Nearly 100,000 investors affected! Concealing major contracts and inflating profits, regulators plan to fine 17.8 million yuan; the company issues an apology.

Chinatimes.net.cn Reporter Shuai Kecong Beijing Report

For failing to disclose major contracts and their performance as required, and artificially inflating profits by over 85.5 million yuan, Fuzhou Dahua Intelligent Technology Co., Ltd. (hereinafter “Dahua Intelligent,” 002512.SZ) has received heavy regulatory penalties, becoming another typical case of financial fraud in the A-share market.

On the evening of February 27, 2026, Dahua Intelligent announced that it had received a prior administrative penalty notice from the China Securities Regulatory Commission Fujian Bureau (hereinafter “Fujian CSRC”). The bureau plans to fine the company and five responsible persons a total of 17.8 million yuan, including a 6 million yuan fine on the company and a 3.5 million yuan fine on the then Chairman and General Manager Chen Rongsheng.

Dahua Intelligent stated that based on the facts identified in the prior notice, the company believes it does not meet the criteria for mandatory delisting due to major violations. The company’s board of directors sincerely apologizes to investors for this matter and will continue to urge management to strengthen measures and further improve internal control systems.

Lawyer Liu Peng of Shanghai Huzhi Law Firm told Huaxia Times that the facts revealed by regulators show that Dahua Intelligent’s information disclosure violations are serious, long-lasting, and severely infringe on investors’ legitimate rights. Investors suffering losses as a result can legally file lawsuits for compensation.

Profit Inflation Exceeds 85.5 Million Yuan

Public information shows that Dahua Intelligent was founded in 1993. Its core strategies are “Communication Network” (One Network) and “Digital Screen” (One Screen). It is a company focused on information communication, optoelectronic displays, and digital applications, listed on the Shenzhen Stock Exchange in December 2010.

On July 28, 2025, due to suspected information disclosure violations, Dahua Intelligent was investigated by the CSRC. After seven months, the administrative penalty notice was issued. It was disclosed that Dahua Intelligent was found to have three suspected violations.

First, failure to disclose major contracts and their progress as required. On December 2, 2021, Dahua’s controlling subsidiary Fujian Fumi Technology Co., Ltd. signed a contract with Kunshan Zhimei Material Trading Co., Ltd., for the purchase of polarizer automatic bonding machines and glass substrate cleaning machines, with a total contract amount of 794.99 million yuan. On August 15, 2023, the two parties signed a supplementary agreement to terminate the contract. Dahua Intelligent should have promptly disclosed these major contracts and their progress but has not done so to date.

Second, Dahua Intelligent failed to disclose these major contracts and their progress in its annual reports for 2021-2023, violating the Securities Law and related regulations.

Third, in 2023, Dahua Intelligent recognized gains from the disposal of two subsidiaries in advance, artificially inflating profits by over 61.11 million yuan; the Fumi Industrial Park Fumei Display Material Bonding Project’s fixed assets were not timely capitalized, and the Fumi Module Project failed to properly account for project suspension and land sales, resulting in an overstatement of profits by more than 24.64 million yuan in 2023. These issues caused a cumulative profit inflation of about 85.76 million yuan in the 2023 annual report, accounting for 24.32% of the company’s disclosed total profit for that period.

A senior market analyst told Huaxia Times that profit inflation is a typical form of financial fraud, distorting true business performance, misleading investors, creditors, and regulators, eroding investor confidence, and shaking market trust.

Regulatory Authorities Take Strong Action

Fujian CSRC pointed out that the above violations are supported by evidence such as relevant announcements, bank transaction records, documents provided by the company, explanations, and interview transcripts of involved parties.

Based on the facts, nature, circumstances, and social harm of the violations, according to Article 197, Paragraph 2 of the Securities Law, Fujian CSRC plans to decide: order Dahua Intelligent to correct the violations, issue a warning, and impose a fine of 6 million yuan; additionally, warnings and fines totaling approximately 11.8 million yuan will be imposed on five responsible persons.

Specifically, fines are proposed as follows: 3.5 million yuan for the then Chairman and General Manager Chen Rongsheng; 2.8 million yuan for Vice General Manager and Secretary of the Board Zhang Gaoli; 2.5 million yuan for Director and CFO Wang Jingyu; 2.2 million yuan for Director and General Manager Zeng Zhonglian; and 800,000 yuan for Independent Director and Audit Committee Chair Huang Qiqing.

Liu Peng pointed out that Dahua Intelligent’s three-year-long incomplete financial reports seriously damaged the authenticity and accuracy of information disclosure, misleading long-term value investors. The fraudulent behavior directly painted a false picture of the company’s profitability, leading investors to make wrong buy or hold decisions when the company’s actual performance was poor. The penalties proposed by regulators clearly reflect the severity of the violations and the serious negative impact on the market and investors.

However, the prior notice of administrative penalty is not an official punishment. Dahua Intelligent and the responsible persons still have the right to make statements, defenses, and request hearings. On February 28, Huaxia Times contacted Dahua Intelligent’s securities department; staff said they were not aware whether the company or responsible persons would seek reconsideration. The company’s current operations are normal.

Dahua Intelligent stated in its announcement that it will take this as a lesson, earnestly learn from it, strengthen internal governance, improve compliance awareness among directors and senior managers, enhance business monitoring and financial management, and effectively safeguard the legitimate interests of the company and all shareholders. The company will continue to monitor the progress of the above issues and strictly fulfill its information disclosure obligations as required.

Investors Can Seek Compensation Legally

Following the exposure of the financial fraud, the Shenzhen Stock Exchange will implement other risk warnings on Dahua Intelligent’s stock. According to the announcement, trading of Dahua Intelligent’s shares will be suspended for one day starting from the opening of March 2, 2026 (Monday), and will resume on March 3, 2026. The stock abbreviation will change to “ST Dahua,” and the daily price fluctuation limit will be 5%.

As of the close on February 27, Dahua Intelligent’s stock price was 6.03 yuan per share, up 0.67%, with a market value of about 6.7 billion yuan. Since 2026 began, the stock has fallen by 3.2%.

Dahua Intelligent stated that, out of responsibility to all shareholders, the board will continue to urge management to take effective measures to quickly eliminate the impact of these issues and, according to regulations, strive to lift the risk warning as soon as possible. The company expressed sincere apologies to investors and will continue to strengthen measures and improve internal controls.

In recent years, Dahua Intelligent’s operations have been poor. The earnings forecast disclosed on January 30 predicted a net loss attributable to shareholders of 190 million to 290 million yuan for 2025, compared to a profit of over 24 million yuan last year; non-recurring net loss estimated at 220 million to 320 million yuan, versus a loss of 75 million yuan last year.

Regarding the reasons for the significant loss in 2025, Dahua Intelligent cited multiple factors, including rising prices of key raw materials leading to lower gross margins in communications and electronics manufacturing; poor performance of joint ventures resulting in large investment losses under the equity method; and some receivables not being collected on time, despite collection efforts including legal procedures, with significant provisions for bad debts made prudently.

As of the third quarter of 2025, Dahua Intelligent had 98,000 shareholders. Under Article 85 of the Securities Law and relevant judicial interpretations on false statements, if an information disclosure obligor fails to disclose information as required, or if the disclosed securities issuance documents, periodic reports, interim reports, or other disclosures contain false records, misleading statements, or material omissions, causing investors to suffer losses, the obligor shall bear compensation liability.

Lawyer Liu Peng stated that investors who bought shares between December 2, 2021, and December 31, 2024, and still hold them as of the close on December 31, 2024, can seek compensation through litigation.