Wuhan Commercial Group: Company Systematically Advancing Strategic Transformation

Securities Star News, Wushang Group (000501) responded to investor questions on the investor relations platform on March 23.

Investor: Compared to other peers in Hubei and leading retail companies nationwide, the company’s asset size, core location, and brand accumulation are not inferior. However, its performance growth rate, profitability, and market value performance are all significantly behind. How does management explain this comprehensive gap? Do you admit that your operational capabilities and strategic vision have long been left far behind by industry peers?

Wushang Group Secretary: The company differs significantly from peers in Hubei and national retail leaders in terms of asset structure, business model, and regional market characteristics. Therefore, relevant operational and market value indicators are not directly comparable. The company has a solid foundation in asset size, core location, and brand accumulation. Currently, we are systematically promoting strategic transformation, accelerating the implementation of new formats, and optimizing business structure. We are continuously improving refined operations, and our operational quality and efficiency are steadily improving. Management will do its best to enhance the company’s profitability and long-term value.

Investor: In recent years, the company has continuously expanded heavy assets and renovated shopping centers. The asset-liability ratio has remained above 60% for a long time, and financial expenses have risen sharply. Meanwhile, net profit attributable to the parent has shrunk from a peak of over ten billion yuan to only 128 million yuan in the first three quarters of 2025, and return on assets has continued to decline. Has the company strictly followed the “Three Major and One Large” decision-making procedures for these heavy asset investments? Have thorough feasibility studies and risk assessments been conducted? Are there issues of blind investment leading to low efficiency of state-owned assets and failure to achieve preservation and appreciation goals?

Wushang Group Secretary: Major asset investments in recent years have strictly followed the “Three Major and One Large” decision-making procedures, with thorough feasibility studies and risk assessments completed. The decision-making process has been compliant and prudent. Due to macroeconomic factors and project cultivation periods, the company’s profit levels and return on assets have experienced temporary fluctuations. However, there is no situation of blind investment causing low efficiency of state-owned assets or failure to preserve and increase value. Going forward, the company will focus on quality improvement and efficiency enhancement to continuously improve asset operation efficiency.

Investor: In the first three quarters of 2025, the company’s operating revenue decreased by 11.64% year-on-year, and operations remain under pressure. Does the company conduct regular impairment tests on its core assets such as existing commercial real estate and long-term equity investments? Are there significant asset impairment risks that should have been recognized but were not? Are there issues of distorted book values of state-owned assets or unclear regulatory data due to improper impairment provisions?

Wushang Group Secretary: The company’s fixed assets and intangible assets are measured using the cost model for subsequent valuation. Long-term equity investments are accounted for using the cost method or equity method depending on the company’s control, joint control, or significant influence over the investee. Other equity instrument investments are measured at fair value according to the company’s holding intentions and in accordance with enterprise accounting standards. All these accounting treatments comply with relevant regulations. The company’s financial reports over the years have been audited by qualified accounting firms and issued standard unqualified opinions. Therefore, there are no significant asset impairment risks that should have been recognized but were not, nor issues of distorted book values or unclear regulatory data.

Investor: According to the “Measures for the Supervision and Administration of State-owned Asset Transactions,” transactions involving state-owned assets must strictly follow the “Three Major and One Large” decision-making mechanism. Have all property rights transfers, major asset disposals, significant investments, and related-party transactions by Wushang Mengtai and Nanchang Wushang in recent years strictly followed these procedures and obtained approval from state-owned asset regulators? Are there any illegal or irregular behaviors such as exceeding authority, unauthorized investments, or unapproved disposals?

Wushang Group Secretary: The company’s major investment decisions and operational management strictly comply with laws, regulations, and relevant regulations of state-owned asset supervision. All decision-making and approval procedures have been properly followed, ensuring legality, compliance, openness, and transparency. There are no violations such as exceeding authority, unapproved investments, or unapproved disposals, nor any loss of state-owned assets.

Investor: The company’s revenue in the first three quarters of 2025 declined by 11.64% year-on-year, but there are significant differences between the changes in net cash flow from operating activities and net profit. Does the company’s financial accounting strictly follow the “Enterprise Accounting Standards”? Are there any illegal activities such as revenue inflation, cost reduction, profit manipulation, or financial data distortion?

Wushang Group Secretary: The third quarter of 2025 shows that net profit attributable to shareholders increased by 2.98%, while net cash flow from operating activities decreased by 27.07%. The differences are mainly due to declines in operating revenue and changes in accounts receivable and payable, which reflect actual business conditions. The company’s financial accounting strictly follows the “Enterprise Accounting Standards” and related regulations. Revenue recognition, cost transfer, and profit calculation adhere to consistent accounting policies and prudent principles. There are no cases of revenue inflation, cost reduction, illegal profit manipulation, or financial data distortion. The company’s financial reports over the years have been audited by qualified accounting firms and issued standard unqualified opinions, ensuring that financial data are true, accurate, and complete.

Investor: Compliance is the bottom line for state-controlled listed companies, but the company has had multiple violations in recent years, with personnel receiving warning letters and accountability from regulators. Does the company incorporate compliance management and legal governance into the core assessment of management and state-owned enterprise governance? Has a comprehensive compliance management system covering all business, processes, and positions been established? What specific measures will be taken to restore the company’s image of compliant operation after multiple violations and rebuild public and investor trust?

Wushang Group Secretary: The company always adheres to compliance operation and legal governance, incorporating compliance management into the core assessment of management and state-owned enterprise governance. A comprehensive compliance management system covering all business, processes, and positions has been established, and internal control mechanisms are continuously improved to ensure all business activities comply with laws, regulations, and regulatory requirements. In recent years, there has been only one incident involving senior management’s relatives engaging in short-term trading. The company has responded seriously, promptly held accountable, remitted the gains, and organized compliance training for all staff. We will learn from this incident, further strengthen compliance training and supervision, improve compliance management effectiveness, and effectively safeguard the safety of state assets and investor trust, thereby consolidating a good image of compliant operation for the state-owned enterprise.

Investor: How long does the company consider a normal cultivation period? Five years or ten years?

Wushang Group Secretary: There is no fixed standard for the market cultivation period of projects, as it is influenced by multiple dynamic factors such as project scale, location conditions, regional market competition, macroeconomic environment, and consumption trends. The company’s judgment on the value realization of projects is based on sustained improvement in core operational indicators, rather than a preset fixed number of years. Currently, Wushang Mengtai has achieved continuous year-on-year growth in revenue and net profit, and Nanchang Wushang MALL’s foot traffic and sales are also steadily improving, with losses gradually narrowing. The operational situation continues to improve. The company will continue to strengthen operational management to protect the interests of all shareholders.

The above content is compiled from public information by Securities Star, generated by AI algorithm (Network Information Backup 310104345710301240019), and does not constitute investment advice.