YOUNGOR And Difficulties Or Return To The Main Garment Industry

China

The world's leading enterprise YOUNGOR group Limited by Share Ltd (hereinafter referred to as YOUNGOR) first landed on the Shanghai stock exchange in 1998.

In the following more than 10 years of development, the company began to set foot in two businesses of real estate and financial investment, and gradually established a diversified strategy of clothing, real estate and investment "three carriages".

However, in the continuous regulation of real estate and the weakness of the domestic A share market, YOUNGOR's two rear carriages are almost "dumb".

Faced with such a predicament, the company has to make "strict control of real estate investment, timely adjustment of investment scale, centralized resources to invest in brand clothing" decision.

Real estate business revenue and profits double

In April 2010, in the face of the excessive rise of housing prices in the whole country, the state launched the combination of real estate regulation and control.

Over the next two years, real estate regulation has become a nightmare for all housing companies.

Although the main industry is clothing production and sales, but YOUNGOR has become a "leg" of the real estate business, and it is clearly impossible to be independent.

Data released by the company in March this year showed that the company achieved operating income of 11 billion 539 million 400 thousand yuan last year, down 20.49% from a year earlier, and realized operating profit of 2 billion 438 million 400 thousand yuan, down 28.29% from the same period last year. Net profit attributable to shareholders of listed companies was 1 billion 762 million 700 thousand yuan, down 34.03% from the same period last year.

In the company's reasons for the decline in performance, "the completion of the real estate project delivery reduction" occupies an important position.

The sub item data in the annual report prove this more intuitively.

Business data show that last year, the company's real estate tourism development business achieved only 3 billion 636 million 300 thousand yuan of operating income, down 46.94% compared with the same period last year. Net profit is only 571 million 500 thousand yuan, down 15.86% compared with the same period last year.

In this regard, the company's explanation is only "the non periodic impact on the amount of delivery completed".

The ever brilliant property business is now overshadowed. In addition to ongoing real estate regulation, the analysis of the outside world agrees that YOUNGOR's land acquisition strategy and specialization are also important factors determining the narrowing of its property market.

Earlier, insiders pointed out that when YOUNGOR was developing its real estate business in Ningbo, it had a certain competitive advantage by acquiring the low price of land, but this advantage gradually lost after the company entered other areas.

Take Hangzhou as an example, most of the land YOUNGOR receives is at a high price.

At the same time, the company's strategy of stimulating sales with high-end positioning is also "not to be bought" by consumers.

The price is hard but the embarrassment of Guangyu and brand is not enough.

To make matters worse, YOUNGOR's real estate development is mainly concentrated in the Yangtze River Delta region, mainly in Ningbo, Suzhou, Hangzhou and Shanghai.

According to incomplete statistics, the commercial residential area of the four main cities in 2011 decreased by 15%, 23%, 53% and 24%, respectively.

Moreover, the company's annual report shows that as of that year, the company's land reserve is only 1 million 500 thousand square meters, and is mainly distributed in the four cities that have issued the "restriction order".

Huge fluctuations in financial investment business

Real estate business suffered a sharp decline.

To add insult to injury, the company's other chariot financial investment business has also experienced tremendous fluctuations.

Annual report data show that the company's financial investment business in 2011 achieved net profit of 487 million yuan, a decrease of 758 million 400 thousand yuan over the previous year of 1 billion 245 million 400 thousand yuan, down 60.90% compared to the previous year, far exceeding the clothing business.

The decline of business.

{page_break}

For the predicament of investment business, the company said that in 2011, China's capital market has undergone great turbulence. The company strictly controls the scale of financial investment, participates in private placement and PE, and accumulates a total investment of 2 billion 950 million yuan, which is 44.78% lower than that of last year's 5 billion 342 million 300 thousand yuan.

However, the downtrend of A shares still has a certain impact on the company's financial investment business, especially for the overall performance of the company has brought greater volatility.

In this regard, in the future outlook of the annual report, the company clearly pointed out that in order to avoid the impact of the two level market volatility on the company's operating performance and asset size, and in favor of investors to make reasonable valuation judgments, the company intends to increase the overall yield rate as a principle, weigh the holdings and replacement of existing investment projects, and gradually reduce the scale of financial investment, and further increase the investment in brand clothing.

Nevertheless, the plight of the company's financial investment business is further enlarged.

A quarterly report released by the company showed that the proceeds of the first quarter of this year's financial investment sector were -2137.57 million yuan, representing a decrease of 108.06% compared to the same period last year, which was 265 million 200 thousand yuan, which also contributed to a 34.27% decline in net profit attributable to shareholders of listed companies in the first quarter, and only 256 million 200 thousand yuan.

Under the background of A shares, it is still unclear when the company's financial investment business will be able to get out of the predicament.

Last year, YOUNGOR spent nearly 3 billion yuan to participate in 14 fixed companies including Qian Yuan electric power, Guang Bai pharmaceutical, Hai Zheng pharmaceutical, Hai Li, Xing Rong investment, Sheng Yi technology, Yun Tian Hua, Jinggong technology, Sheng Nong development, Dongfang zirconium industry, Xinjiang Zhonghe, Zhongjin gold, Huaxin Cement and Shanxi Coal International Co., Ltd.

Since January this year, YOUNGOR's restricted shares, including the 12 companies of Qian Yuan electric power, Guang Bai share, Hai Zheng pharmaceutical, Hai Lide, Xing Rong investment, Sheng Yi technology, and Yun Tian Hua, have all entered the circulation, but almost without exception, they are in a tight position.

Taking into account the dividend payment schemes of these companies, and at the latest closing price, the remaining 11 companies are floating losses except the eastern zirconium industry, with a total floating loss of more than 400 million yuan.

Or suspend cross-border activities to return to the garment industry.

YOUNGOR has to rethink its strategy of diversification after the two carriages of real estate and financial investment are hard to repair.

Compared with the declining real estate business and financial investment business, the clothing industry seems to play an irreplaceable role in the survival of the company.

2011, the company

Clothing sales revenue of 3 billion 812 million 340 thousand yuan, an increase of 24.66% over the same period last year, and gross domestic product sales reached 65.66%, an increase of 2.81 percentage points over the same period last year.

"We must strictly control the investment in real estate, adjust the scale of investment in a timely manner, and concentrate resources on brand clothing."

According to previous media reports, in April this year, YOUNGOR chairman Li Rucheng said in the first quarter of the group's economic work: "this year's economic situation is grim, and the heads of companies are ready to overcome difficulties."

Making major structural adjustments and once again turning his attention back to the clothing business is his solution to the biggest predicament facing the company.

It has been pointed out that at the height of YOUNGOR's development, whether or not Li Rucheng admitted that it copied the road of Buffett, but from the action point of view, YOUNGOR is indeed similar to Buffett's Boxill Hathaway.

But when YOUNGOR almost wanted to create a real Chinese version of Boxill Hathaway, the dismal performance in 2011 led it to choose to return to the past.

{page_break}

As for YOUNGOR's real estate business, Li Rucheng put forward a series of "prudent" strategies this year, not only did not add new land reserves, but also proposed to speed up the sale of existing projects, strengthen the ability to repay money, and strictly control the cost of costs, in order to enhance the ability to resist risks.

However, in view of the "2012 prospect statement" of its board of directors, the company has put forward "strengthening risk control force as the first element". On the other side, it still believes that "real estate still has broad prospects for development". And it also proposes a real estate business plan to achieve "pre-sale income of more than 5 billion yuan in 2012, and business income increased by more than 35% over the previous year".

Obviously, YOUNGOR is not willing to withdraw from real estate and financial investment, and is trying to wait for the policy and market to turn around. Only when the good news comes, can we first shift the gravity center to the clothing sector so as to "save lives".

However, although YOUNGOR maintains 7 billion 526 million yuan in clothing business (including clothing and textiles) and has the whole industry chain in the leading position of the industry, but in the face of increasingly fierce competition in the industry, YOUNGOR's goal of achieving "20% growth at the end of 2012" can not be realized.