(Yicai Global) Aug. 16 -- Baofeng Group Co. [SHE:300431] has finally provided an update on its asset reorganization a month after stock trading suspension, declaring that it will introduce strategic investors for its subsidiary, Shenzhen Storm Chief Technology Co.

Strategic investors will be introduced through capital injection and share transfers, the group said in a statement on Aug. 14. They will be selected from the company's controlling shareholder and its affiliates as well as independent third parties. The latest valuation of the subsidiary and the identities of the investors will be disclosed prior to Sept. 18, per the statement.

Baofeng Group closed at CNY20.2 (USD3.02) per share just before the trading suspension on July 18. Its market capitalization hit an all-time low at CNY6.71 billion, about CNY26 billion below the highest level (CNY32.701 billion) recorded on May 21, 2015. Its actual controller, Feng Xin, has pledged all his 70 percent stake in the group.

Per the 2016 annual report, Baofeng Group's operating income soared by 152.62 percent to CNY1.647 billion last year, but its net profit slumped 69.53 percent on the year to CNY52.81 million. Similarly, its net profit attributable to shareholders is projected to be CNY13.2 million to CNY18.8 million in the first half of this year, posting a sharp drop, despite a 50 to 80 percent spike in revenue, estimated to be around CNY742 million to CNY891 million.

The fall in net profit last year was mainly attributable to losses incurred in launching the new business, Baofeng TV, which has become the group's core product line, the company explained. Storm Chief Technology currently generates the largest proportion of revenues for Baofeng Group. However, for market insiders, it is nothing more than a 'prime loss' strategy.

"Storm Chief earned CNY929 million last year with losses of CNY358 million and a gross margin of minus 15.29 percent, and its 800,000 TV sales represented a market share of merely 3 percent, putting it at roughly the same position as Leshi in 2014," said a private equity professional in an interview with 21st Century Business Herald. "Leshi is selling seven million TV sets a year now, but it has still not turned a profit on the hardware business. And in the case of Baofeng, no one knows when it'll become profitable."