Report highlights
Description of the event
Langsha Underwear, a wholly-owned subsidiary of the company, jointly invested in the establishment of Guangzhou Langsha Investment Management Co., Ltd. (provisional name). The registered capital of the newly established company was RMB 2 million, of which Langsha Underwear invested 1 million yuan, accounting for 50% of the shares; in order to firmly transform into the Internet culture industry, the company announced a strategic investment in the Oriental Huifu Hangzhou Angel Fund, with a strategic investment amount of RMB 1 million.
Incident comments
Set up a joint venture company and promote the strategic development of the “Langsha” e-commerce project. The Langsha Investment Management Company established in this joint venture will act as the e-commerce project operator for “Langsha” products and promote the strategic development of e-commerce projects. The company is developing e-commerce projects, on the one hand, because e-commerce for underwear products is currently relatively low and is expected to increase rapidly in the future. On the other hand, the company's product structure mainly focuses on intimate underwear, making it easier to internet-connect compared to bras. The establishment of a joint venture e-commerce project management company is conducive to integrating the resources of the “Langsha” brand on platforms such as WeChat, Tmall, and Vipshop, increasing brand stickiness, and building brand marketing in all aspects.
It strategically invested in the Oriental Huifu Hangzhou Angel Fund to transform the Internet culture industry. The strategic investment was the first phase of the Oriental Huifu Hangzhou Angel Fund, formed jointly by Oriental Huifu and Zhejiang Qianran, to transform the Internet culture industry, with an investment amount of 1 million yuan. The Oriental Huifu Hangzhou Angel Fund focuses on angel-stage early-stage investments in the fields of mobile internet, pan-entertainment, and smart hardware. The fund's initial size is RMB 100 million, the lifetime period is 5 years, and the number of investment projects is not less than 15. Since the project fund has inferior capital, the safety of funds is guaranteed.
Rely on large groups to achieve business collaboration, and expect asset injection in the medium to long term. Langsha Group, the controlling shareholder of the company, owns many companies such as Hongguang Knitting, Microfinance Company, Anhang Photovoltaic, and Lanye Optoelectronics, which integrates diversified businesses such as socks, underwear, clothing, finance, and home furnishings. The scope of consolidated financial reports of listed companies includes subsidiary Langsha Underwear and Sun company Sukai Apparel. In 2014, the company purchased 1,6813 million yuan of sock products from its affiliate Langsha Knitting to achieve combined sales with e-commerce underwear. The group's diversified business collaborated with the main business of listed companies. Furthermore, on August 28, the company announced that it would stop planning to raise funds from the non-public offering of shares to be used to purchase assets for the Lanye Film project under construction with an annual output of 50,000 tons of high-performance packaging film, which belongs to the group, and promised not to plan the non-public offering of shares within six months. Against the backdrop of weak growth in traditional business, the company's asset quality has gradually recovered, and the scale of monetary capital continues to grow. Asset injection is still expected in the medium to long term.
Give it an “increase in holdings” rating. Against the backdrop of poor terminal sales in the early stages, the company actively optimized channels and absorbed high-priced inventories. Currently, the inventory scale has dropped to a low level, and the company's performance is expected to reverse. At this stage, the company's e-commerce project strategy continues to advance and strategically transform the Internet culture industry. It is easy to achieve business collaboration by relying on large groups. There are still expectations for asset injection in the medium to long term. We expect the company's EPS for 2015-2016 to be 0.03 yuan or 0.12 yuan, corresponding to the current stock price estimates of 251 times and 69 times. Give it an “increase in holdings” rating.