China High-speed Transmission: Auditor Change Causes Delay in Financial Results Publication 4.1 Suspension

China High-Speed Transmission (00658) has issued a supplementary announcement, expecting that the replacement of the auditor will lead to a delay in the announcement of its results, and trading will be suspended on April 1. The announcement also fully discloses conflicts among parties: the major shareholder Fengsheng Holdings (00607) insists on changing the auditor to align with the parent company’s own audit, which has met strong opposition from the founder; meanwhile, the current auditor Guo Wei listed three unresolved issues before the handover, revealing that audits involving over 6.6 billion yuan are at an impasse.

In mid-January this year, Fengsheng faction successfully restructured China High-Speed Transmission’s board of directors and gained a majority of seats. Chairman Hu Jichun was dismissed, and the company secretary was replaced. The new management immediately pushed to replace the auditor with Baichun, who is currently employed by Fengsheng. The supplementary announcement directly states that Fengsheng insists on changing the auditor to ensure that relevant audit data can also be used directly for the review of Fengsheng’s 2025 fiscal year results.

The announcement discloses that founder and executive director Hu Yueming and independent director Jiang Jianhua cast dissenting votes against Yi Shuai. Hu Yueming criticized the approach as “merely following the will of a single shareholder without regard for the overall interests of all shareholders.” However, the majority of new directors believe they cannot persuade the major shareholder and have passed resolutions to avoid entanglement.

Before being asked by the new board to “stop the audit work,” Guo Wei pointed out three major deadlocks involving large sums of money. The most critical issue concerns abnormal transactions in 2023 involving receivables of 3.189 billion yuan and prepayments of 3.451 billion yuan, which were made without board approval. The announcement states that although independent firm FTI has completed forensic investigations on this matter, Guo Wei indicated that as of the end of February, the investigation report and related supporting documents had not yet been provided.

Additionally, there are issues with inventory and prepayments of nearly 1 billion yuan related to EPC projects, as well as a full impairment loss of 423 million yuan on investments, which lack audit working papers due to “subcontractors’ non-cooperation” and “failure to obtain financial data.”