A landscaping company that has posted losses for four straight years is now moving to acquire a loss-making storage chip developer to reinvent itself.

On September 14, Yuanlin Co Ltd (SZSE: 605303), a veteran gardening and municipal landscaping firm, suspended trading after announcing late on September 11 that it plans to purchase a controlling stake in Hangzhou Hualan Microelectronics Co Ltd (Hualan Micro). The target company, which focuses on self-developed storage chip technology, previously attempted a STAR Market IPO but terminated the process in May 2024, leaving analysts questioning its viability and valuation.

Back in December 2025, Yuanlin disclosed plans to buy a 6.4969% minority stake in Hualan Micro for 112 million yuan. Public financial data shows Hualan Micro's revenue has been shrinking while its core operations remain deeply unprofitable, prompting regulators to question whether the deal truly strengthens the listed company's sustainability.

Valuation figures for Hualan Micro's equity ranged from 813 million yuan under the income approach to 1.725 billion yuan under the market approach. The company ultimately adopted the market method, reflecting an appreciation rate of 265.23% over net assets, a move that drew scrutiny from the exchange.

From Premium Stake to Controlling Bid: Regulators Demand Answers

In its September 11 announcement, Yuanlin said it is planning to acquire control of Hualan Micro through a combination of share issuance and cash. While key terms such as audit results, transaction price, and the ratio of shares to cash remain unresolved, the company confirmed the deal is expected to constitute a major asset restructuring under exchange rules, which typically applies when the target's total assets, net assets, or revenue exceed 50% of the listed company's corresponding metrics.

This is not the first time Yuanlin has eyed Hualan Micro. In December 2025, the company agreed to pay 112 million yuan for a 6.4969% stake. At that time, the income approach valued Hualan Micro at just 813 million yuan while the market approach came in at 1.725 billion yuan, a wide gap that prompted the Shanghai Stock Exchange to demand an explanation for choosing the higher figure.

In response, Yuanlin argued that the income approach could not fully quantify the impact of industry policy, business restructuring, and product iteration on future performance, making the market approach more reliable. Independent directors added that Hualan Micro's proprietary storage and semiconductor chip design capabilities supported the premium valuation.

Shrinking Revenue, Widening Losses

Hualan Micro's operating results tell a sobering story. In 2022 and the first nine months of 2023, the company generated main-business revenue of 565 million yuan and 221 million yuan, with adjusted net losses of 111 million yuan and 78 million yuan, respectively. By 2024 and the first nine months of 2025, revenue had fallen to 366 million yuan and 199 million yuan, while adjusted losses widened to 143 million yuan and 84 million yuan.

Regulators previously asked Yuanlin to justify the commercial rationale for entering a persistently loss-making business and whether it would genuinely improve the listed company's long-term viability. The company replied that the minority stake purchase limited downside exposure, and noted that Hualan Micro had already filed for domestic IPO guidance, making the investment a timely financial opportunity before a potential public listing.

Hualan Micro originally filed for a STAR Market IPO in December 2022 but withdrew in May 2024, citing a need to restructure due to overseas business environment challenges and refocus on domestic operations. The company restarted its IPO process in September 2025, filing for guidance with the Zhejiang securities regulator. A third-phase progress report was disclosed in July 2026, though no formal application to the exchange has been submitted yet.

From Planting Trees to Making Chips: Synergy or Mismatch?

A central puzzle remains: if Hualan Micro has re-entered the IPO pipeline, why would its many shareholders hand over control to a landscaping firm? According to a 2022 prospectus, Hualan Micro had 95 shareholders with a highly fragmented ownership structure, with the largest holding just 5.90% and no controlling shareholder or actual controller. After completing its 6.4969% purchase, Yuanlin became the largest shareholder.

The fragmentation stems from years of continuous fundraising. Business registration data shows Hualan Micro conducted financing rounds nearly every year from its angel round in 2013 through 2021, with a surge of venture capital and industrial investors entering between 2019 and 2020. Facing potential exit pressure from numerous institutional shareholders, the company has pursued a dual-track strategy: if a takeover materializes, shareholders achieve a backdoor listing; if not, the IPO process continues.

On the buyer side, Yuanlin's traditional business involves municipal landscaping construction, landscape design, flower seedling R&D, and ecological maintenance. That business has hit a ceiling, driving the company's own losses. From 2022 to 2025, revenue fluctuated from 514 million yuan to 483 million yuan, while net losses attributable to shareholders accumulated for four straight years, totaling approximately 779 million yuan.

In 2024, Yuanlin began building a second growth engine, establishing Yunhe Technology in August as its technology platform. By the first half of 2026, the company had increased its stake in Yunhai Technology, which does storage product business, creating a dual main-business structure of municipal landscaping and semiconductor storage. The new segment is already contributing meaningfully: first-half revenue reached 261 million yuan with a narrower loss of 71.07 million yuan. Semiconductor storage generated 114 million yuan, or 43.78% of total revenue, while Yunhai Technology posted a net profit of 6.63 million yuan.

Hualan Micro's chip design operations are not directly related to landscaping, but they are vertically linked to Yunhai Technology, whose main products include consumer-grade storage, enterprise-grade storage, and embedded storage modules. The controlling acquisition represents Yuanlin's most significant attempt yet to diversify.

Numerous questions remain unresolved: will the company repeat its earlier premium valuation? Has Hualan Micro's latest performance improved enough to break even? And does the listed company possess the capital and management depth to integrate across industries successfully? These issues will determine not only Yuanlin's future earnings but also the protection of minority shareholder interests. As the deal progresses, further transaction details and financial disclosures are expected to emerge, and the outcome of this unusual transformation will be closely watched.