How does Dehao Runda perform the

Dehao Runda (002005.SZ), which has received widespread attention due to the recent escalation of the dispute with the original actual controller of NVC Lighting (02222.HK), has disappointing results in the first half of the year.

Based on statistics from regular reports over the years, reporters from the 21st Century Business Herald found that from 2009 to the first half of this year, Dehao Runda’s government subsidies included in the profit and loss at the end of the period reached a total of 1,108.584 million yuan, but the cumulative net profit realized during the same period was only 846.5217 million yuan. The former was actually 1.31 times the latter.

"It is impossible to predict whether this year's government subsidies will reach last year's amount, but the government subsidies included in profits and losses in the first half of this year are more than 50 million yuan higher than the same period last year." said the aforementioned Dehao Runda staff. The annual report shows that the government subsidy included in the profit and loss of Dehao Runda in 2013 was 232.004 million yuan. Although it was lower than the 310.264 million yuan in 2011, it was slightly higher than the 224.224 million yuan in 2012.

Dehao Runda has received a wide range of government subsidies. In addition to major industrialization project funding for LED chip production projects related to the LED industry, MOCVD equipment research and development subsidies, LED production line subsidies and other asset-based subsidies, it also involves provincial and municipal financial subsidies, imported equipment subsidies, imported equipment interest discounts and other income-based subsidies. There are more than 10 government financial subsidy projects in these two categories.

Government subsidies have supported Dehao Runda for more than five years, but the development of its LED industry has always been unsatisfactory. Although the sales revenue of the LED business reached a record high in the first half of the year and exceeded the small home appliance business for the first time, its gross profit margin dropped by 4.55%.

Of the 92 MOCVD machines that Dehao Runda has received high subsidies from the government, only 58 are currently in production (including 6 R&D machines).

"Since the price market competition for formal chips is very fierce and the gross profit margin is not high, the company's remaining machines will mainly be used for the production of flip-chips." Deng Fei, secretary of the board of directors of Dehao Runda, said during the investigation of the reception organization.

However, institutions seem to have doubts about Dehao Runda’s future focus on developing flip-chip business. In the first half of the survey, they also raised questions about whether flip-chip is a niche product and how to improve market acceptance and ensure production capacity utilization.

Dehao Runda, which has a lackluster profit in its own LED industry, has been planning to "rob" NVC Lighting, which has the largest channel strength in the country, since the end of 2012. Through the secondary market purchase and transfer of equity, as of the first half of this year, it has spent a total of HK$2,156,371,400 to obtain 27.03% control of the latter.

NVC Lighting, which is now caught in disputes between stakeholders and the whirlpool of public opinion, has also brought book profits to Dehao Runda. In the first half of this year and 2013, Dehao Runda's profits and losses from this equity investment were 17.9634 million yuan and 47.2566 million yuan respectively. Together with the steady stream of high government subsidies, it whitewashed the "holes" in Dehao Runda's main business.

It non-publicly issued 100 million shares to 8 specific investors at 15.61 yuan/share, with a net fund-raising amount of 1,522,245,600 yuan. On June 6, 2014, it non-publicly issued 230 million shares to 2 specific investors at 5.86 yuan/share, with a net fund-raising amount of 1,337.3 million yuan.

In addition to the above-mentioned total fixed-increase refinancing of RMB 4.366 billion, Dehao Runda also issued corporate bonds in March 2013, raising net proceeds of RMB 791.2 million.

However, Dehao Runda, which has received more than 5.1 billion yuan in refinancing, claims to have built eight major industrial bases and formed a LED full industry chain layout, but its fundraising projects have fallen into a "cake" situation.