Shenzhou International, A Famous Brand "Harvester": What Is The Strength Of Garment Industry'S Foundry Giants?

Now it is the most anxious stage for the Hong Kong listed companies to hit the list of the top 100 Hong Kong stocks in 2018. Looking back on the list of the top 100 companies in the past, we will find many familiar figures, such as the 02313-HK which has already entered the Hong Kong stock comprehensive strength hundred times in four degrees.

As the most large-scale vertical integrated knitting manufacturer in China, the history of Shenzhou International's business development can be traced back to the Ningbo weaving in 1988. The controlling shareholders are Ma Baoxing, Ma Jianrong and his sons and their families.

Its main business is to manufacture knitted garments by means of OEM, while designing and developing new fabrics to cater for the needs of its main customers.

When the main board was listed on the HKEx in November 24, 2005, Shenzhou International has developed into a vertically integrated business model, which integrates four production processes in the same industry: fabric weaving, dyeing and finishing services, printing and embroidery services and knitted apparel products tailoring and sewing.

In the mid 90s of last century, Shenzhou took the international well-known Japanese clothing brand Uniqlo in China and became an important node in its rapid development.

Since then, the purchasing agent of clothing retailer UNIQLO has been one of the largest customers in Shenzhou for two days. The two day trustee, UNIQLO, chooses clothing categories to Shenzhou, while the terms of purchase are directly consulted by UNIQLO and Shenzhou.

In the 2002-2004 years before the listing, sales to the group's largest customers on two days accounted for 63.5%, 64% and 63.5% of the total turnover of Shenzhou respectively. The significance of UNIQLO's OEM business to Shen Zhou's development is self-evident.

Until the listing, Shenzhou International has been concentrating on the Japanese market, while Japan is the third largest importer of clothing in the world after the European Union and the United States. Based on this, most of the turnover in Shenzhou was from Japan, and knitted garments exported to Japan accounted for 89.1% of its turnover in 2004.

From the time of preparing for listing, Shenzhou began to plan to expand its business to Europe and the United States through internal growth. In contrast to the regional market layout of the group, Shenzhou started the rise of other cooperative apparel brand businesses besides the UNIQLO.

At this time, in addition to UNIQLO's OEM business, Shenzhou International also manufactures casual wear and sportswear for Nike, Adidas, Puma, Decathlon, Russell and Mizuno.

In terms of clothing category, Shenzhou's main knitted apparel products include casual wear, sportswear and other knitted products (mainly blankets).

Among them, leisure clothing brands are mainly from UNIQLO, while Nike, Adidas, Puma and other major international sports brands naturally constitute Shenzhou's sportswear.

Before the beginning of the new millennium, the proportion of casual garments in Shenzhou knitted apparel products was still about 9, while the proportion of sportswear sales was very small: in 2004, the proportion of casual wear sales was 89.8%, sportswear sales accounted for only 1.9%, and the remaining 4.2% were contributed by other knitting products (mainly blankets).

During this period, casual clothing was still the main product of Shenzhou tradition, with solid customers and markets, and sales continued to steadily improve.

Although the sales of sportswear are relatively small, their growth is very fast, with a compound annual growth rate of 191.4% between 2002 and 2004.

In the past few years before and after the listing, Shenzhou has constantly increased its efforts to cultivate internationally renowned sports brand customers such as Nike, Adidas and Puma, so that the proportion of sales of sports apparel products has been significantly improved.

In 2005, the sales volume of Shenzhou leisure clothing and sportswear products accounted for 80.3% and 3.5% respectively (the rest for other knitwear), and in 2007, the sales proportion of these two categories had been significantly adjusted to 61.5% and 31.9% respectively.

As shown in the above table, by 2010, the sales volume of Shenzhou International sports apparel products exceeded the first time for casual clothing, accounting for 50.2%, while the sales of casual clothing continued to decline significantly, and sales accounted for a further decline from 35.2% in 2009 to 35.2%.

In the past 2018, the proportion of sales of sports products has increased to 68.1%, the proportion of leisure products sales has been reduced to 24.7%, and underwear products accounted for 6.3%.

Overall, the structure of internal products has been constantly adjusted since Shenzhou International listing. The overall trend is that the proportion of casual wear has been declining, while the proportion of sportswear sales has gradually increased, and has stabilized the top position of group sales in recent years.

After more than 30 years of eventful years, Shenzhou International has gradually grown into an OEM tycoon in the domestic garment industry, and has achieved remarkable results in recent years from the group's business efficiency.

In 2005, Shenzhou International sales just listed were less than 2 billion 500 million (RMB, the same below), and net profit could reach 350 million yuan.

However, Shen Zhou has maintained a very steady growth momentum in its performance after listing, especially the linear performance of sales growth is very strong, reaching 9 billion 43 million yuan by 2011, which is only a drop from the 10 billion mark, and the net profit level has also reached 1 billion 704 million yuan.

In 2012, domestic cotton prices were significantly higher than the international market, labor costs continued to rise, the global market demand was weak, and some overseas orders were pferred to other developing countries around China, which made the domestic textile and garment industry's business environment more difficult.

In such a market environment, Shenzhou's capacity has not been significantly increased, so that its order arrangements with its main customers have not increased significantly. At the same time, the group's sales in the Japanese market are not as good as expected, and domestic customers are also affected by inventory and business has been greatly reduced. In addition, the average sales price of Shenzhou in 2012 has been reduced as the average purchasing price of raw materials has decreased significantly compared with the previous year.

In the wake of these internal and external factors, Shenzhou International's comprehensive performance in 2012 dropped for the first time, and sales fell 1.2% to 8 billion 938 million yuan, while net profit fell 4.9% to 1 billion 620 million yuan.

Fortunately, the industry environment improved rapidly, and the export volume of domestic textile and garment industry rebounded in 2013, but the pressure of rising cost is still more obvious than before.

To this end, Shenzhou constantly optimizes the layout of its production base and strengthens cooperation between key customers.

This year, following the establishment of a garment production base in Phnom Penh, Kampuchea, Shen Zhou invested in the construction of a fabric production base in Xining, southern Vietnam, so that its vertically integrated production mode extended to overseas, which has an important impact on the long-term development of the group business.

In 2013, Shenzhou integrated business resumed its growth and set a new record of its own. Sales for the first time broke through 10 billion yuan, and maintained a healthy growth trend thereafter.

In 2018, the prices of raw materials and labor in the textile and garment industry continued to rise, and the exchange rate of RMB against the US dollar increased.

Although the business pressure of the industry has not improved, Shenzhou International Business has maintained an ideal growth, and its sales revenue and business performance have reached a new high.

According to the performance bulletin, the net profit of Shen Zhou Sales revenue and the owner's net profit increased by 15.8% and 20.7% to 20 billion 950 million yuan and 4 billion 540 million yuan respectively last year, achieving a profit of 3.02 yuan per share.

This is mainly due to the obvious increase in the capacity contribution of overseas bases, the further improvement of production automation level, the effective reduction of resource consumption level and the more reasonable distribution of sales market.

Despite the ups and downs of over ten years of listing, it is quite worthwhile to recall Shen Zhou's performance in the past period.