Eliza Wong
The Judicial Auction That’s Shaking China’s Construction Sector
The forced judicial auction of Nantong Sanjian Holding Co., Ltd. (南通三建控股有限公司)’s controlling stake in Jingyi Metals Co., Ltd. (精艺股份, 002295.SZ) represents a stark paradox in China’s equity markets: a fundamentally strong company caught in the crossfire of its parent company’s debt crisis. This situation highlights the complex interdependencies within China’s corporate ecosystem and the lingering effects of the Evergrande collapse.
The auction, scheduled for October 9th on JD.com’s asset disposal platform, involves 75.1847 million shares representing 29.9996% of Jingyi Metals’ total equity. With a starting price of approximately 725 million yuan, this forced divestment could trigger a change in control of a company that has demonstrated remarkable operational resilience and stock performance.
Auction Mechanics and Market Response
According to the auction rules, the final starting price will be determined by calculating the average closing price of Jingyi Metals’ stock over the 20 trading days preceding October 9th, multiplied by the number of shares being auctioned, then discounted by 10%. This unique pricing mechanism has created significant volatility in the stock, with investors carefully monitoring the pre-auction trading activity.
The auction has already attracted substantial attention, with over 60,000 viewers monitoring the listing despite zero formal bids registered thus far. Potential bidders must post a 60 million yuan guarantee and participate in increments of 3 million yuan, creating a high barrier to entry that may limit participation to well-capitalized institutional investors.
Jingyi Metals: A Hidden Gem in China’s Industrial Landscape
Jingyi Metals represents one of China’s copper processing industry leaders, established in 1999 and headquartered in Shunde, Guangdong. The company has built a formidable reputation over two decades of operation, supplying critical components to the家电 (home appliances), 汽车 (automotive), 通信 (communications), and 新能源 (new energy) sectors.
The company’s financial performance has been consistently strong, with five consecutive years of profitability and impressive growth metrics. In 2024, Jingyi Metals reported operational revenue of 3.754 billion yuan, representing a 38.43% year-over-year increase, while net profit attributable to shareholders reached 277.063 million yuan, growing 15.57% compared to the previous year.
Stock Performance Defying Market Challenges
Jingyi Metals’ stock performance has been particularly remarkable amidst broader market challenges. From January to July of this year, the share price surged from 5.7 yuan to a high of 12.49 yuan per share – a spectacular 120% increase that significantly outperformed broader market indices.
This impressive rally was primarily driven by increased demand from the new energy产业链 (industrial chain), where copper and other industrial metals play critical roles in components for electric vehicles, renewable energy systems, and energy storage solutions. The company’s strategic positioning within these growth sectors has made it an attractive investment despite the ownership uncertainty.
Nantong Sanjian’s Meteoric Rise and Spectacular Fall
Nantong Sanjian’s acquisition of Jingyi Metals in November 2018 represented the pinnacle of the construction giant’s expansion strategy. At the time of the 1.2 billion yuan acquisition, Nantong Sanjian ranked 157th among China’s Top 500 Enterprises and 39th among China’s Top 500 Private Enterprises – a remarkable ascent from 365th and 69th positions respectively in previous years.
According to data released by the Nantong Municipal Bureau of Industry and Information Technology (南通市工业和信息化局), Nantong Sanjian ranked as the second-largest private enterprise in Nantong by revenue in 2018, with annual revenues exceeding 100 billion yuan. The company’s controlling stake in a publicly listed company represented both a financial investment and a strategic diversification beyond its core construction business.
The Evergrande Domino Effect
Nantong Sanjian’s downfall began with the 2022 liquidity crisis at China Evergrande Group (中国恒大集团), which created a domino effect among construction companies that had engaged in deep, long-term partnerships with the property developer. Like many construction firms in the Nantong region, Nantong Sanjian found itself holding massive amounts of unpaid receivables from Evergrande projects, creating severe liquidity constraints.
The situation deteriorated throughout 2023 and 2024, culminating in July 2024 when Nantong Sanjian publicly disclosed that it had been included on the list of失信被执行人 (discredited persons subject to enforcement) due to multiple defaults on obligations. This designation significantly restricted the company’s ability to conduct business and access additional financing.
Regulatory Scrutiny and Disclosure Failures
The Shanghai Stock Exchange (上海证券交易所) took disciplinary action against Nantong Sanjian in July 2025, issuing a public reprimand for failures in disclosure obligations related to the company’s corporate bonds “16 NanSan 01” and “17 NanSan 01.” The exchange found that Nantong Sanjian and its subsidiaries had experienced multiple debt payment defaults during the periods covered by its 2022 annual report, 2023 interim report, and 2023 annual report but failed to make timely temporary disclosures as required.
This regulatory action highlighted broader concerns about corporate governance and transparency among companies affected by the property sector crisis. The failure to properly disclose material information deprived investors of critical data needed to assess the company’s financial health and make informed investment decisions.
Legal Proceedings and Asset Freezes
The judicial auction stems from multiple consolidated cases being handled by the Nantong Haimen District People’s Court (南通市海门区人民法院), with total claims amounting to approximately 1.4 billion yuan. The court ordered the freezing of Nantong Sanjian’s assets, including its stake in Jingyi Metals, as part of enforcement proceedings against the company.
If the initial auction fails to attract qualified bidders, the process will move to a second auction phase with the starting price discounted by an additional 20%. This creates potential opportunities for value-oriented investors but also introduces additional uncertainty about the ultimate ownership transition timeline.
Market Implications and Investor Considerations
The Nantong Sanjian-Jingyi Metals situation illustrates several critical considerations for investors in Chinese equities. First, it demonstrates how strong individual companies can become collateral damage in broader industry crises, creating potential mispricing opportunities for discerning investors. Second, it highlights the importance of thorough parent company due diligence, even when evaluating apparently healthy subsidiaries.
For institutional investors considering participation in the auction, several factors warrant careful analysis: the fundamental strength of Jingyi Metals’ business, the potential for synergy with existing operations, the regulatory environment for copper processing and industrial metals, and the broader outlook for China’s manufacturing and new energy sectors.
Broader Sector Impact
The troubles facing Nantong Sanjian reflect wider challenges in China’s construction sector, particularly among companies that relied heavily on property development contracts. According to industry analysts, dozens of construction firms across Jiangsu province and nationwide face similar financial pressures stemming from exposure to troubled property developers.
This situation has prompted increased scrutiny from regulators and investors alike, with greater emphasis on diversification, liquidity management, and counterparty risk assessment. Companies that successfully navigated these challenges typically maintained more balanced project portfolios, stronger cash flow management practices, and more conservative financial policies.
Navigating Ownership Transitions in Chinese Equities
The impending ownership change at Jingyi Metals through judicial auction represents both challenges and opportunities. For current minority shareholders, the uncertainty surrounding control transition creates near-term volatility but could ultimately result in stronger ownership if acquired by a strategic investor with relevant industry expertise and financial resources.
Historical precedents suggest that well-executed ownership transitions following judicial auctions can create significant shareholder value, particularly when the acquiring entity brings operational expertise, financial stability, and strategic vision to the target company. However, poorly managed transitions can result in strategic drift, management distraction, and value destruction.
Investment Strategy Considerations
For investors considering exposure to Jingyi Metals or similar situations, several strategic approaches merit consideration: monitoring the auction process for potential entry points, assessing the quality and strategic fit of potential new controlling shareholders, analyzing the company’s fundamental valuation relative to peers, and evaluating the broader sector outlook for copper processing and industrial metals.
The current situation also highlights the importance of active engagement and thorough due diligence when investing in companies undergoing ownership transitions. Investors should pay particular attention to corporate governance practices, management continuity plans, and strategic direction under potential new ownership structures.
Forward Outlook and Strategic Recommendations
The judicial auction of Nantong Sanjian’s stake in Jingyi Metals represents a critical inflection point for both companies and offers broader lessons for market participants. For distressed sellers, it underscores the importance of proactive balance sheet management and diversification away from single-industry or single-customer exposure. For potential acquirers, it demonstrates opportunities to acquire valuable assets at potentially attractive valuations during industry dislocations.
Market participants should monitor several key developments: the outcome of the October 9th auction, the strategic plans of any successful bidder, Jingyi Metals’ operational performance under new ownership, and broader regulatory developments affecting China’s construction and industrial metals sectors.
Investors with existing positions should maintain active dialogue with company management regarding the transition process and post-auction strategy. Those considering new positions should conduct thorough due diligence on both the fundamental business and the potential implications of ownership change. The situation warrants careful monitoring as it represents both specific investment opportunities and broader market implications for Chinese equities undergoing ownership transitions.
