Controller Economics

Figures converted from Chinese renminbi and Hong Kong dollars at historical FX rates — see data/company.json.fx_rates. Renminbi amounts are converted at period-end CNY/USD market rates: 0.1569 (FY2021), 0.1450 (FY2022), 0.1409 (FY2023), 0.1370 (FY2024) and 0.1408 (FY2025); Hong Kong dollar amounts pass through the company's own HK$1 = RMB0.9032 translation of its proposed final dividend. Ratios, margins, percentages, dates and names are unitless and unchanged.

The two channels

Bottom line. Between FY2021 and FY2025 the controlling shareholder collected $149.5 million from the company as a supplier and lessor, against $122.6 million of dividends paid to every shareholder together. The largest of those flows — $138.4 million of utilities — has had no disclosed pricing basis, annual cap or independent review since a 2018 agreement expired at the end of 2020. What can be measured on that channel is worth roughly 3% to 6% of profit a year.

Cash leaves Prinx Chengshan for its controlling shareholder along two roads. One is the dividend, which is pro-rata: Chengshan Group Co., Ltd. holds 68.36% of the shares directly and a further 1.99% through Chengshan Trade (Hong Kong) Limited, so it receives 70.35% of whatever the board declares and the other 29.65% goes to everyone else [1]. The other is the purchase ledger, which is not pro-rata at all: every dollar the company pays Chengshan Group for utilities, rent and services belongs to Chengshan Group alone.

Over five years the purchase channel carried more cash than the dividend. The company paid $138.4 million to Chengshan Group for utilities and a further $11.1 million in rent, estate management and a right-of-use asset purchase — $149.5 million in all [2] [3] [4] [5] [6]. Over the same five years the company paid $122.6 million of cash dividends to all shareholders combined [7] [8] [9] [10] [11]. At the roughly 70% holding the controller has carried throughout, about $85.8 million of the dividend reached Chengshan Group and about $36.8 million reached everybody else.

All figures $ million, converted from renminbi at period-end rates. Purchases from Note 36 Related Party Transactions in each year — FY2025 [12], FY2024 [13], FY2023 [14], FY2022 [15], FY2021 [16]; dividends from each year's consolidated statement of cash flows [17] [18] [19] [20] [21]. Dividend split derived at a flat 70% controller holding; the actual holding rose from 69.43% to 70.35% over the period. Energy-management services, disclosed on a different basis before FY2024, are excluded from this table and discussed below.

The FY2025 columns make the point without any five-year aggregation. The company paid Chengshan Group $30.4 million for utilities that year and $40.1 million of dividends to all holders, of which the controller's share was about $28.1 million. Chengshan Group received more cash from the company as a utility supplier than as its 70.35% owner.

Sources: purchases of utilities from Note 36 of the FY2021 to FY2025 annual reports [22] [23]; dividend share derived from cash dividends paid at a flat 70% holding [24].

The utility line

Utilities are a real input, not a bookkeeping device. The 2018 prospectus is explicit that the Shandong plant does not generate its own power: "We do not maintain our own thermal power station," and utilities ran at 5.4% of cost of goods sold in 2017 [25]. Steam and electricity for a tyre plant of this size are a large recurring bill by nature, and the size of the number is not by itself evidence of anything.

The pricing basis is the part that has lapsed. On 1 January 2018 the Shandong subsidiary entered a Utility Charge Agreement under which it would pay Chengshan Group for shared electricity at cost, calculated on charges actually incurred plus taxes under price guidance issued by the Rongcheng Power Supply Bureau. The prospectus adds two facts that cut in the group's favour: Chengshan Group had negotiated a discount on the standard tariff that during the track record period ran about 10% below the standard electricity rate, and the group has independent access to electricity if it needs it [26]. Because the arrangement was a sharing of services on a cost basis, it qualified as a fully exempt continuing connected transaction under Rule 14A.98 of the Listing Rules [27].

That agreement ran from 1 January 2018 to 31 December 2020. No annual report from FY2021 to FY2025 mentions its renewal, its successor, its term, or the cost basis. What each report does carry is one line in Note 36 giving the amount, and one sentence in the Report of the Directors stating that the purchase of water and electricity from Chengshan Group is "fully exempt from the disclosure requirements under Chapter 14A of the Listing Rules" [28]. The exemption is asserted; the cost basis that earned it in 2018 is not restated.

The governance is inverted relative to size. The two continuing connected transactions that do get the full treatment — annual caps, independent non-executive director review and an auditor letter — are the energy-management contract at $1.51 million against a $1.55 million cap and property services at $0.90 million against a $0.96 million cap [29]. Together they come to $2.4 million. The utility purchase, at $30.4 million, is twelve and a half times larger and carries none of it. Nor does it appear as a separate line anywhere else: the expenses-by-nature note running to $1,504.2 million of total expenses has no utilities or energy caption, so Note 36 is the only place the figure is visible at all [30].

What is at stake is bounded and modest. Against FY2025 profit attributable to shareholders of $153.1 million, a 5% overcharge on $30.4 million would be $1.52 million, or 1.0% of profit; 10% would be $3.04 million, or 2.0%; a 25% overcharge would be $7.60 million, or 5.0% [31]. Those are the magnitudes; none of them is a threat to the earnings power the rest of this report has traced. The issue is that the cost basis which would let a shareholder rule out even the largest of them was published once, in 2018, for an agreement that expired six years ago.

Votes and economics

The voting stake and the look-through economic interest behind it are different numbers. On votes, 70.35% sits with Chengshan Group and its Hong Kong subsidiary, in a single share class (People carries the full control map). On economics, the corpus supports a range rather than a number, and the range is wide.

Two disclosures bound it. The first is the chain the shareholding notes trace: Che Baozhen and Li Xiuxiang each own 50% of Shanghai Chengzhan, which owns 95% of Beijing Zhongmingxin, which controls 39.79% of Chengshan Group [32]. That chain carries 37.80% of Chengshan Group, and therefore 26.6% of the listed company. The second sits in the first note of the financial statements, which the prior tabs did not reach: Chengshan Group "is ultimately held as to 69.15% by Mr. Che Baozhen and his spouse, Ms. Bi Wenjing, Mr. Che Hongzhi and his spouse, Ms. Li Xiuxiang (collectively the 'Controlling Shareholders') and other individual shareholders" [33]. That 69.15% is a ceiling, not the family's stake, because the sentence explicitly folds other individual shareholders into the same block. Multiplied through the 70.35%, it caps the family's look-through economic interest at 48.6%.

Sources: FY2025 substantial shareholders table [34] and shareholding notes [35]; the FY2025 accounts' statement of the 69.15% ultimate block [36]; the FY2021 accounts' statement of the same block at 76.43% [37]. Rows 2 and 4 are ceilings, not point estimates, because each ultimate block includes unnamed individual shareholders.

That ceiling moved once, and the filings do not say why. The FY2021 accounts put the ultimate block at 76.43%; from FY2022 onward every report states 69.15% [38] [39]. Against the listed-company holding of each year, the ceiling on family economics fell from about 53.1% to about 48.6% while the voting block rose from 69.43% to 70.35%. A 7.3-point change in the ownership of the immediate holding company is not a rounding adjustment, and no annual report narrates it.

The wedge this creates is specific, and it is what makes the purchase ledger above worth reading carefully. Whoever else sits on the Chengshan Group register receives none of the listed company's dividend, but takes a share of everything routed through Chengshan Group as a supplier or lessor. Cash paid as dividend is split 70.35 / 29.65 between the controller and the market. Cash paid through the purchase channel is split entirely inside Chengshan Group, among a register the listed accounts do not name.

The loan at 3%

In FY2025 Chengshan Group lent the group $32.4 million at a fixed 3% for three years [40]. The $0.38 million of interest charged during the year implies about 4.7 months of elapsed term, so the money was drawn around the middle of August [41]. It shows in financing activities alongside $218.0 million of bank drawdowns and $226.1 million of repayments [42].

Three percent is not a concessionary rate here. At 31 December 2025 the weighted average effective interest rate on the group's bank borrowings was 2.70%, down from 3.34% a year earlier [43]. The controller lent at 30 basis points above what the banks were charging, into a balance sheet that closed the year with $145.7 million of cash and equivalents against $96.2 million of total bank borrowings [44] [45]. The spread costs the company about $0.10 million a year, which is immaterial against $153.1 million of profit.

The comparison deserves one qualification, and it is a real one: 2.70% is a year-end weighted average across a book that is mostly short-dated, while the related-party loan is three-year fixed money. Term-matched, 3% may well be competitive or better. What the filings do not supply is any statement of purpose. A company holding net cash, funding replacement-level capex from operations and proposing a $40.6 million final dividend took on a new three-year obligation to its controlling shareholder, and no note explains what it funds.

Sinotruk on both sides of the trade

The second shareholder relationship runs the other way. Sinotruk (Hong Kong) Capital Holding Limited holds 8.59% of the shares [46], holds a board seat, and is the group's largest single customer. In FY2025 sales to Sinotruk rose 85.9% to $104.0 million while the receivable from Sinotruk rose 212.1% to $72.0 million [47] [48].

Sources: Sinotruk sales and receivable from Note 36 [49] [50]; group revenue from the consolidated statement of profit or loss [51]; group gross trade receivables of $278.2 million from Note 22 [52] plus $77.2 million of related-party trade receivables [53], which the balance sheet reports on a separate line [54].

One customer at 6.3% of revenue holds 20.3% of the group's trade receivables. On sales for the year, the $72.0 million balance is 253 days of Sinotruk revenue, against the 70 days of trade-receivable turnover the company reports for the group as a whole [55].

The company's own ageing table is the counter-fact, and it is a strong one: $77.6 million of the $77.9 million related-party balance is one to three months old by invoice date, with only $0.32 million in the four-to-six-month bucket [56]. Nothing is overdue on the company's own reckoning. The 253-day figure is therefore a statement about how heavily these sales landed in the closing months of the year rather than evidence of slow payment — but it also means the balance was funded by the group for the whole of that period, at a carrying cost of roughly $1.94 million a year at the group's 2.70% borrowing rate.

The structural point is that none of this passes through a connected-transaction review. Sinotruk has sat below the 10% substantial-shareholder threshold that defines a connected person under the Listing Rules for the whole period covered here, and its holding has been drifting down — 9.69% in FY2021, 9.65% in FY2022 and FY2023, 8.62% in FY2024 after a sale of about 6.5 million shares, 8.59% now [57] [58] [59]. The largest customer relationship in the group, and the largest single receivable, therefore sit outside the caps and independent review that cover $2.4 million of property and energy services.

The other side of the ledger

A controller can be measured by what it has not done as much as by what it has taken, and on that test the record is clean.

It has not sold. Chengshan Group's combined interest rose from 69.43% to 70.35% over the five years, which means the family bought while the second-largest holder was reducing. It has not diluted anyone: there has been no placement, no rights issue and no share issuance beyond the employee schemes, with the share count essentially flat at 638.6 million. It has not injected assets: the only capital transfer from the controller into the listed company across five years was the $3.41 million of right-of-use assets recognised on the 2024 property lease [60]. The dated founding record, including the family's repurchase of Cooper's stake before listing, sits in History.

Nor has management been paid for results it did not deliver. Options granted under the 2021 scheme were forfeited on missed performance targets, a ledger People carries in full, and $5.38 million of previously recognised expense was reversed through profit and loss [61] [62]. Total key management compensation, covering directors and senior management together, was $2.91 million of cash and $0.23 million of share-based expense — $3.14 million against $153.1 million of profit, or 2.05% [63]. The only share purchases on the market were the 4,000,000 shares the 2024 award-scheme trustee bought for employees at a cost of $3.86 million [64] [65].

And the dividend was defended. Profit attributable fell 17.1% in FY2025, yet the proposed final dividend was held at $0.064 per share, $40.6 million against $40.4 million a year earlier [66]. Holding a pro-rata payment flat through a down year is the one action on this list that pays the minority and the controller in exactly the same proportion.

Derived: a 10% utility overcharge ($3.04 million) plus the loan spread ($0.10 million) plus the Sinotruk receivable carry ($1.94 million), rounded, against FY2025 profit attributable of $153.1 million [67]; key management compensation from Note 36 [68].

What the channel is worth

Adding the measurable pieces together: a 10% overcharge on utilities at $3.04 million, the loan spread at $0.10 million, and the funding cost of the Sinotruk receivable at $1.94 million come to about $5.1 million a year, or 3.3% of FY2025 profit. Pushing the utility assumption to a 25% overcharge takes the total to about $9.7 million, or 6.3%. Those are the outer edges of what the disclosed record can support.

The read this supports is narrow. The related-party channel at Prinx Chengshan is real, it runs mainly through one uncapped line, and on any assumption the filings can bear it is worth a low single-digit percentage of profit — not enough to explain a share trading at 3.6 times earnings and 0.54 times book (Valuation and Discount). Governance is not where the discount comes from.

The strongest fact against that read is the one this chapter could not close. The bound above rests on an assumption about utility pricing, not a disclosure: the only cost basis ever published expired at the end of 2020, and $138.4 million has passed through that channel since without a cap, an independent review or an auditor letter. A shareholder cannot currently verify the assumption that makes the number small. A renewed utility agreement with a stated cost basis and an annual cap, brought inside the same Chapter 14A review that already covers the $2.4 million of property and energy services, would settle which end of the $5.1 million to $9.7 million range applies and would bound the $30.4 million line the way the $2.4 million is already bounded. Until it exists, the 3.3% to 6.3% span above is an assumption rather than a measurement.