Core Viewpoint - Huali Co., Ltd. announced a plan to acquire a 19% stake in Shenghui Clean Group for HKD 47.5 million, marking its second acquisition attempt in three months, with both companies experiencing significant stock price increases on announcement days [1][2]. Group 1: Acquisition Details - The acquisition does not constitute a related party transaction or a major asset restructuring and does not require shareholder approval [1]. - Huali's stock hit the daily limit on the announcement day, while Shenghui Clean's stock rose by 26.19% [1]. - The previous acquisition attempt involved a 51% stake in Zhongke Huilian Technology, which was later terminated due to a lack of consensus on key terms [1]. Group 2: Regulatory Inquiry - The Shanghai Stock Exchange requested Huali to disclose the details of the previous acquisition attempt and the current acquisition process, including key timelines and involved personnel [2]. - Huali is also required to investigate recent stock trading activities of insiders to check for potential information leaks [2]. Group 3: Strategic Intent - Huali aims to leverage core resources and capabilities through this strategic investment to enhance competitiveness and industry influence in internationalization, intelligence, and marketization [2]. - The financial performance of Shenghui Clean shows revenue of approximately CNY 674 million and net profit of CNY 49.23 million for 2024, with a decline in net profit for the first half of 2025 [2]. Group 4: Financial Performance Concerns - Shenghui Clean's revenue increased by 10.14% year-on-year in the first half of 2025, but net profit decreased by 21.78% [3]. - The company has seen a continuous rise in accounts receivable, with a 15.40% increase to CNY 268 million by the end of 2024 [3]. - Operating cash flow was negative for both 2024 and the first half of 2025, indicating financial strain [3]. Group 5: Justification for Investment - Huali is required to explain the reasons for the performance decline at Shenghui Clean and assess the potential ongoing impact on the company's performance [4]. - The necessity of the acquisition is questioned given the significant differences between Huali's main business and Shenghui Clean's operations, prompting a need for clarity on strategic alignment and resource sharing [5].