It took more than a year, and the 3.7 billion yuan increase of Red Star Macron (601828.SH) has finally come to fruition.

Hongxing Macron announced that it will issue 450 million shares to 17 specific targets, including BABA, Ruiyuan Fund, Guohua Life Insurance and Nord Fund, at an offering price of 8.23 yuan per share, raising 3.701 billion yuan.

3.7 billion fixed increase landing, let the car Jianxing heart of the stone down, but also let its "light capitalization retail new business type" strategy ushered in an acceleration.

Behind Ding Zeng: does the "double bibcock" also have "troubles"?

On the bright side, Hongxing Meikailong is the leader of household furniture store industry and the first stock of Chinese home retail. However, in fact, Hongxing Macailong is still an invisible investment real estate leader. Behind this is the founder che Jianxing.

Che Jianxing and SUNING founder Zhang Jindong are very similar, both were born from scratch, both were born in the 1960s, both started in Jiangsu, and both got rich by chain mode, one is furniture store chain, the other is home appliance retail chain. In addition, the backers are all BABA.

In 1986, Che Jianxing, the founder of Hongxing Meikailong, set up the first home workshop with a start-up capital of less than 1,000 yuan; in the following ten years, Che Jianxing held Hongxing Macailong in his hands. The main business model is to directly operate shopping malls: to obtain shopping mall properties through self-construction, leasing and other ways, and to undertake property management, investment promotion, brand promotion, product promotion and other business. This also planted the "seed" for Hongxing Metro to set up a real estate company in the future.

In 2000, Hongxing Metro opened Shanghai Zhenbei Shopping Mall, and the first home mall under the brand "Hongxing Macailong" was established, which laid the foundation for the national expansion of the "Hongxing Macailong" chain in the future.

In the following decade, while China's economy was booming, chain furniture stores such as Red Star Metro and unexpectedly Home opened horse racing enclosures and staged a good show of catching up with each other. The nationalized territory of Hongxing Macron has also been rolled out at this time, and the company has gradually shifted from direct shopping malls to light asset models such as entrusted management and joining shopping malls, while increasing the provision of management consulting services to partners and franchisees, so as to achieve the rapid development of remote replication, expansion and rapid sinking of channels.

In the rough era, not only let the Red Star Metro get a qualitative leap, become the big brother of the industry, and rising housing prices also let che Jianxing heart "real estate seeds" began to sprout.

In terms of furniture stores, in 2010, the number of shopping malls managed by Hongxing Metro reached 46, surpassing the number of self-operated shopping malls for the first time (33). In 2012, Hongxing Metro set up its 100th shopping mall, while the home of its old rival only reached 100 in 2014.

In terms of real estate, in 2009, Che Jianxing's "Red Galaxy Empire" began to dabble in the real estate industry and registered Hongxing Real Estate. It is understood that che Jianxing at the beginning of the positioning of the real estate business is very clear: in addition to furniture MALL, at the same time vigorously promote the development and construction of Red Star International Plaza and Aegean Shopping Mall. The former focuses on office buildings and shops, while the latter focuses on shopping malls. They all rely on Hongxing Macron's home MALL, bundled with Naodi, and three types of malls expand synchronously, with an early model similar to Wanda.

In 2018, Red Star Macmillan, which just got through the double financing platform of "Atroph" with abundant cash on hand, greatly increased the size of real estate, and the scale of investment real estate continued to rise; at the same time, it moved into finance, PE investment, department stores and other fields.

It is understood that in 2018, the scale of investment real estate accounted for 70.8% of the total assets, about 78.5 billion yuan, ranking in the forefront of A-share listed companies and becoming an invisible investment real estate leader; in the same year, in terms of PE investment, Hongxing Macailong also invested in laundry brand "seahorse laundry", intelligent lock first brand Deshmann and other start-up companies.

Over the next few years, real estate regulation and debt reduction and other policies continue to increase, car Jianxing is still fond of land acquisition and investment. In 2020, Red Star Real Estate spent nearly 20 billion yuan to acquire land, and car Jianxing took over the Jinke shares sold by Rongchuang with a private company of 4.7 billion yuan.

However, on the face of it, Red Star Meikailong has made great progress under the leadership of che Jianxing, but its performance continues to decline. From 2018 to 2019, the revenue growth rate of Hongxing Macron dropped from 30% to 16%, and the net profit growth rate dropped from 10% to 0.05% over the same period. By 2020, both revenue and net profit showed negative growth, with revenue down 13.6% from the same period last year and net profit down 61.4% from the same period last year.

Behind the decline in performance, the scale of Hongxing Meikailong investment real estate is approaching 100 billion yuan. In the first half of 2021, Hongxing Metro Investment Real Estate was 93.5 billion yuan, second only to China Merchants Shekou and China Construction, and far more than Metro Holdings and Vanke An and other real estate companies.

At a time of declining performance, the total debt of Hongxing Metro continues to rise. As of the first half of 2021, Hongxing Macron's total debt was 80.2 billion yuan, a slight increase of 0.38% over the same period. Of this total, current liabilities soared 10.8 per cent to 35.1 billion yuan over the same period last year. On the other hand, in terms of cash flow, the balance of cash and cash equivalents at the end of the first half of the year was 4.415 billion yuan, down 49.87% from the same period last year, the worst year of cash flow performance at the end of the period since mid-2015.

Increasing the "timely Rain": new business type of Light capitalization Retail welcomes the acceleration

Due to the high debt, since last year, che Jianxing began to face up to the debt problem of Hongxing Metro comprehensively and actively, and actively seek a solution to the problem.

First of all, Hongxing Metro put forward the development strategy of "light assets, heavy operation, and reduced leverage" last year; secondly, actively deploy the strategy of "new retail reform to enhance the competitiveness of the main industry, and home decoration business to create a second growth curve"; finally, introduce strategic investors in the way of equity to help them tide over the difficulties. The 3.7 billion growth plan was launched after the performance changed in the first half of last year.

Specifically, the first task of Hongxing Metro is to rapidly expand the entrusted shopping malls, cooperative distribution and franchise store business, and reduce the proportion of self-built and self-operated shopping malls with heavy assets. At the same time, set up the decoration industry group and promote the decoration business to the first business, accelerate entry and compete for front-end flow through the three major brand matrixes "Mei Kailong Space Aesthetics", "Home double" and "better Home". Through "one-stop" home decoration to achieve household consumption integration; actively promote equity financing plans, optimize debt structure, and provide liquidity.

A more important point is to increase the intensity of "weight loss" with the potential of a strong man breaking his wrist. Especially since 2021, the willingness to "lose weight" has been significantly strengthened. In June 2021, the logistics assets with a total value of 2.5 billion yuan were packaged and transferred to Yuanchuan, Tianjin, and the newly established Meikailong property was transferred to Xuhui with 700 million yuan in October 2021. In addition, it has recently been reported that che Jianxing plans to prepare the Aegean Commercial Group of Red Star Metro to be listed in Hong Kong.

Back to this fixed increase of 3.7 billion yuan. For Hongxing Michaelon, it is undoubtedly a "timely rain".

In terms of reducing debt and leverage, Red Star Metro will raise the largest single fund to repay interest-bearing liabilities, involving about 1.1 billion yuan. Focusing on the main industry and re-operation, about 1.72 billion yuan from the funds raised will be used for the construction of furniture shopping malls (Foshan, Nanning and Nanchang). The remaining 870 million yuan is used for Tmall's "home improvement city war", 3D design cloud platform and new generation home decoration platform construction.

It can be predicted that the smooth landing of the 3.7 billion yuan increase will accelerate the strategic pace of "light assets, heavy operation, and leverage reduction" of Hongxing Meikailong.

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