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

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Reporter: Chen Pengli | Editor: Liao Dan

A drone business investment spanning over a decade ultimately was divested at a price of 1 yuan, but the aftereffects of the story are still ongoing.

On the evening of March 25, Long鑫 General (SH603766, share price 14.09 yuan, market cap 28.934 billion yuan) announced that the loans and other payable/receivable amounts totaling 70.3128 million yuan owed by its former controlling subsidiary, Zhuhai Longhua Helicopter Technology Co., Ltd. (hereinafter referred to as Zhuhai Longhua), have become overdue.

This is only a little over four months after Long鑫 General “sold off” all of its equity in Zhuhai Longhua at a price of 1 yuan in November 2025. Regarding this overdue situation, Long鑫 General stated that in 2025 it had made full provision for impairment on this creditor’s right, so it expects that it will not have a material impact on the company’s profit and loss for fiscal year 2026.

The reporter learned that Zhuhai Longhua is currently insolvent and, as of late February 2026, its net assets were -68.2934 million yuan. Long鑫 General was blunt that there is a risk that the subsequent payments may be difficult to recover.

Zhuhai Longhua financial data

From boldly entering the drone industry with an investment of 50 million yuan in 2014, to quietly exiting more than ten years later, Zhuhai Longhua’s journey became a failed attempt by Long鑫 General in its exploration of emerging businesses.

According to Long鑫 General’s recent disclosure of its 2025 performance forecast, the company expects that last year’s net profit attributable to the parent increased by more than 47% year over year. The driving force came from the steady growth of the company’s motorcycle and general machinery core businesses, as well as the ongoing optimization of the product structure of the 无极 (Wuji) series.

The 70.31 million yuan owed by Zhuhai Longhua has become overdue

Regarding the overdue status of the financial assistance, Long鑫 General’s announcement stated that as of the date of the disclosure, the company’s total receivables from the former controlling subsidiary Zhuhai Longhua—comprising principal and interest on the loans and other payable/receivable items—amounted to 70.3128 million yuan, and the related amounts have already become overdue. This outstanding amount mainly consists of two parts: principal and interest on the loans of 59.0997 million yuan, and other payable/receivable items of 11.2131 million yuan.

In fact, when Long鑫 General decided to sell the equity of Zhuhai Longhua, it had already flagged the risk of recovering this debt. In the equity transfer announcement disclosed by the company last November, it had explicitly reminded that Zhuhai Longhua still owed the company loans and principal and interest on the loans, as well as other payable/receivable amounts totaling 69.8952 million yuan, and it pointed out that “because Zhuhai Longhua’s commercialization objectives were not achieved, its book net assets are negative, it is insolvent, and there is a risk that the above amounts cannot be recovered.”

In the announcement, Long鑫 General emphasized that it has made full provisions for impairment in 2025 for the receivables of loans and payable/receivable items from Zhuhai Longhua, and it expects that this will not form a material impact on the company’s profit and loss for 2026. The specific result is subject to the audit by the annual audit accounting firm. The relevant outstanding receivables account for 0.77% of the company’s latest audited net assets.

A reporter from the Economic Daily learned that although “the provision for impairment on loans and payable/receivable items related to Zhuhai Longhua” affected Long鑫 General’s performance in the fourth quarter of last year, it did not cause a significant impact on the company’s full-year 2025 performance. Based on the company’s earlier expectations, the company’s net profit attributable to the parent for 2025 was expected to be between 1.65 billion yuan and 1.8 billion yuan, representing an increase of 47.15% to 60.53% year over year; and the net profit after excluding non-recurring items was expected to increase by 46.03% to 59.72% year over year.

Just over four months ago, it “dumped/sold off” all its equity in Zhuhai Longhua at 1 yuan

Let’s roll the timeline back more than ten years. Long鑫 General once had hopes for the drone industry. In October 2014, Long鑫 General announced that it would jointly invest with partners including Wang Haowen and Shenzhen Lihé Venture Capital Co., Ltd. (now renamed Lihé Kechuang Group Co., Ltd.) to establish a joint venture company with a total investment of 100 million yuan, specifically engaging in R&D, manufacturing, and sales of complete unmanned helicopter systems and components. Among them, Long鑫 General invested 50 million yuan and held 50% equity in Zhuhai Longhua.

At that time, in its announcement, the company painted a broad market outlook, believing that the domestic unmanned aviation equipment industry was in its early stage and that future potential and room for growth were enormous. In April 2015, Zhuhai Longhua’s first professional agricultural plant protection drone (XV-2) was successfully assembled.

The ideal is full, but reality is harsh. A reporter from the Economic Daily noted that since its establishment, Zhuhai Longhua’s commercialization process has remained slow and its profitability has been weak. In Long鑫 General’s reply in July 2024 to the letter for regulation work sent by the SSE, it stated that since the establishment of Zhuhai Longhua, except for 2017 and 2020 when it achieved marginal profits, the other years were loss-making, with total losses exceeding 100 million yuan. Its main product, agricultural plant protection drones, failed to form mass orders in the market. Its subsequent shift to special uses such as security also remained in the product trial production and performance verification stages for a long time due to technical requirements. The large scale of R&D spending contrasted sharply with modest operating revenues.

Faced with this long-term loss-making business, Long鑫 General ultimately chose to “cut off the arm.” On November 13, 2025, the company’s board of directors reviewed and approved the proposal to transfer about 50% of its equity in Zhuhai Longhua to its minority shareholder, Li Liangjun, at a price of 1 yuan. In the announcement, the company clearly stated that this move was to implement the development strategy of “focusing on the main business.” After the divestment is completed, Long鑫 General will 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 its total liabilities were as high as 88.8895 million yuan.

The reporter also learned that Long鑫 General has another subsidiary engaged in drone-related business, namely Chongqing Lingzhihang Technology Co., Ltd. In the first half of 2025, this subsidiary’s revenue was only 1.9751 million yuan, and its net profit did not reach 1 million yuan.

Cover image source: Zhu Yu

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