Core Viewpoint - The expansion of the consumption tax on refined oil products has led to significant tax liabilities for companies, highlighting the need for clarity on which products fall under the tax scope to mitigate tax risks [1][2]. Group 1: Tax Incidents - Two listed companies, Chengzhi Co., Ltd. and Ningbo Bohui Chemical Technology Co., Ltd., have faced substantial tax payments exceeding 100 million yuan due to the recent expansion of the consumption tax scope [1]. - Chengzhi's subsidiary was required to pay approximately 166 million yuan in consumption tax and related penalties, while Bohui reported a total of about 479 million yuan in tax payments [1][2]. Group 2: Regulatory Changes - In June 2023, the Ministry of Finance and the State Taxation Administration issued an announcement that effectively broadened the consumption tax scope for refined oil products, including mixed aromatics and heavy aromatics [2]. - The announcement aims to enhance tax management and promote the healthy development of the refined oil industry, with different tax rates applied to various oil products [2]. Group 3: Disputes and Clarifications - There are disputes between companies and tax authorities regarding whether certain products fall under the consumption tax scope, as seen in Bohui's case where the tax authority classified its heavy aromatic derivatives as taxable [3][4]. - The complexity arises from the diverse nature of chemical products and the potential for tax evasion through product name changes [4]. Group 4: Risk Mitigation Strategies - Companies are advised to assess their products against national and industry standards to determine tax obligations, as outlined by the State Taxation Administration [5]. - The administration has also introduced a temporary management method for testing taxable refined oil products to standardize the detection process and resolve disputes [6]. Group 5: Future Tax Reforms - The government plans to accelerate the reform of the consumption tax system, potentially moving the tax collection process to local levels, which could alleviate financial pressure on production enterprises [6][9]. - Experts suggest that moving the tax collection process could improve local government engagement in tax management, although it may also increase the administrative burden on tax authorities due to a larger number of taxpayers [9].

Investment Rating - The report does not explicitly provide an investment rating for the company Core Insights - The company, Bohui Co., has experienced a drastic decline in profitability, with a cumulative loss of 5.1 billion in just two years, erasing nearly 80% of its ten-year accumulated profits of 6.5 billion [15][35] - The significant losses are attributed to changes in tax policies that have imposed new consumption taxes on its main product, heavy aromatic hydrocarbons, which previously benefited from tax exemptions [19][35] - The company has attempted to pivot by producing derivative products to circumvent the new tax regulations, but this strategy has raised concerns with tax authorities [36][44] Summary by Sections Company Background - Bohui Co. has been in the fuel oil deep processing industry for 20 years, primarily producing heavy aromatic hydrocarbons, which are essential for asphalt and rubber [10] - The company saw substantial revenue and profit growth from 2013 to 2022, peaking in 2022 with revenues of 2.97 billion and profits of 152 million [12] Recent Developments - In early 2025, the company announced a change in control, with state-owned Wuxi Guozi acquiring a significant stake [3][5] - The acquisition process involves multiple stages, including share transfer and capital increase, with the original owner set to exit with 263 million [5][7] Financial Performance - In 2023, the company reported a 6.32% decline in revenue to 2.78 billion, with a notable shift to losses due to reduced trade income and increased tax burdens [15] - The new consumption tax policy introduced in June 2023 has drastically affected the company's profitability, leading to a situation where selling its main product results in losses [21][35] Tax Policy Impact - The new tax policy requires the company to pay approximately 2200 per ton in taxes for heavy aromatic hydrocarbons, which significantly exceeds its profit margins [21][22] - The company has attempted to adapt by producing derivative products that are not explicitly covered by the new tax regulations, but this has led to scrutiny from tax authorities [36][44] Strategic Responses - Bohui Co. has reduced production and announced plans to stop producing aromatic series products, citing operational difficulties while simultaneously managing idle funds [29][30] - Despite these challenges, the company has resumed production of its aromatic products, indicating a struggle to maintain operations amid financial pressures [34]

Core Viewpoint - The article discusses the recent acquisition of Bohui Co., Ltd. by Wuxi State-owned Assets, highlighting the company's significant financial struggles and the impact of tax policy changes on its profitability [3][10][32]. Group 1: Acquisition Details - Wuxi State-owned Assets plans to invest 680 million yuan to acquire Bohui Co., Ltd., which has been a topic of public discussion [3]. - The acquisition process involves three stages: transfer of shares, capital increase subscription, and relinquishment of voting rights by the previous owner [8]. - As of May 20, 2025, the first stage of the acquisition has been completed, with the second stage underway [9]. Group 2: Financial Performance - Bohui Co., Ltd. experienced a significant increase in revenue and profit from 2013 to 2022, reaching peak figures of 2.97 billion yuan in revenue and 152 million yuan in profit in 2022 [12][13]. - However, in 2023, the company reported a 6.32% decline in revenue to 2.78 billion yuan and incurred losses of 510 million yuan over two years, erasing 80% of its ten-year accumulated profits [16][32]. Group 3: Tax Policy Impact - The introduction of a new tax policy in June 2023 required Bohui Co., Ltd. to pay consumption tax on its main product, heavy aromatic hydrocarbons, which previously enjoyed tax exemptions [20]. - The new tax burden resulted in a loss of approximately 1,800 yuan for every ton of heavy aromatic hydrocarbons sold, leading to severe financial distress for the company [21][32]. - The company's previous profitability was largely dependent on government tax incentives, raising concerns about its competitive position in the market [26]. Group 4: Strategic Responses - In response to the tax changes, Bohui Co., Ltd. attempted to pivot by producing derivative products of heavy aromatic hydrocarbons, which were not subject to the same tax [33][36]. - Despite these efforts, the company faced scrutiny from tax authorities, leading to a significant tax liability of nearly 500 million yuan for the period from July 2023 to March 2024 [41][42]. - The ongoing financial challenges and strategic missteps have raised questions about the company's long-term viability and operational focus [43].