Eft Equipment's planned acquisition of Shengpu Fluid Equipment for 1.074 billion yuan at a 133% premium raises a key question: will this move genuinely enhance the listed company's quality, or will it become a financial drag?

On one hand, given the company's weak core business cash generation and elevated debt levels, this large cash outlay could intensify its funding strain. On the other hand, the target's earnings are heavily reliant on its photovoltaic business, which prompts concerns about potential risks hidden in related receivables. Moreover, despite the target's declining performance, the appraisal agency has applied aggressive high-growth projections in its valuation.

Recently, Eft Equipment updated its restructuring draft. Earlier, the company announced plans to acquire 100% of Shanghai Shengpu Fluid Equipment Co., Ltd. through a combination of share issuance and cash payments, with a total consideration of approximately 1.074 billion yuan.

Will the restructuring drain cash reserves and heighten financial pressure?

The listed company intends to purchase all shares of Shengpu from 12 counterparties, including Zhiqian Industrial. Specifically, it will acquire 95.97% of the shares from 10 counterparties such as Zhiqian Industrial through a mix of share issuance and cash, while the remaining 4.03% will be bought in cash from Shanghai Yiyao and Gongqingcheng Kaiyi. Notably, the latter transaction is conditional upon the former being completed.

Under the deal structure, the consideration for the 95.97% stake is approximately 1.033 billion yuan, with 50% paid in shares and 50% in cash, totaling 516 million yuan in cash. The remaining 4.03% stake carries a cash price of about 41 million yuan. As of March 31, 2026, Eft Equipment reported book monetary funds of 624 million yuan (unaudited) and trading financial assets of 292 million yuan (unaudited). During the same period, short-term borrowings stood at 465 million yuan and long-term borrowings at 638 million yuan. Overall, the company's book funds cannot fully cover its debt obligations. After excluding short-term debt, only about 400 million yuan in usable funds remains, meaning this substantial cash payment could further strain its liquidity.

The company's asset-liability ratio has been climbing steadily, reaching 61.81% in 2026. Notably, its cash-generation capability appears weak, with multiple years of net cash outflows. The transaction will be funded through a mix of internal resources and self-raised capital, including approximately 500 million yuan in syndicated acquisition loans, which have already received approvals from several banks. The company maintains that by balancing internal funds, acquisition loans, and payment schedules, it can execute the transaction without disrupting daily operations.

In response to concerns about whether the cash acquisition might burden the company, Eft Equipment stated that it will comprehensively coordinate the use of self-owned funds and acquisition loans, rationally arrange payment schedules, and optimize its financing structure to improve liquidity and solvency ratios. The company also emphasized that the target has solid profitability and cash flow, along with smooth bank financing channels, concluding that the transaction will not materially harm its future operations, financial position, or debt repayment capacity.

Target's core business tied to photovoltaic clients, with declining revenue yet soaring valuation forecasts

Can this acquisition genuinely improve the listed company's quality? Public information shows that Shengpu Fluid Equipment specializes in the R&D, production, and sale of precision fluid control equipment and core components. Its products include PV module frame gluing machines, junction box dispensing machines, potting machines, and power battery cell, module, and pack coating equipment, primarily serving new energy and automotive electronics manufacturing.

It's worth noting that Shengpu Fluid Equipment previously attempted a ChiNext IPO in June 2022 but ultimately withdrew its application. The company's core business is predominantly tied to the photovoltaic sector. In 2024, PV-related revenue accounted for over 90% of total revenue, and by 2025, this share remained around 70%. In 2025, the top five customers contributed over 60% of revenue, with PV giant Tongwei alone accounting for 25.43%.

Given that the PV industry remains at a cyclical trough with uncertain timing for a rebound, and given the heavy reliance on a major PV customer, whether this acquisition can meaningfully boost Eft Equipment's quality remains questionable. In 2025, the PV industry faced overall overcapacity, driven by demand growth lagging behind supply expansion and delayed capacity exit mechanisms. By the end of 2025, China's PV module annual capacity reached 1,089.40 GW, far exceeding global actual installation demand of around 700 GW, exacerbating the supply-demand imbalance.

Since 2024, leading PV module manufacturers such as LONGi Green Energy and JA Solar have experienced significant earnings pressure, with substantial combined losses and module prices falling below production costs. In response, PV companies have shifted toward cost reduction and efficiency improvements rather than blind expansion. Capital expenditure in the industry is now contracting as companies slow their expansion pace. However, given the asset-heavy nature of the PV industry, major players like Tongwei, Trina Solar, and JA Solar maintained relatively high capital expenditure levels in 2024 and 2025 following the 2023 peak.

In fact, the target's 2025 revenue declined, with PV segment revenue falling 28.69% year-over-year. Despite this downturn, the acquisition carries a 133% premium and includes performance commitments. Appraisal agency Tianyuan Valuation used the income approach to value Shengpu Fluid Equipment at 1.083 billion yuan, reflecting a 133.33% appreciation rate. Notably, despite the target's declining performance, the agency projected revenue growth of 24% for 2026.

The performance commitment period covers three consecutive fiscal years following the transaction's completion. Shengpu Fluid Equipment must achieve net profits attributable to the parent company (excluding non-recurring gains, share-based payments, and performance bonuses) of no less than 80 million yuan, 90 million yuan, and 100 million yuan respectively, with an average of no less than 90 million yuan over the three years. If cumulative performance achievement falls below 90%, the performance commitment parties will prioritize compensation using unpaid cash consideration, supplementing with cash or shares as needed. The deal also includes an earn-out mechanism: if performance targets are met and on-hand order gross profit at the end of 2028 exceeds 200 million yuan, an additional consideration of up to 108 million yuan may be paid. After the performance period, separate impairment testing compensation arrangements will be made.

Potential red flags in target's receivables

As of the end of 2025, Shengpu Fluid Equipment's accounts receivable balance stood at approximately 153 million yuan. The proportion of receivables aged over one year surged from 28.79% at the end of 2024 to 50.48%. Meanwhile, bad debt provisions increased from 23.97 million yuan to 31.28 million yuan, with provision ratios rising from 13.15% to 20.42%. Individually assessed bad debt provisions rose from 3.32 million yuan to 6.31 million yuan, with provision ratios of 100% and 85.63%, respectively. Two warning signals emerge: the significant rise in aged receivables and the marked increase in bad debt provision ratios.

Meanwhile, Eft Equipment's own performance has been lackluster. In 2024 and 2025, its revenue was 1.373 billion yuan and 932 million yuan respectively, showing a declining trend primarily due to reduced revenue from its non-strategic system integration business. Its strategic industrial robot business saw a slight decline in sales volume in 2025, compounded by lower pricing from certain leading strategic customers in key industries, leading to reduced revenue. Additionally, the European automotive industry is undergoing transformation pains, with EV policy adjustments, cost pressures, regional divergence, and external competition causing major European OEM customers to delay investments and cut existing orders. This resulted in a sharp decline in overseas system integration business, with gross margins plummeting and overall integration business revenue falling 53.60% year-over-year.

Consequently, the listed company's gross profit declined year-over-year in 2025, with both total profit and net profit attributable to shareholders turning negative, and losses widening compared to the prior year.

Addressing whether the acquisition strengthens company quality, Eft Equipment explained in its announcement that the target's deep cultivation in the power battery sector has paid off. In 2025, power battery industry revenue grew 222.70% year-over-year, with the revenue share rising from 8.29% to 27.63%. Concurrently, PV industry revenue share dropped from 90.77% to 66.88%. The target has thus transitioned from a PV-focused structure to a more diversified portfolio, broadening downstream applications and covering leading industry players, enhancing resilience against industry fluctuations. As the power battery revenue share grows, the target's overall profitability is expected to improve, providing a stronger buffer against downstream demand volatility. In 2025, new orders in the power battery sector accounted for 29.86% of total orders, while PV sector orders declined to 57.18%, indicating that the target's business structure will further optimize during the performance commitment period, with continuously strengthened risk resistance capabilities.