Topstrong Group's competition intensifies, with a non-GAAP loss of 194 million over two years. It plans a 268 million cross-industry acquisition with a 10-fold premium, facing financial pressure.

Yangtze River Business News ● Yangtze River Business Reporter Xu Jia

Home furnishing listed company Topstrong (300749.SZ) is making a bold move into the electronic information sector.

Recently, Topstrong announced its acquisition plan. The company intends to purchase a 51.5488% stake in Xi’an Sidan De Information Technology Co., Ltd. (hereinafter referred to as “Sidan De”) for 268 million yuan in cash. After the transaction is completed, Sidan De will become a controlling subsidiary of Topstrong.

As a well-known domestic custom home furnishing company, acquiring Sidan De in the electronic information field is undoubtedly a strategic move to diversify its business. In the context of increasing industry competition and ongoing performance pressure, this acquisition is seen as a way for Topstrong to expand its business scope, accelerate strategic transformation, and create a second growth curve.

Yangtze River Business News notes that in 2024 and 2025, Topstrong’s net profit (excluding non-recurring gains and losses) will record losses for two consecutive years, with a total loss exceeding 194 million yuan.

It is important to note that in this transaction, Sidan De’s valuation premium is as high as 1025.67%. After the deal, goodwill will increase on Topstrong’s consolidated balance sheet. The entire payment will be made in cash, which may temporarily increase Topstrong’s financial pressure.

As of the end of September 2025, Topstrong’s total assets amount to 1.278 billion yuan, with a debt ratio of 55.37%, and cash and cash equivalents of 267 million yuan. The cash consideration of 268 million yuan for this deal exceeds the company’s recorded cash holdings.

Target commits to earning 130 million yuan over three years

According to the transaction plan, Topstrong intends to acquire 51.5488% of Sidan De’s equity in cash. After the completion of the transaction, Sidan De will become a controlling subsidiary of Topstrong.

Acquiring Sidan De is a key step for Topstrong to venture into the electronic information sector.

Historically, Topstrong has mainly engaged in the design, R&D, production, sales, installation, and interior decoration services for custom home furnishings, high-end hardware, doors and windows, and other products. It is a leading comprehensive service provider for integrated high-end whole-house custom solutions in China.

Sidan De focuses on R&D, production, sales, and technical services related to electronic information products. It specializes in precise guidance systems, communication systems, and signal processing systems, serving domestic and international key equipment models, and providing integrated solutions and supporting services for clients.

Topstrong believes that after this transaction, the company’s business will expand into the electronic information field, helping accelerate strategic transformation and build a second growth curve. Operationally, this will inject new revenue streams, broaden profit channels, enhance resilience against industry cycle fluctuations, and improve overall competitiveness.

Yangtze River Business News observes that the valuation of this deal carries a high premium. According to the announcement, based on income approach valuation, Sidan De’s equity value as of the valuation date is estimated at 521 million yuan, representing an appreciation of 475 million yuan over its book value of 46.28 million yuan, with a valuation increase rate of 1025.67%.

Based on this, the parties agree on a 520 million yuan price for 100% of Sidan De’s equity, with 51.5488% corresponding to a transaction price of 268 million yuan.

This means that after the transaction, goodwill on Topstrong’s consolidated balance sheet will increase. If Sidan De’s future operations do not meet expectations, there is a risk of goodwill impairment, which would directly reduce the company’s current profits.

The transaction counterparty has also made performance commitments: from 2026 to 2028, Sidan De’s net profits will be no less than 37 million, 43 million, and 50 million yuan respectively, totaling at least 130 million yuan over three years.

In addition to performance targets, Topstrong will also assess the recovery of accounts receivable from Sidan De as of September 30, 2025. If by December 31, 2028, the receivables’ book value has not been fully recovered, the transferor must compensate the listed company for the unrecovered amount.

Furthermore, if Sidan De completes its performance commitments and no impairment occurs, Topstrong may initiate the purchase of the remaining equity stake in Sidan De.

Performance under pressure

Relying on external acquisitions to expand new business areas, Topstrong has faced significant operational pressures in recent years.

Yangtze River Business News notes that due to industry slowdown and intensified market competition, Topstrong has experienced consecutive losses in its main business for two years.

From 2021 to 2024, Topstrong’s revenue was 1.298 billion, 1.073 billion, 1.284 billion, and 1.027 billion yuan respectively. Net profits attributable to the parent were -84.82 million, 24.66 million, 19.85 million, and -175 million yuan. Excluding non-recurring items, net profits were -87.81 million, 8.54 million, 6.92 million, and -183 million yuan.

The earnings forecast indicates that in 2025, Topstrong expects to achieve a net profit attributable to the parent of between 9 million and 12.8 million yuan, turning profitable year-over-year. This is mainly due to gains from debt restructuring through property offset, reversal of impairment provisions on receivables, government grants, and investment income from cash management.

However, in 2025, Topstrong’s net profit excluding non-recurring items is expected to be a loss of 10.7 million to 14.5 million yuan, though the loss margin will significantly narrow compared to the previous year. Overall, in 2024 and 2025, Topstrong’s combined non-recurring net losses will exceed 194 million yuan.

Topstrong states that in 2025, the company will actively reduce costs and increase efficiency, strictly control expenses, and reduce period costs compared to the previous year. It will also strengthen accounts receivable management, improve collection efficiency, and reduce credit impairment losses.

As for the target company, in the first nine months of 2024 and 2025, Sidan De’s revenue was 97.97 million and 64.17 million yuan, with net profits of 3.73 million and 9.71 million yuan, and net cash flows from operating activities of -12.81 million and -12.07 million yuan.

It should be noted that the entire payment is in cash, which may temporarily increase Topstrong’s financial burden.

As of the end of September 2025, Topstrong’s total assets are 1.278 billion yuan, with a debt ratio of 55.37%, and cash holdings of 267 million yuan. The cash consideration of 268 million yuan exceeds the company’s recorded cash balance.

Topstrong admits that paying the transaction price entirely in cash will lead to a certain scale of net cash outflow. Part of the funds will come from bank acquisition loans, which are expected to add some interest-bearing debt on the consolidated financial statements. The company plans to repay the loans gradually using its own funds, with an expected increase in annual financial expenses, which may impact current and future profit levels.