Loss-Making Oil Companies Gamble Big on Chips: Hunan Oil Tycoon Acquires Cross-Sector Target at 821% Premium

Chinatimes.net.cn Reporter He Yihua and Li Weilai Beijing Report

Heshun Petroleum (603353.SH) has made new progress in its cross-industry acquisition.

On March 18, Heshun Petroleum announced that it will acquire a 51.11% voting stake in Shanghai Kuaixin Integrated Circuit Design Co., Ltd. (referred to as “Kuaixin Technology”) through a combination of equity purchase and capital increase, paying 540 million yuan to gain control of Kuaixin Technology.

To secure control of Kuaixin Technology, Heshun Petroleum paid a premium. According to disclosures, the valuation of Kuaixin Technology’s equity was 1.208 billion yuan higher than its book value, an increase of 821.07%. The Huaxia Times reporter called Heshun Petroleum’s secretariat, but the phone was not answered at press time.

A securities analyst told reporters that Heshun Petroleum’s main business is operating gas stations. Entering the chip industry requires very high management standards. The market valuation for chip companies is definitely higher than for oil companies, but since the announcement of the cross-industry merger, the stock has already gained some momentum. Investors should be cautious about chasing high prices.

Cross-industry Acquisition

According to the announcement, on March 18, the board of directors approved the relevant equity acquisition plan. The listed company, its wholly owned subsidiary HeXinWei (Shanghai) Electronics Co., Ltd. (“HeXinWei”), and Kuaixin Technology and some of its shareholders and actual controllers signed a series of agreements including equity transfer and capital increase agreements.

Specifically, HeXinWei plans to acquire a 35.1105% stake in Kuaixin Technology for 540 million yuan in cash through capital increase and equity transfer, and to exercise voting rights on an additional 16% of Kuaixin Technology’s shares held by other companies as a trustee, for a total control of 51.1105% of Kuaixin Technology’s voting rights, thus gaining control.

After the transaction, Kuaixin Technology will be consolidated into Heshun Petroleum’s financial statements and become its controlling subsidiary. Heshun Petroleum will appoint two-thirds of Kuaixin Technology’s board members. The CFO of Kuaixin Technology will be recommended by Heshun Petroleum, which will have decision-making power over its operations, personnel, and finances.

Data shows that Kuaixin Technology specializes in R&D and licensing of high-speed interface IP, providing Chiplet solutions and high-speed connectivity products, along with one-stop chip customization services. It operates in the semiconductor IP industry, which involves reusable integrated circuit modules with specific functions, verified through pre-designed validation, and is a core technology in chip design.

Heshun Petroleum stated that its management believes the semiconductor IP industry has good growth prospects and significant development space. Kuaixin Technology’s business model is based on high-value semiconductor IP solutions. The company plans to strategically position itself in this industry to seize opportunities for domestic substitution of semiconductor IP, find new growth points, and promote sustainable future development.

Financial data shows that Kuaixin Technology achieved revenue of 159 million yuan in 2024, with a net loss of 18.4888 million yuan; in 2025, revenue is expected to grow to 212 million yuan with a net profit of 20.6405 million yuan, turning profitable. As of the end of 2025, the company’s total assets are 332 million yuan, with net assets of 84.1092 million yuan.

Main Business Losses

Unlike Kuaixin Technology, which is expected to turn profitable, Heshun Petroleum experienced its first loss since listing.

On January 23, Heshun Petroleum released its 2025 earnings forecast. Preliminary calculations by the finance department estimate that the company will achieve a net profit attributable to shareholders of -22 million to -17.6 million yuan for 2025; non-recurring net profit will be -30.5 million to -25 million yuan.

The company explained that the temporary loss was mainly due to provisions for bad debts related to pre-paid rent and pre-paid goods. These receivables are likely to be recovered in the future, and the provisions are a prudent, phased accounting measure to strengthen asset quality.

Public information shows that Heshun Petroleum was founded in July 2005. Its main businesses include retail chain gas stations, refined oil storage, logistics distribution, and wholesale, forming a complete industrial chain in refined oil circulation. In April 2020, Heshun Petroleum was listed on the main board of the Shanghai Stock Exchange, with founder Zhao Zhong’s family becoming prominent in Hunan’s oil industry. The semi-annual report for 2025 shows that Heshun Petroleum operates 35 self-operated gas stations.

In recent years, due to the impact of the new energy industry, the company’s performance has been under pressure. In 2023 and 2024, Heshun Petroleum’s revenue was 3.273 billion yuan and 2.812 billion yuan, respectively, down 18.04% and 14.11% year-on-year; net profits attributable to shareholders were 52.23 million yuan and 29.27 million yuan, down 49.66% and 43.97%.

In response, the company is actively transforming into new energy, focusing on ultra-fast charging business. Leveraging existing gas station sites, it is promoting charging infrastructure. As of June 30, 2025, Heshun Petroleum has seven ultra-fast charging stations in operation. However, this business has not yet significantly contributed to revenue growth; in the first half of 2025, gasoline and diesel sales still accounted for over 98% of revenue.

Now, the company is placing hopes for growth on the chip industry, with a high premium paid to acquire control of a chip company. The announcement shows that, based on a valuation report, the total equity value of Kuaixin Technology is estimated at 1.355 billion yuan, an increase of 1.208 billion yuan over its book value, an appreciation of 821.07%.

Renowned tax and financial expert and senior CPA Liu Zhigeng told reporters that such a high premium of 821.07% is usually seen when the acquirer is highly optimistic about the target’s future technological potential, strategic synergy, or industry trends, and market expectations are very high, even if current financial performance has not fully realized its value.

Liu Zhigeng further pointed out that such extreme premiums are not accidental but result from specific conditions, essentially “paying today’s heavy price for tomorrow’s explosion.” Such high premiums reflect strong market expectations for technological potential but also carry significant valuation risks—if future performance falls short, the acquirer could face serious losses.

To ensure transaction security, Heshun Petroleum has also signed performance compensation agreements with related parties of Kuaixin Technology. From 2026 to 2028, Kuaixin Technology’s annual revenue must not be less than 450 million, 600 million, and 750 million yuan, respectively, with IP and high-speed connectivity product revenues not less than 210 million, 235 million, and 262.5 million yuan, respectively, and each year’s net profit attributable to shareholders must be positive.

It should be noted that if performance commitments are not met, the actual controller of Kuaixin Technology, Chen Wanyi, and five other parties will compensate Heshun Wei in cash and bear joint liability.

Editor: Li Weilai Chief Editor: Zhang Yuning