HZ info: July 14th (Evening) – GP Titanium (SZSE: 000545) announced a major asset restructuring plan, marking the company's complete exit from the titanium dioxide business it has focused on for many years and a full pivot towards the rubber products industry.

According to the announcement, the company plans to acquire a 100% equity stake in Nanjing Lide Oriental Rubber & Plastics Technology Co., Ltd. (Lide Oriental) held by Nanjing Jinpu Dongyu Investment Co., Ltd. (Jinpu Dongyu) and Nanjing Hengyutaihe Investment Partnership (Limited Partnership) (Hengyutaihe) through a combination of major asset replacement, share issuance, and cash payment. The company will also raise supporting funds concurrently.

The specific transaction plan is as follows: GP Titanium will replace part of the assets (subject to specific adjustments) and all liabilities corresponding to Nanjing Titanium, Xuzhou Titanium, and GP Supply Chain with a 91% equity stake in Lide Oriental held by Jinpu Dongyu at an equivalent value. For the difference arising from this replacement, and for the 9% stake in Lide Oriental held by Hengyutaihe, the company will purchase them by issuing shares and paying cash. Furthermore, the company plans to issue shares to no more than 35 specific investors to raise supporting funds. These funds will be used to pay the cash consideration for the transaction, related taxes and fees, intermediary expenses, Lide Oriental's ongoing projects, and to supplement working capital.

This transaction is expected to constitute a major asset restructuring and a connected transaction. After the transaction, the controlling shareholder of GP Titanium will remain Jinpu Group, and the actual controller will still be Guo Jindong; the company's control rights will not change. Upon application, GP Titanium's stock resumed trading on July 15, 2025. On the first day of resumption, GP Titanium's stock price hit the "limit-up," closing at CNY 3.05 per share.

The core of this restructuring lies in GP Titanium's strategic exit from the titanium dioxide industry. Upon completion of the transaction, Lide Oriental will become a wholly-owned subsidiary of GP Titanium. The company's main business will be completely transformed into the rubber products industry, with main products covering rubber hoses, seals, vibration dampers, sleeves, and more. This marks a fundamental shift in the company's development trajectory.

The impetus for this strategic transformation stems from the continuously deteriorating operational difficulties of the titanium dioxide business. GP Titanium stated that in recent years, the titanium dioxide industry has faced severe profit margin compression due to multiple factors including overcapacity, high costs, weak demand, intense low-price competition, and a sluggish real estate market. Related listed companies have seen their performance decline significantly for three consecutive years. As one of China's larger sulphate-process titanium dioxide producers, GP Titanium, lacking conditions for new investment, mineral resources, and scale advantages, has seen its losses widen continuously.

The company first reported a loss in 2019 and has incurred substantial losses every year since 2022. Its net loss reached CNY 244 million in 2024. According to its H1 2025 performance forecast, losses remained severe in the first half of 2025. This was mainly due to persistently low product prices resulting from weak titanium dioxide market demand and a significant negative impact on performance caused by the temporary suspension of production at its subsidiary, Xuzhou Titanium.

Meanwhile, several downstream industries related to rubber products are demonstrating strong growth potential:

• New Energy Vehicles (NEVs): China's NEV market continues its rapid growth, with sales expected to reach 16.5 million units in 2025 and penetration rates exceeding 50%. The 1:1.7 ratio of vehicle parts suggests that increasing vehicle ownership will drive demand for rubber products.

• Rail Transportation: Domestic railway investment, especially in high-speed rail and urban rail transit, remains high. The large and growing vehicle fleet and replacement needs resulting from continuously increasing operational mileage provide vast opportunities for rubber products.

• Wind Power: Supported by national energy policies, wind power installation capacity is projected to grow steadily, driving demand for related rubber products.

• Defense: Steady growth in defense budgets also provides a development foundation for the defense-related rubber products industry.

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As an application R&D platform company in the domestic rubber new materials field, Lide Oriental possesses technology R&D capabilities covering the entire industrial chain. Centered around four major categories – hoses, seals, vibration dampers, and sleeves – it has formed a "4+N" product system, serving numerous application fields including automotive, rail transit, new energy, and defense. Its predecessor was Factory 415 of the Logistics Department Transportation Unit of the East China Military Region Command, founded in 1949. After over 70 years of development, it embodies the characteristics of military product quality, state-owned enterprise (SOE) standardized management, and private enterprise agility. Lide Oriental has now become a significant domestic R&D and production base for automotive brake hoses, a supplier of key rubber hose systems for high-speed rail with independent intellectual property rights, and has achieved import substitution for wind turbine main shaft seals. Its customer base covers numerous enterprises in the automotive, rail transit, wind power, and defense sectors.

Financial data further confirms Lide Oriental's growth potential. In 2024, compared to 2023, its total assets, net assets, operating revenue, and net profit all achieved significant growth. Notably, net profit reached CNY 120 million, and net cash flow from operating activities nearly doubled to CNY 129 million, demonstrating sound profitability and cash flow.

Faced with industry woes of high costs, overcapacity, and weak demand, compounded by the realities of consecutive losses and a significant decline in cash flow, GP Titanium is strategically divesting its disadvantaged sulphate-process titanium dioxide business. By injecting Lide Oriental's rubber products assets to pursue transformation, the company aims to complete its strategic shift through this transaction, improve asset quality, enhance profitability, and strengthen its overall risk resistance.