How Can Shenzhou International Become The Most Valuable Clothing Listed Company In China?

At the end of 2018, Foxconn began to lay off a lot of layoffs because of the slow growth of the smartphone market and the unreliability of "thigh" apple.

Even the "king of foundry" is so, no wonder the "new manufacturing" is so loud.

However, a garment foundry has become a big winner in the domestic apparel industry.

According to Forbes's official website data, Jian Rong, the international brand owner of Shenzhou, a famous brand manufacturer such as UNIQLO, Nike and Adidas, is worth $7 billion (about 48 billion yuan), becoming the richest person in the domestic apparel retailing industry, ranking 199th in the total list (two to five followed by Hai Lan's home Zhou Jianping, Semir dress Qiu Guang and its family, Anta group Ding Shizhong and Ding Shijia).

Because of close cooperation, Ma Jianrong and Ryui Jungcheng are very close friends. They will play golf together when they have the chance.

Shenzhou International has long been known in the industry, and has been the most expensive clothing company in the market in recent years. But it is still surprising that the company can do that. What secret does the company have?

Privatization of state-owned enterprises

Gold diggers tend to be more easily attracted by the public and the media than those who sell water. Perhaps the name of Shenzhou International is relatively new to you. Let me give you a brief introduction.

Shenzhou International is China's largest vertically integrated knitting manufacturer. It has four complete processes including weaving, dyeing, printing, embroidery, cutting and sewing. It covers all knitted garments, including sportswear, casual wear, underwear and so on.

The company was founded in the late 80s of last century, when the weak Ningbo Beilun district government, in order to solve the local employment problem, introduced Shanghai state owned enterprises and overseas Chinese compatriots. It was jointly invested by Beilun industrial Second Bureau (50%), Shanghai knitting twenty factory (25%) and overseas Chinese Xie Lipei (25%) who was engaged in garment trade in Beilun, Australia. The joint venture set up Ningbo Shenzhou Weaving Co., Ltd., and was officially established in December 28, 1987.

This cooperation is common after the reform and opening up. The State implements the "three to one subsidy" mode of economic and trade cooperation, which provides foreign equipment, raw materials and samples, and is responsible for the export of products. The Chinese enterprises provide land, factories and labor force, not only to solve the employment problem, but also to introduce technology and manufacturing technology.

Policy support coupled with the abolition of cloth tickets, the textile industry is facing great development.

In 1990, Ma Jianrong's father, Ma Baoxing, was introduced to Shenzhou International as deputy general manager.

When he was 13 years old, he went to Shanghai textile mill to do "child labor". He gained the opportunity to study in Japan by virtue of his excellent performance. After returning, he became a technical backbone. He once served as vice director of Shanghai knitting twenty factory and deputy director of the knitting factory of Shanghai Linping, and is an expert in the textile industry.

Ma Baoxing is willing to go to Ningbo, mainly to give children city accounts, so that they can become workers later.

At that time, Shen Zhou's funds were not in place, and because of the national inflation, the factory building was still in debt. There was no way out for Ma Baoxing to borrow 3 million from the Beilun branch of Bank of China.

Shenzhou International main group made two business of knitting grey cloth and knitted garment processing. At that time, the export of Chinese textiles was mainly based on foreign trade companies, with low quality and competitive homogenization. Ma Baoxing, who had been trained in Japan earlier, decided to open the Japanese market first, so as to differentiate competition from the relatively high level production line of domestic counterparts.

It is worth mentioning that perhaps because of the participation of the district government, Shenzhou International began building sewage treatment ponds from the beginning of the plant construction. In this regard, we must apply for international continuous investment.

In addition to saving costs, energy saving and emission reduction will also help to enhance Shenzhou International's brand rating and get more export quotas from the government.

Backed by the Beilun district government, and the twenty knitting factory of Shanghai is mainly responsible for training and dispatching managers and technicians, and improving the technological process, Shenzhou International Development started smoothly after international construction.

Public information shows that Shenzhou International began to make profits in 1992.

In the Asian financial crisis in 1997, Shenzhou International ushered in a major turning point - management buyout.

The three party shareholders pferred the shares to the Ma Baoxing family, also from the apprenticeship, and spent nearly 20 years in the factory, Ma Jian Rong took the big head (46.62% stake) and began to take charge of Shenzhou International.

Also in 1997, Shenzhou International delivered 20 UNIQLO 350 thousand urgent orders on schedule, and won the opportunity to cooperate with UNIQLO for a long time.

In the following period, Shenzhou International stabilized the Japanese market and established business relations with famous Japanese clothing brands and retailers such as UNIQLO, ITO, Ito, and so on.

In 2001, Shenzhou International made three of the domestic knitting industry's sales revenue, total profits and taxes and total profits.

Shenzhou International listed on the HKEx in 2005.

Due to the long history, Shen Zhou's early international history can only find some reports in the local news of Beilun. At that time, the three party shareholders supported the Shenzhou International growth.

After the pfer of shares, the new management decided the development direction of Shenzhou International.

Counter cyclical survival

From Shenzhou International's revenue and profit margin since 2002, we can see that Shenzhou International Development is relatively stable even under the influence of external environment such as economic crisis, shrinking foreign trade and industrial pfer.

Summing up more than 10 years of earnings information, Shenzhou International has 4 main business strategies: the Japanese market as the core, gradually expanding its business to the European and American markets; adjusting the product mix, focusing on sports products with higher profit margins; establishing stable cooperative relations with the customers in the service industry; and developing long-term technology R & D and new product capabilities.

1. from Japan to the world

The Japanese market is home to Shenzhou International, with 2002 accounting for 92.5% of its sales. Shenzhou International has begun to increase its sales in Europe and the United States after listing, so as to avoid the current situation of our group's dependence on the single market.

This process of globalization is also in step with the gradual opening up of export quotas in the Chinese market.

Shen Zhou International has repeatedly mentioned that the Japanese market is its core market. In the 2008 financial crisis, the Japanese market played an important and irreplaceable role in the steady development of its business.

Until now, Shenzhou International Export ranked first among China's knitted garment export enterprises, and ranked first among knitwear manufacturers in China exporting to the Japanese market.

However, looking at the current market share, China's market demand will gradually become Shenzhou International Performance stabilizer.

2. "heavy duty" sportswear

Just like the Winter Olympic Games held in Beijing in 2022, the Anta bought the original bird at a high price. In 2001 that year, Beijing successfully bid for the Olympic Games, which directly led to the development of China's sports consumption market.

Based on the anticipation of the increasing demand for sportswear in Beijing Olympic Games and the relatively higher profits of sportswear, Shenzhou International began to develop the sportswear market.

In 2003, Shenzhou International main category was casual wear, and its customers were mainly Japanese retailers represented by UNIQLO.

After the production of sportswear, Shenzhou International and Nike, Adidas, Puma, Decathlon, MIZUNO and other sports brands to carry out business.

Since 2006, Shenzhou International underwear business has gradually expanded its scale.

Continuous product structure optimization helps Shenzhou International to increase gross margin. In this process, Shenzhou International has gradually reduced the low margin casual wear orders, while the Japanese market only retained some core customers such as UNIQLO.

In 2007, Shenzhou International sportswear orders surged and sales of casual wear fell for the first time.

3., embrace big customers, high-end products.

Shenzhou International sales account for the top five customers is very stable, basically maintained at the 80%~85% interval, the current service of Nike, Adidas and Puma are all the sports brand of the industry's head.

Brands like Decathlon and Russell no longer appear in Shenzhou International Financial Report.

In 2007, when Shenzhou International built special factories for Nike and Adidas, its sportswear categories increased rapidly and the proportion of Shenzhou international high-end products increased.

Garment foundry is a real "sell product" and holds the largest two legs. No matter which one wins, Shenzhou International will not lose.

4. long term investment in technology research and development

Thigh is not meant to hold.

According to relevant reports, Shenzhou International insists on putting more than 60% of annual profits into technological pformation before listing.

After the listing, Shenzhou International annual R & D investment is about 2% of the annual revenue, and will continue to make technological improvements and equipment inputs to improve production efficiency.

In 2003, Shenzhou International began to research and develop fabrics independently. According to the design and functional requirements of customers, we developed and produced corresponding fabrics and made garments.

As of 2017, it had about 246 patents, including 90 patents for new material fabrics, and 156 patents related to the pformation of equipment and processes during the production process.

Shenzhou International estimates that its annual 25 series patents will be pformed into products, with about 625 new products.

In addition, in order to maintain relations, Shenzhou International also has to bear certain risks. The typical case is in 2012, in the future uncertain demand, Shenzhou International decisively purchased 2000 Flyknit vamp production equipment and assumed all the orders of Nike Flyknit shoe upper.

Here is another detail. In 2011 Shenzhou International formed a domestic retail team and launched MAXWIN, a leisure brand similar to UNIQLO, but has been in a state of loss.

In 2016, Shenzhou International sold 49% of its shares to NetEase.

Foreign trade factories do not own their own brands. This is a genetic problem, because the factory will be restricted by more product patents, and the higher the profit of the foundry business is, the less competitive their own products will be.

Shenzhou International does not make the core sports apparel, presumably because many of the product design has been bought up by the brand side.

NetEase Yan Xuan has only worked with Shen Zhou International for an underwear. According to the financial data, Shenzhou International has a capacity of 1 million units per day, and the volume of NetEase's strict selection may not be enough.

Costumes, "Foxconn", capital markets, ice and fire

To tell you the truth, Shenzhou International Development has nothing to say. In general, it is to accurately judge the development of the industry, and gradually accumulate its advantages through continuous technological improvement and equipment investment.

But many representative foreign trade factories such as shirts, Lu Tai, Yida, underwear (instant knitted export first), and Hong Ni have grown up most of the way.

Here is a brief comparison of tiger sniffer high street, Gao Shen, who has reported another world-renowned leading clothing manufacturer, Jingyuan international.

In 2016, Fortune magazine published the 50 companies that changed the world in 2016, and Jingyuan ranked seventeenth in the world (another thirtieth Chinese companies ranked on the list). According to the output, Jingyuan is the largest clothing manufacturer in the world.

In the general direction, Shenzhou International and Jingyuan International were attracted by tariff and cheap labor before and after 2013, and the capacity was pferred to Southeast Asian countries such as Vietnam.

Expanding the scale of overseas production can also reduce the impact of exchange rate fluctuations.

(Vietnam benefited from the TPP agreement to export the United States zero tariff, after the US withdrew, Japan pushed the remaining 11 countries to maintain the TPP agreement).

It has been mentioned in previous articles that Jingyuan's main customers are fast fashion brands, which is highly competitive in the field. Every quarter is a new round of competition. The product changes greatly. The advantage is that it can be as high turnover as fast fashion brands, but it is difficult to introduce automatic production and reduce manual labor. It is a typical labor-intensive enterprise.

Shenzhou International is mainly engaged in knitted sports products, emphasizing fabric functionality. The advantage is that products are relatively standardized and easier to introduce automation equipment. The disadvantage is that they sacrifice the breadth of their business.

Just as Foxconn is affected by apple, the garment foundry is also influenced by the brand side.

Under the influence of fashion movement and sustainable consumption, fast fashion brands are growing at top speed. Basically, inventory problems begin to appear. Generally speaking, sports brands are better than fast fashion brands.

Jingyuan International did not make sportswear before, and began to do sportswear and outdoor wear in 2017.

The brand development of UNIQLO, Nike, ADI and so on is good, so it also drives the increase of purchasing volume to promote the steady growth of Shenzhou International Business.

On the whole, the gross margin of Shenzhou International and Jingyuan international is on the rise, which is synchronous with the pfer of capacity to Southeast Asia.

The gross profit margin of the two parties is about 13 percentage points apart. Apart from the difference in OEM OEM business, Shenzhou International vertical integration supply chain has covered the fabric design and production links, and has gained more profits.

In 2017, Jingyuan international also opened a fabric research and development center in Taiwan to expand vertically to increase its value to the upstream.

In addition to increasing the added value, the advantages of the vertical integrated supply chain also enable Shenzhou International to establish closer cooperation with the brand side, making up for the shortage of the scope of the foundry business.

The most important indicators of brand selection are price, tariff and performance capability, quality, delivery time, risk and R & D capability.

The general clothing manufacturers are almost the same as Jingyuan international. They only refer to the sewing process of the garments. The brand chamber of Commerce will give the manufacturer the designated fabric buyer.

The production capacity, appointment, delivery and other links between manufacturers and fabric manufacturers will increase the production cycle time and uncertainty.

Shenzhou International has formed the vertical production capacity of fabric production and garment manufacturing in the field of knitting. The process is placed in a park, shortening the production cycle and reducing the risk of uncertainty, such as ZARA is not available on the fast track, and this is the full link control of the supply chain.

Fast and stable performance will not only be preferred by the brand side, but also a bargaining power.

Take a point well. This is the secret of Shenzhou International.