Shanshan split clothing business to go public in Hong Kong clothing king Zheng Yonggang transforms new energy leader

Zheng Yonggang, chairman of Shanshan Holdings Board of Directors, has multiple labels. He is the first clothing brand in China in the 1990s, and a new energy leader with a forward-looking and successful transformation of lithium battery materials. Those who know Zheng Yonggang’s “attack and retreat” in the capital market may be more willing to call him the “shell king”.

Now, just as Shanshan’s investment action is slightly stable, Zheng Yonggang has made new moves in the capital market.

On May 10, Shanshan announced that its subsidiary, Shanshan Brand Operation Co., Ltd., received the approval of the CSRC on the approval of the Shanshan brand to issue overseas listed foreign shares. This means that Shanshan shares will be spun off from the apparel business to achieve IPO in Hong Kong. Zheng Yonggang's multi-business kingdom will build a financing map across A-shares and H-shares.

After the completion of the split, according to Shanshan's prospects for the future in the 2017 annual performance briefing: "In 2018, Shanshan will focus on the new energy industry, with the new energy business as the strategic development focus, and integrate the upstream and downstream resources of the industrial chain. On the other hand, the Shanshan clothing business, which has been able to obtain blood transfusions in Hong Kong stocks, will also usher in a new development climate.

Clothing business spin-off integration

The separation of the apparel business from the listing platform is a decision made by Shanshan in 2016. Shanshan said that the spin-off will help maximize the subjective initiative of the subsidiaries, and at the same time help the subordinate subsidiaries to expand financing channels and enhance independent financing capabilities.

The apparel business was the starting business of Shanshan. In the few years since its establishment in 1989, the market share has once reached 37.4%.

However, as Zheng Yonggang expected at the time, the success of Shanshan suits was only a product of a shortage of economic times. According to statistics from Wande, Shanshan’s 2017 annual revenue structure constitutes only 8.06% of apparel products, which is the “chicken rib” of the company’s performance.

However, in this report, in 2017, the sales volume of the main business of Shanshan Garment Business reached 670 million yuan, a year-on-year increase of 27.23%; the net profit attributable to listed shareholders was 49.374 million yuan, a year-on-year increase. 36.16%. Judging from the gross profit margin of various businesses, Shanshan Garment Business ranked first with a high level of over 40%.

Obviously, although the total revenue is relatively small, Zheng Yonggang did not intend to give up this in the field of clothing. He has been trying to spin off the business and operate the market. It is understood that while splitting the Shanshan brand, Shanshan also uses the Shanshan brand as a platform to sort out the relevant assets of its apparel business, and to sell or cancel some subsidiaries while loading the relevant assets of the garment business into the Shanshan brand. . These include the sale of the joint-venture brands MARCOAZZALI and LUBIAM.

The Shanshan brand said the move was to streamline the group's structure and streamline its business and brand portfolio. It is reported that the Shanshan brand after the splitting and finishing will no longer produce products, and instead adopt OEM production methods. Shanshan said in the prospectus that this is to focus resources on the core competencies of brand management, design and product development, sales and distribution management.

It is worth noting that while Shanshan split the clothing business and build the Shanshan brand as the only clothing platform, the Shanshan brand began to vigorously cultivate another sub-brand, SHANSHAN. Different from the core brand of Shanshan brand, FIRS is positioned as a business men's wear for men aged 35-45. SHANSHAN's position is relatively young, targeting 25-35 year old men.

New energy new dream

Separating the apparel business, Zheng Yonggang placed a big dream on new energy vehicles for Shanshan.

After more than 20 years of development, Shanshan has entered the apparel, lithium battery industry, car leasing, financial and venture capital businesses, while the new energy business based on lithium materials has become a bright revenue for Shanshan. The mainstay.

In Shanshan's achievement of 8.27 billion yuan in revenue in 2017, a year-on-year increase of 51.07%, it was the lithium battery material positive business business performance increased significantly year-on-year. It is reported that the revenue of cathode materials accounted for 51.5% of the total revenue of Shanshan. Judging from the list published by many domestic media, Shanshan’s positive electrode materials ranked first in the list for four consecutive years, and the negative electrode materials ranked first in 2017 and electrolytes ranked fourth in the list.

After becoming a leader in new energy materials, Shanshan said that it will continue to strengthen the leading position of lithium battery materials in the future, guided by market demand, with independent research and development as the core, and with cost control as a means to further expand production capacity. Enhance the scale advantage to cope with and grasp the good opportunities and development dividends brought about by the rapid development of the new energy automobile industry.

In fact, as early as 2017, Shanshan has increased its production capacity in the cathode material, anode material and electrolyte business of the lithium battery business. The Ningxiang Phase II lithium cobalt oxide production line of the cathode material was first put into production in April 2017, and the Sanyuan production line was put into trial production at the end of 2017. In addition, Shanshan Energy launched an annual production of 7,200 tons of high-nickel ternary and precursor projects in Shizuishan City, Ningxia, and successively launched trial production in March 2018. In January 2018, Shanshan Energy launched a 100,000-ton high-energy-density lithium-ion battery cathode material project, in which the first-phase 10,000-ton capacity is expected to be put into trial production by the end of 2018.

However, the expansion of many businesses has also brought about greater financial pressure. According to the 2017 annual report of Shanshan, its lithium battery material inventory increased by 131% compared with the same period of last year. The inventory turnover rate was 3.57 this year, a decrease of 0.71 from 4.28 in the previous year. In addition, due to the sharp increase in the raw materials of the positive and negative electrodes and the tight supply, Shanshan’s accounts payable also reached 7.39 at the end of 2017. 100 million yuan, a year-on-year increase of 46%, accounts payable turnover rate of 7.29, an increase of 0.44 over the previous year of 6.85; accounts receivable also reached 2 billion yuan, the turnover rate increased by 2.94 over the previous year. .47.

It is worth noting that Shanshan’s newly expanded new energy vehicle business generated a revenue of 545 million yuan in 2017 and a significant year-on-year growth of 476.64%, but due to fluctuations in the subsidy policy of the industry. The market environment changes and the initial investment in industrial cultivation, the net profit attributable to shareholders of listed companies is still a loss of -180 million yuan. At the same time, this business has also increased the company's accounts receivable mentioned above.

It can be seen that the slow recovery of the lithium battery industry, the impact of upstream raw material price increases and capacity expansion are reflected in the performance of Shanshan. At the beginning of the year, at a forum, Zheng Yonggang, who is now particularly important in the relationship between investment impulses, development and risk control, may be more aware of the need for “cash flow is king”.

It is worth noting that in the rush to build new energy vehicles, Shanshan has already decided to enter new energy vehicles as early as last year, and has already carried out some relevant layouts at home and abroad. In April, Shanshan announced that its subsidiary, Ningbo Shanshan Electric Vehicle, has obtained the qualification for the production of national special vehicles. At present, Shanshan has been deployed in 15 cities, completing 3,000 charging piles and operating 600 new energy vehicles.

According to the 2017 annual report of Shanshan, during the reporting period, Shanshan Automobile obtained the qualification for the production of new energy special vehicles. The self-developed 1.5-ton pure electric logistics model and 0.5-ton pure electric logistics model entered the Ministry of Industry and Information Technology and announced the entry into the new energy vehicle promotion catalogue; the trailer-mounted motorhome business achieved mass sales and the products were mainly sold to the Australian market. Qingshan Automobile completed the design and research and development of 11 new energy buses, including 8 pure electric city buses and 3 plug-in hybrid buses.

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