Longxin General's Follow-up After "Clearance Sale" of Subsidiary for 1 Yuan: 70.31 Million Yuan Financial Assistance in Default, Company Claims Full Impairment Provision Was Made Last Year

Everyday Economic News Reporter | Chen Pengli Everyday Economic News Editor | Liao Dan

A ten-year investment in the drone business was ultimately divested for 1 yuan, but the story’s ripple effects are still ongoing.

On the evening of March 25, Longxin General (SH603766, stock price 14.09 yuan, market value 28.934 billion yuan) announced that the loans and transactions owed by its former controlling subsidiary, Zhuhai Longhua Helicopter Technology Co., Ltd. (hereinafter Zhuhai Longhua), totaling 70.3128 million yuan, have become overdue.

This is just over four months after Longxin General sold all its shares in Zhuhai Longhua at a price of 1 yuan in November 2025. Regarding this overdue payment, Longxin General stated that the company had fully provisioned for the impairment of this receivable in 2025, so it is not expected to have a significant impact on the company’s 2026 financial results.

Sources indicate that Zhuhai Longhua is now insolvent. As of the end of February 2026, its net assets were -68.2934 million yuan. Longxin General openly admits that there is a risk that the subsequent payments will not be recovered.

Zhuhai Longhua Financial Data

From a high-profile investment of 50 million yuan into the drone industry in 2014 to a dismal exit over a decade later, Zhuhai Longhua’s journey has become a failed attempt by Longxin General to explore emerging businesses.

According to Longxin General’s recent disclosure of its 2025 performance forecast, the company expects a year-over-year increase of over 47% in net profit attributable to the parent last year. The growth is driven by steady expansion in the motorcycle and general machinery main businesses, as well as ongoing optimization of the Wuji series product structure.

The overdue 70.3128 million yuan owed by Zhuhai Longhua

Regarding the overdue financial support, Longxin General announced that as of the disclosure date, the company’s total receivables from its former controlling subsidiary Zhuhai Longhua, including principal, interest, and related transactions, amounted to 70.3128 million yuan. This debt mainly consists of 59.0997 million yuan in principal and interest, and 11.2131 million yuan in related transactions.

In fact, when deciding to sell Zhuhai Longhua’s equity, Longxin General had already warned of the risk of non-recovery. In the November 2024 equity transfer announcement, the company explicitly stated that Zhuhai Longhua still owed the company a total of 69.9852 million yuan in principal, interest, and related transactions, and pointed out that “due to Zhuhai Longhua’s failure to achieve commercialization goals, its book net assets are negative and it is insolvent, with a risk of non-recovery of the above amounts.”

Longxin General emphasized in the announcement that it had fully provisioned for the impairment of the receivables from Zhuhai Longhua in 2025, and it is not expected to significantly impact the company’s 2026 earnings, subject to annual audit by accountants. The overdue amount accounts for 0.77% of the company’s latest audited net assets.

According to reporters from Daily Economic News, although the “provision for impairment of loans and transactions from Zhuhai Longhua” affected Longxin General’s performance in the fourth quarter of last year, it did not have a significant impact on the company’s 2025 annual results. The company previously forecasted that its net profit attributable to the parent in 2025 would be between 1.65 billion and 1.8 billion yuan, an increase of 47.15% to 60.53% year-over-year; net profit after deducting non-recurring gains and losses was expected to increase by 46.03% to 59.72%.

Just over four months ago, all of Zhuhai Longhua’s shares were sold at 1 yuan

Looking back over a decade, Longxin General once had high hopes for the drone industry. In October 2014, Longxin General announced that it, along with partners Wang Haowen and Shenzhen Lihé Venture Capital Co., Ltd. (now renamed Lihehe Innovation Group Co., Ltd.), jointly invested 100 million yuan to establish a joint venture dedicated to the research, development, manufacturing, and sales of unmanned helicopter systems and components. Longxin General invested 50 million yuan, holding 50% of Zhuhai Longhua.

At that time, the company painted a bright picture of the market prospects, believing that the domestic unmanned aerial vehicle industry was in its infancy with huge potential and room for growth. In April 2015, Zhuhai Longhua successfully assembled its first professional agricultural pest-control drone (XV-2).

Idealism was high, but reality was harsh. The Daily Economic News reporter noted that Zhuhai Longhua’s commercialization process has been slow, and its profitability weak. According to Longxin General’s reply to the Shanghai Stock Exchange’s regulatory work letter in July 2024, Zhuhai Longhua has been in a loss-making state except for slight profits in 2017 and 2020, with total losses exceeding 100 million yuan. Its main product, agricultural pest-control drones, failed to generate mass orders, and its subsequent transition to security and other specialized uses was hampered by technical requirements, leaving products in testing and performance validation stages. The high R&D costs contrasted sharply with the meager operating income.

Faced with long-term losses, Longxin General ultimately chose to “cut its losses.” On November 13, 2025, the board approved the plan to transfer approximately 50% of Zhuhai Longhua’s shares to minority shareholder Li Liangjun at 1 yuan. The company explicitly stated that this move was part of its strategy to “focus on core businesses,” and after the transfer, Longxin General would no longer hold any shares in Zhuhai Longhua.

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

Sources also revealed that Longxin General has another subsidiary involved in drone-related business, Chongqing Lingzhihang Technology Co., Ltd. In the first half of 2025, its revenue was only 1.9751 million yuan, with net profit less than 1 million yuan.

Cover image source: Zhu Yu