Aihua Group Plans 1.88B Yuan Private Placement for High-End Capacitor Expansion, Payback Period Over 8 Years

September 18 Evening — AiHua Group has announced a private placement plan aimed at funding the expansion of its high-end capacitor production capacity.

Key Terms of the Offering

• Pricing Mechanism: The issuance price will be determined through a competitive bidding process, with the pricing benchmark set as the first day of the issuance period. The issue price shall not be lower than 80% of the average trading price of the company's stock over the 20 trading days prior to the benchmark date.
• Maximum Shares: Up to 119,633,958 shares, representing no more than 30% of the total share capital before the issuance. This cap is based on the total share capital of 398,779,860 shares as of the announcement date, without considering subsequent changes in share capital.

Use of Proceeds: High-End Capacitor Capacity Expansion Project

The funds raised will be directed toward the "AiHua Group Integrated High-End Capacitor Capacity Expansion Project", which includes:

• Acquisition of approximately 86.07 mu (approx. 5.74 hectares) of industrial land through a bidding, auction, or listing process.
• Construction of new buildings with a total floor area of approximately 126,708.00 square meters.
• Production lines for plastic-case/aluminum-aluminum electrolytic capacitors, large-size lead-type high-voltage aluminum electrolytic capacitors, and solid-liquid hybrid aluminum electrolytic capacitors.

Project Investment Breakdown

| Item | Amount (CNY) | Notes | |------|--------------|-------| | Total Project Investment | 1.507 billion | | | Construction Investment | 1.407 billion | Entirely funded by raised capital | | Equipment Procurement | 931 million | 61.79% of total investment | | Working Capital Reserve | 100 million | 93.294 million from raised capital; remaining 680,100 not covered by proceeds |

Projected Returns and Timeline

• Construction Period: 24 months
• After-Tax Internal Rate of Return (IRR): 11.53%
• After-Tax Static Payback Period: 8.55 years (including construction period)

The company noted that approvals from the National Development and Reform Commission (NDRC), environmental impact assessment, energy efficiency assessment, and land-use procedures are still in progress.

Strategic Rationale: Structural Upgrade

AiHua Group stated that new businesses such as film capacitors are still in the market introduction and capacity-building phase, contributing little to current profits. Profit growth continues to rely on the structural upgrade of its aluminum electrolytic capacitor business. The addition of high-end capacity is expected to increase the proportion of high-value-added products, thereby improving gross margins and earnings stability.

Financial Impact and Capital Structure

The issuance is expected to:

• Reduce interest-bearing debt
• Alleviate cash flow pressure from large capital expenditures
• Optimize key financial indicators such as asset-liability ratio and current ratio
• Improve liquidity and solvency
• Lower financial risk and strengthen the company's long-term capital base

Post-Issuance Shareholding Structure

Based on the maximum issuance volume, total share capital would increase from 398,779,860 to 518,413,818 shares. The controlling shareholder will remain Hunan AiHua Holdings Co., Ltd., and the actual controllers will remain Ai Lihua and Wang An'an. All subscribers will pay in cash, and the subscribed shares will be locked for six months from the issuance completion date.

Dilution Risk

The company acknowledges that the infusion of funds will increase share capital and net assets, while the new projects will take time to generate returns. As a result, earnings per share (EPS) and weighted average return on net equity (ROE) may decline in the short term. The company provided scenario analyses assuming 2026 net profit remains flat, increases by 10%, or decreases by 10% compared to 2025.

Key Risks

Issuance Process Risks

The plan has been approved by the board of directors but still requires:

• Approval by shareholders' meeting
• Approval by the Shanghai Stock Exchange
• Registration with the China Securities Regulatory Commission (CSRC)

There is uncertainty regarding final approval and timing, which may result in the issuance not being completed.

Market and Subscription Risks

The outcome of the issuance is subject to macroeconomic conditions, industry trends, overall stock market performance, the company's stock price trajectory, and investor sentiment. The company warns of the risk of insufficient fundraising or even issuance failure. If actual proceeds fall short of the plan, the company will adjust project priorities, sequencing, and investment amounts accordingly.

Project Execution Risks

Adverse changes in construction progress, quality, or investment costs could delay the project timeline or result in lower-than-expected outcomes. Other risks include policy changes, demand fluctuations, industry competition, and safety/environmental compliance.

Macro and Operational Risks

The company's downstream markets cover consumer electronics, new energy, and industrial sectors, which are subject to cyclical demand. The high-end market remains dominated by overseas players, while the mid-to-low-end market is highly competitive domestically. The company also faces exposure to fluctuations in aluminum and copper prices.

Dividend Policy

From 2023 to 2025, the company's cash dividend payout ratios relative to net profit attributable to shareholders were approximately 29.60%, 30.90%, and 30.09%, respectively. The cumulative cash dividends over the past three years accounted for 90.22% of the average annual net profit attributable to shareholders over the same period. The company's future three-year dividend plan emphasizes cash dividends as the priority, with an annual cash dividend of no less than 20% of distributable profits.

Stock Performance

As of the close on September 18, AiHua Group's stock fell 1.94% to CNY 34.78 per share, with a total market capitalization of approximately CNY 13.87 billion. The stock has surged approximately 108% year-to-date.

Source: Shenzhen Business Daily / Dochong Finance