The company plans to acquire 15.9% of Shanghai Jiale's shares for RMB 200 million
The company plans to use capital raised to acquire 10.9% of Shanghai Jiale Co., Ltd.'s shares held by Taihe Intelligent Mobility Equity Investment Partnership in Anhui Province; it plans to acquire 5.0% of Shanghai Jiale Co., Ltd. held by Huai'an Jiuan Venture Capital Partnership for 63 million yuan.
After the transaction is completed, Chuzhou Mirun (a wholly-owned subsidiary of the listed company) will hold 51.848% of Shanghai Jiale's shares, and Shanghai Jiale will become the company's holding subsidiary and included in the scope of the company's consolidated statements.
Previously, in December 2021, the company's wholly-owned subsidiary Ningbo Purun Investment Partnership (Limited Partnership) participated in the investment and establishment of the Zhuhai Jiale Equity Investment Fund for RMB 286 million to acquire 49% of Shanghai Jiale's shares; in September 2020, Chuzhou Mirun, a wholly-owned subsidiary of the company, planned to acquire 28.70% of Shanghai Jiale's shares for RMB 326 million.
Break into the field of textile, clothing and fabric production to open up market space
Shanghai Jiale's main business is textile and garment production and processing and fabric development and manufacturing. This transaction will further extend the product categories of the company's OEM business from the field of luggage to the field of textile, clothing and fabric manufacturing, providing new categories and market space for the company's long-term development in the future.
The textile and garment retail market is over trillion US dollars. The market space for garment and fabric manufacturing is large. It occupies an important position in the global economy, has stable industry prospects, and has a strong scale effect. In the supply chain system of leading global sports and leisure customers, a number of companies have been nurtured and born with a market capitalization of more than 100 billion dollars, excellent net profit levels and cash flow levels.
Relying on its excellent manufacturing capabilities and differentiated global production capacity layout, Shanghai Jiale quickly expanded global brand customers and increased its share. In 2023, global textile and garment brand customers bucked the trend and achieved a 26.87% increase in sales revenue. Shanghai Jiale's vertically integrated production capacity for fabrics and garments in the field of garment manufacturing has formed a vertical integration advantage in the industrial chain, which helps Kairun Co., Ltd. broaden profit margins and raise profit levels.
Expand global high-quality customer resources and expand R&D and production capacity
Established in 1993, Shanghai Jiale has a vertically integrated production capacity from fabric research and development, weaving, dyeing and finishing, printing (embroidery) to ready-to-wear. It mainly produces and sells various high-end textile, casual fashion and sports products. The production capacity serves world-renowned customers UNIQLO (Uniqlo), Adidas, Puma, MUJI, etc., and has significant customer resource advantages. Among them, Shanghai Jiale began cooperating with Uniqlo in 2006. It has been almost 18 years since then, and is one of Uniqlo's core textile and garment suppliers.
Shanghai Jiale has built a vertically integrated “textile fabric+garment” production base in Shanghai and Indonesia. It has built a ready-to-wear manufacturing base in Anhui. It has rich experience in global operation and management, and has excellent product R&D, design and manufacturing capabilities. It has an “academician workstation” and a “Shanghai Enterprise Technology Center”, which combines production, research and learning to provide strong support for its product development and design.
Shanghai Jiale had revenue of 1.29 billion yuan and net profit of -75 million yuan in 2023; revenue of 320 million yuan and net profit of 100 million yuan from January to January 2024.
High degree of business collaboration, win-win cooperation to help high-quality development
Shanghai Jiale's development philosophy and future plans in the textile and garment field are highly coordinated with Kairun Co., Ltd.'s global layout strategy and high-quality brand customer strategy, which helps achieve mutual empowerment, mutual benefit and win-win situation.
On the global manufacturing side, the company has factories in Indonesia, Anhui, etc., which is highly consistent with the layout direction of the Shanghai Jiale production base. In terms of production process, bags and clothing and textile accessories belong to the same textile industry, and there is a certain degree of similarity in manufacturing technology, supply chain and factory management, R&D and design. In terms of talent pool, the core team of Kairun Co., Ltd.'s foundry manufacturing business has worked for large textile, garment and fabric accessories manufacturing companies, and has sufficient experience in industry operation and management.
Through this transaction, Kairun Co., Ltd. will further explore and fully integrate the management experience and industry technical experience of both parties to cooperate, support each other, and achieve a win-win situation in terms of development strategies, customer resources, and production experience. This transaction will have positive significance for the company's future business performance and long-term development. It will help Kairun Co., Ltd. develop with high quality, enhance long-term investment value, and increase shareholder returns.
Maintain profit forecasts and maintain “buy” ratings
After completing this transaction, the company's main business will fully enter the textile, garment and fabric manufacturing field, open up new market space, and play a role in improving the company's development quality and investment value. We estimate that the company's net profit for 24-26 will be 2,92/336/456 million yuan, EPS will be 1.22/1.51/1.90 yuan/share, respectively, and the corresponding PE will be 18/14/11X, respectively.
Risk warning: acquisition and integration risk, risk of high value-added rate of target assets, risk of impairment of goodwill, etc.