Recently, the Chinese real estate giant Evergrande, which once had a market value of up to 400 billion Hong Kong dollars, officially delisted from the Hong Kong stock market, marking the end of its 16-year capital journey. However, the “curtain call” of this event has left behind a debt black hole of 2.4 trillion yuan (RMB), and thousands of suppliers are still struggling to escape the quagmire. In this massive storm caused by Evergrande, many industry giants that were deeply tied to it have suffered devastating blows.
Evergrande’s listing status was officially revoked on August 25th. As of June 2023, Evergrande’s total debt amounted to 2.39 trillion yuan, total assets were only 1.74 trillion yuan, and net assets were -644.2 billion yuan, deeply mired in insolvency.
According to a report by Sohu Finance, the Hong Kong Stock Exchange will permanently erase the code 03333, which also signifies that Evergrande will never be able to make up for the “huge hole” it dug back then.
As disclosed by the liquidators, they currently only control over 100 subsidiary companies with assets worth about 27 billion Hong Kong dollars, and the actual amount realized is only 2 billion Hong Kong dollars. Faced with declared debts of 350 billion Hong Kong dollars, the repayment rate is less than 1%. Apart from the large number of creditors, the “collapse” of Evergrande in those years has also had a huge impact on the entire real estate supply chain.
According to incomplete statistics, there were 26 A-share listed companies that had suffered losses due to Evergrande, with 20 of them reporting losses and 6 showing significant declines in performance. Moreover, these 26 listed companies collectively wrote off bad debts related to Evergrande exceeding 35.3 billion yuan, a substantial amount.
Among the thousands of suppliers of Evergrande, the fate of the decoration giant Gold Mantis is particularly striking. Since 2012, Evergrande became Gold Mantis’ largest client, with its business accounting for up to 20% at one point, and the two companies were “in prosperity together”. In order to deepen their cooperation, Gold Mantis even invested in a football club alongside Evergrande, but this investment ultimately went in vain due to the club being delisted.
With the eruption of Evergrande’s debt crisis, this close cooperation quickly turned into a nightmare. Gold Mantis had to take Evergrande and its affiliated companies to court, suing for an amount as high as 1.717 billion yuan. The massive accounts receivable eventually turned into bad debts, dealing a devastating blow to Gold Mantis’ financials. In 2021, Gold Mantis saw a drastic drop in net profits of over 300%, resulting in nearly 5 billion yuan in losses.
According to media calculations, as of June 30, 2022, Gold Mantis had a total receivable exposure to Evergrande amounting to 8.24 billion yuan, with accumulated impairment losses totaling 5.789 billion yuan, leaving a net receivable exposure of 2.451 billion yuan.
Now, four years have passed since Evergrande went bust. As of the close on August 21 this year, Gold Mantis’ stock price was at 3.61 yuan per share, with a total market value of 9.4 billion yuan. Compared to its historical peak of 24.65 yuan per share, Gold Mantis’ current stock price is just a fraction, resulting in a market value decline of over 50 billion yuan. This is not only a severe blow to the company’s finances but also a significant hit for its shareholders and employees.
Similar to Gold Mantis, the electronic appliance giant Boss Electricals was also a typical representative within Evergrande’s supplier system. To catch the real estate boom, Boss Electricals has been deeply cooperating with real estate developers since 2009. Boosted by the real estate boom, its revenue and net profits maintained astonishing high-speed growth until 2016.
In 2020, Boss Electricals’ dependence on the real estate industry reached its peak.
However, this prosperity came to an abrupt halt after the Evergrande crisis erupted. At that time, Boss Electricals announced that due to the financial difficulties of customers in the interior decoration business, they would make a one-time bad debt provision of 710 million yuan. Since then, its revenue and net profit growth rates experienced a sharp decline. During the period from 2022 to 2024, Boss Electricals’ revenue growth rates were 1.22%, 9.06%, and 0.1%, while the net profit growth rates were 18.07%, 10.2%, and -8.97%.
Even more challenging, after the “big ship” of real estate sank, Boss Electricals, accustomed to relying on major clients, has been struggling in its efforts to diversify and transform. Both the core embedded and integrated stove product sales have declined, showing that the company has yet to find new growth engines.