Longxin General's 1 Yuan "Fire Sale" of Subsidiaries Follow-up: 70.31 million yuan in financial assistance overdue, the company states that full impairment provision was made last year

Every reporter | Chen Pengli Every editor | Liao Dan

An investment in the drone business that spanned over ten years was ultimately divested for 1 yuan, but the story’s aftershocks continue.

On the evening of March 25, Longxin General (SH603766, stock price 14.09 yuan, market value 28.934 billion yuan) announced that its former subsidiary Zhuhai Longhua Helicopter Technology Co., Ltd. (hereinafter referred to as Zhuhai Longhua) owed the company a total of 70.3128 million yuan in loans and accounts receivable, which have now become overdue.

This comes just over four months after Longxin General “dumped” all of its shares in Zhuhai Longhua for 1 yuan in November 2025. Regarding this overdue payment, Longxin General stated that the company had fully provided for impairment of this debt in its 2025 fiscal year, and therefore it does not expect a significant impact on the company’s profits and losses for the 2026 fiscal year.

According to reporters, Zhuhai Longhua is currently insolvent, with net assets of -68.2934 million yuan as of the end of February 2026. Longxin General bluntly indicated that there is a risk of difficulty in recovering subsequent payments.

Zhuhai Longhua Financial Data

From investing 50 million yuan to boldly enter the drone field in 2014 to exiting quietly over a decade later, Zhuhai Longhua’s journey has become a failed attempt by Longxin General in exploring emerging businesses.

According to Longxin General’s recent 2025 annual performance forecast, the company anticipates a year-on-year increase of over 47% in net profit attributable to shareholders. The growth momentum comes from the steady growth of the company’s motorcycle and general machinery main businesses, as well as the continuous optimization of the product structure of the Wujing series.

The 70.31 million yuan owed by Zhuhai Longhua has become overdue

Regarding the overdue financial assistance, Longxin General announced that as of the announcement date, the company had cumulatively received loan principal and interest and accounts receivable totaling 70.3128 million yuan from its former subsidiary Zhuhai Longhua, and the relevant amount has become overdue. This debt mainly consists of two parts: loan principal and interest of 59.0997 million yuan and accounts receivable of 11.2131 million yuan.

In fact, when deciding to sell the equity in Zhuhai Longhua, Longxin General had already indicated the risk of recovering this debt. In the equity transfer announcement disclosed by the company last November, it clearly reminded that Zhuhai Longhua still owed the company loan principal and interest and accounts receivable totaling 69.8952 million yuan, and pointed out that “due to Zhuhai Longhua’s inability to achieve its commercialization goals, the net assets on the books are negative, and it is insolvent, so there is a risk of the aforementioned amounts being unrecoverable.”

Longxin General emphasized in its announcement that it had fully provided for impairment on the receivables from Zhuhai Longhua regarding loan principal, interest, and accounts receivable in the 2025 fiscal year, and it expects that there will be no significant impact on the company’s profits and losses for the 2026 fiscal year, subject to the annual audit by accountants. The related debt accounts for 0.77% of the company’s most recent audited net assets.

Reporters from the Daily Economic News learned that although the “provision for impairment on Zhuhai Longhua’s loans and accounts receivable” affected Longxin General’s performance in the fourth quarter of last year, it did not significantly impact the company’s annual performance for 2025. The company had previously estimated that its net profit attributable to shareholders for 2025 would be between 1.65 billion and 1.8 billion yuan, representing a year-on-year increase of 47.15% to 60.53%; net profit after deducting non-recurring gains and losses is expected to increase year-on-year by 46.03% to 59.72%.

Just over four months ago, all shares in Zhuhai Longhua were “dumped” for 1 yuan

Going back over a decade, Longxin General once had high hopes for the drone industry. In October 2014, Longxin General announced that it would jointly invest 100 million yuan with Wang Haowen and Shenzhen Lihe Venture Capital Co., Ltd. (now renamed Lihe Science and Technology Group Co., Ltd.) to establish a joint venture company dedicated to the research, development, manufacturing, and sales of unmanned helicopter systems and components. Among them, Longxin General invested 50 million yuan and held a 50% stake in Zhuhai Longhua.

At that time, the company described a broad market outlook in its announcement, believing that the domestic unmanned aerial vehicle industry was in its infancy, with enormous potential and space for the future. In April 2015, Zhuhai Longhua successfully assembled its first professional agricultural plant protection drone (XV-2).

The ideal is full, but the reality is stark. Reporters from the Daily Economic News noted that since its establishment, Zhuhai Longhua’s commercialization process has always been slow, with weak profitability. According to Longxin General’s response to the Shanghai Stock Exchange’s regulatory letter in July 2024, Zhuhai Longhua has been in a loss state in all years except for 2017 and 2020, with total losses exceeding 100 million yuan. Its main product, the agricultural plant protection drone, failed to generate bulk orders in the market, and its later transition to special uses such as security has long remained at the product trial and performance verification stage due to technical requirements, resulting in a huge contrast between high R&D investment and meager operating income.

Faced with this long-term loss-making business, Longxin General ultimately chose to “cut off the arm.” On November 13, 2025, the company’s board of directors reviewed and approved a proposal to transfer approximately 50% of its shares in Zhuhai Longhua to its minority shareholder Li Liangjun for 1 yuan. The company clearly stated in the announcement that this move was to implement a development strategy focused on its main business, and after the divestiture, Longxin General would no longer hold shares in Zhuhai Longhua.

As of the end of February this year, Zhuhai Longhua’s total assets were only 20.5961 million yuan, while total liabilities reached 88.8895 million yuan.

Reporters also learned that Longxin General has another subsidiary engaged in drone-related businesses, namely Chongqing Lingzhi Aviation Technology Co., Ltd. This subsidiary had revenue of only 1.9751 million yuan in the first half of 2025, with net profit of less than 1 million yuan.