A seemingly low-priced cross-sector share acquisition has once again thrust Huali Industries into the spotlight of regulatory and market scrutiny.
On the evening of January 16, Huali Industries announced its intention to acquire a 19% stake in the Hong Kong-listed company SHENGHUI CLEAN for HK$47.5 million. Just two days later, on January 18, the company received an inquiry letter from the Shanghai Stock Exchange. Following the disclosure of this inquiry letter, market sentiment quickly cooled. On January 19, Huali Industries' stock price opened lower and continued to decline, closing at 18.61 yuan per share, down 5.39%, with its total market capitalization falling back to 5 billion yuan. In terms of the transaction's structure, this is not a major asset reorganization requiring shareholder approval. On January 16, Huali Industries disclosed its plan to acquire the 19% stake in SHENGHUI CLEAN at a price of HK$0.128 per share, for a total consideration of HK$47.5 million. Upon completion of the transaction, the company will become the second-largest shareholder of SHENGHUI CLEAN. Huali Industries stated in its announcement that this share acquisition is a strategic investment aimed at creating synergies with the target company in the areas of internationalization, intelligence, and marketization. However, the swift regulatory attention this deal attracted is no coincidence. Looking at a broader timeline reveals that over the past year, Huali Industries has successively proposed three cross-sector mergers and acquisitions or attempts, with the industry span involved noticeably widening.
The first foray into a new sector occurred in September 2024. At that time, Huali Industries announced its intention to acquire a 51% stake in Suzhou Shangyuan Intelligent for 358 million yuan, extending its business from decorative composite materials into the intelligent equipment field. Shortly after the deal was disclosed, and due to issues such as the target company's persistently negative operating cash flow and a high valuation premium, Huali Industries received a regulatory work letter from the Shanghai Stock Exchange. Despite this, the transaction was completed with business registration changes in November 2024.
The second cross-sector move appeared on October 29, 2025, when Huali Industries announced its plan to acquire a 51% stake in Beijing Zhongke Huilian Technology Co., Ltd., further venturing into the government software sector. On the day of the announcement, the company's stock price hit the daily limit-up, indicating a strong market reaction. However, this transaction did not proceed smoothly. Just two months later, on December 30, 2025, Huali Industries announced the termination of the acquisition, citing a failure to reach consensus on core terms among the parties involved.
The third cross-sector attempt is the current stake acquisition in SHENGHUI CLEAN that prompted the inquiry. This transaction comes just half a month after the termination of the Zhongke Huilian acquisition. The target company's main business is property cleaning and public space cleaning services, which differs significantly from Huali Industries' core business of decorative composite materials in terms of industry chain and business model. Concurrently, the company's own financial position is not particularly strong. Financial reports show that from January to September 2025, the net cash flow from operating activities for Huali Industries was negative 89 million yuan, turning negative year-on-year and indicating clear pressure on its operating cash flow. SHENGHUI CLEAN's operational performance has also become a key focus for regulators. Financial data from its 2024 interim report shows that SHENGHUI CLEAN achieved revenue of 359 million yuan, a year-on-year increase of 10.14%; pre-tax profit was 12 million yuan, up 5.71% year-on-year; while net profit was 8 million yuan, a decrease of 21.78% compared to the previous year. What has sparked even more market discussion is the pricing level of this transaction. As of January 16, SHENGHUI CLEAN's stock price was HK$1.06 per share, with a total market capitalization of approximately HK$2.067 billion. This implies a market value of about HK$393 million for a 19% stake, whereas Huali Industries' transaction consideration is only HK$47.5 million. In response, the company explained that it is not acting as a pure financial investor but is entering as an industrial strategic investor, with the discount reflecting a comprehensive consideration of future resource commitments, business risk assumption, and long-term cooperation arrangements. Beyond the transaction itself, stock price anomalies and the management of insider information have also become significant parts of the current inquiry. The inquiry letter points out that on January 16, the day the acquisition was announced, Huali Industries' stock price hit the daily limit-up, while SHENGHUI CLEAN's stock price simultaneously surged by 26.19%. Furthermore, on the day the previous intended acquisition of Zhongke Huilian was announced, Huali Industries' stock price also hit the limit-up. Based on this, the Shanghai Stock Exchange has required Huali Industries to disclose in detail the specific processes of the previous acquisition and its termination, as well as the current share acquisition, including key timelines and the scope of individuals privy to the information. The company must also conduct a comprehensive self-inspection of the stock trading activities of insiders—including controlling shareholders, actual controllers, directors, senior management, and the counterparties to the transaction—to clarify whether there was any premature leakage of insider information, and to ensure that the list of insiders is truthful, accurate, and complete. Against the backdrop of three consecutive cross-sector M&A proposals, regulators are clearly paying closer attention to whether Huali Industries' M&A logic is sound, whether its pace is reasonable, and how the boundary between information disclosure and market reaction is being strictly managed.