to cash out billions of Hong Kong dollars. On the other hand, Huabao shares listed on the A-share IPO in March 2018, raising 2.312 billion yuan. In the following year, Huabao launched the 2018 dividend plan, with a dividend of 2.464 billion yuan in one go. Since the major shareholder Huafeng International holds 81.10% of the shares, this dividend basically went into the pocket of Zhu Linyao, the actual controller.
In addition, in March 2020, Huabao disclosed its dividend distribution plan for 2019, distributing a cash dividend of 19.8 yuan per 10 shares to all shareholders, with a total dividend of 1.22 billion yuan, accounting for 98.8% of the year’s net profit. In March 2021, Huabao disclosed its 2020 profit distribution plan, with a cumulative dividend of 985 million yuan, accounting for 83.5% of the year’s net profit. A large part of these money also went into Zhu Linyao’s pocket.
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