The World'S Second Largest Sports Shoe Manufacturer With An Annual Output Of 180 Million Pairs Of Shoes And A Market Value Of 100 Billion

Recently, Huali group (300979. SZ), the world's second largest sports shoe manufacturer, officially landed on the domestic gem. In this listing, Huali group's total equity was 1.167 billion shares, 117 million shares were publicly issued, and the IPO raised capital of 3.887 billion yuan. The market value of Huali group was 10.463 billion yuan as of the date of publication on the 27th.

Huali group (Hongfu) provides the development, design and manufacturing services mainly for sports shoes. Its stable customers include Nike, converse, vans, puma, ugg, Columbia, under armour, Hoka one one one and other famous sports brands in the world. It is one of the few professional manufacturers of sports shoes with the output of more than 100 million pairs. In 2020, the company's revenue will exceed 13.9 billion yuan.

　　 "Mysterious shoe king" creates the second largest shoe factory in the world

"Taiwan's shoe-making industry has 3000 shoe factories in the world, and one pair of every three pairs of shoes is made by Taiwan businessmen." this is not an exaggeration. Since 1950, famous shoe companies all over the world have gone to Taiwan to look for contract workers. By the 1980s, the industrial chain of Taiwan's shoe industry had been relatively perfect, with an annual output of 800 million pairs. Many famous OEM shoe factories such as Hongfu, Baocheng, Fengtai, Yuqi, Longdian, Qinglu, Kainan, Jiuxing, etc., have emerged, and Taiwan has gained the reputation of "shoe Kingdom".

The actual controller of Huali group listed this time is Zhang Congyuan family from Taiwan. According to the prospectus, Zhang Congyuan and his wife Zhou Meiyue, the eldest son Zhang Zhibang, the eldest daughter Zhang Wenxin and the second son Zhang Yuwei form the Zhang Congyuan family, which is the actual controller of Huali shares. The family is through the charm smart Holdings Limited Junyao Group Co., Ltd. (hereinafter referred to as Hong Kong Junyao Group Co., Ltd.) and the second son Zhang Yuwei Zhongshan sunting Shoes Co., Ltd. (hereinafter referred to as Zhongshan sunting) indirectly controls 97.23% of Huali shares.

In addition, the remaining shareholders of Huali are Yongcheng No.5 and Yongcheng No.6, which are new shareholders in June 2019, holding 1.54% and 1.23% of Huali shares respectively. Yongcheng capital is the executive partner of Huali, belonging to the equity investment fund.

Huali group is the second largest shoe factory in the world. It includes many companies such as dinghuixing, Liangxing shoes and dexie shoes. Before the epidemic, the company had 150000 employees all over the world, with 43 holding subsidiaries and 21 shoe factories in China, Vietnam, Dominica and Myanmar. In 2019, Huali group will produce more than 180 million pairs of shoes.

Little is known about the 74 year old Zhang Congyuan and his family, so Zhang Congyuan has been named the "mysterious shoe king" by the industry. According to the data, Zhang Congyuan has been engaged in the shoe industry since the 1970s. He has successively invested in a number of shoe factories in Taiwan, Guangdong and other regions. In 1990, he and his partners set up Liangxing industry in Hong Kong as the Hong Kong headquarters of various shoe companies.

In March 1995, Liangxing group was listed in Hong Kong. In October 1997, with the addition of new shareholders, Liangxing (Group) was renamed as "Xinfeng group". Since then, Zhang Congyuan has been the director of Xinfeng group, responsible for shoe manufacturing business. As time goes on, Xinfeng group's business has gradually diversified from shoe-making to brand operation and property investment.

In 2013, due to rising labor costs and other issues, Xinfeng group decided to sell shoes manufacturing business. Zhang Congyuan's family took over and renamed it "Huali shares" and began to operate independently. After that, Zhang Congyuan's family first acquired 15 Vietnamese factories and Domini processing plants, 24 trading companies' trading businesses through the family controlled Hong Kong company, and then acquired 15 companies in Hong Kong, China through its subsidiaries.

It is understood that every place Zhang Congyuan goes to, he does a good job in political and business relations and helps the government to promote national diplomacy. For example, he invested 35 million US dollars (about 227 million yuan) in Dominica, and was received by its president Fernandez. Wei Weihan, mayor of Zhongshan City, Fang Tao, deputy director of the Taiwan Affairs Office of Guangdong Province, ye Hongguang, vice mayor of Zhongshan City, and Tan Meishan, deputy secretary of the Party Working Committee of the Torch Development Zone, all attended the bell ringing ceremony.

At present, Huali group's main production plant is located in northern Vietnam. Compared with other Southeast Asian countries, Vietnam has the advantages of being close to China, effectively saving transportation costs and low import tariffs on European and American countries.

Zhang Congyuan said that compared with other Southeast Asian countries, Vietnam is closer to China, and the transportation distance of main raw materials required for production is close, which saves transportation time and freight; European and American countries have zero or low tariff rates on shoes originating in Vietnam. Due to the earlier layout, the construction cost of land and plant is lower, which reduces the manufacturing cost of unit product; The north of Vietnam is also a region with strong labor cost advantage and abundant labor resources. By the end of the first half of 2020, the company's self-produced production totaled 75.4 million pairs, including 74.61 million pairs produced in Vietnam and 800000 pairs produced in Dominica, accounting for 98.9% and 1.1% respectively.

　　 Under the strategy of brand globalization, the transformation from OEM to OEM

With the globalization of brand has become a trend, many manufacturers no longer manufacture and promote their products, but directly purchase products and then "brand" them.

This makes the former OEM factory must transform from the original simple processing operation mode to design OEM. In recent years, Huali group has upgraded from OEM production to design and OEM production, and gradually has strong product R & D and design strength. At present, the company has a design and development team system of more than 2400 people. The company also has a large investment in the development of software and equipment, such as using the industry's vanguard VR design system and 3D printing equipment for product development and design.

Perhaps it is such a transformation that makes Huali group still maintain stable performance in the case of general contraction of the clothing industry in 2020. Last year, due to the severe epidemic situation, large brand factories cut orders by more than 80%. Shenzhou International, which is also a substitute processing factory, lost about 483 million yuan in exchange balance in 2020.

According to statistics, in the first half of 2020, Huali group left more than 40000 employees, with a turnover rate of 27.31%, which was higher than that of the previous year. Among them, the number of grass-roots production staff decreased by 19000. However, the group's revenue in 2020 shrank to 13.331 billion yuan, a decrease of 8.14% year-on-year, Net profit (excluding non recurring profit and loss) still reached 1.876 billion yuan, up 7.27% year on year. Huali also expects the first quarter net profit of 2021 to be between 449 million and 549 million, with a significant year-on-year growth.

After the IPO, Huali group plans to use the raised funds to expand the production base in Vietnam, build the Shichuan base in Myanmar, and expand the production capacity of Zhongshan knitting vamp, with a total of nearly 60 million pairs / year. At the same time, it will invest in the construction project of Huali Shoes Development and design center and headquarters building, the upgrading construction project of operation information system and supplementary working capital, with a total investment of 3.838 billion yuan.

However, for Huali group, there are still external risks after listing. Major changes in international political and economic environment or trade policies of import and export countries may have an important impact on the development of the company's business. In March this year, Baocheng and Changyi factories were shut down due to the riots in Myanmar.

At the same time, as a OEM factory, Huali group's performance will naturally be affected by the performance of the brand side. Recently, several international clothing brands have been involved in the "cotton storm". Among them, Nike and puma, the main customers of Huali group, are listed. Shenzhou International, which is also a OEM factory, has been affected by this, and its stock price has fallen for several consecutive days.

In the long run, Huali group's stock market performance is expected to be better than its competitors. Compared with Baocheng and Shenzhou International, Huali group has a very stable cooperative relationship with international famous customers, and has a long-term cooperation history with 5 of the top 10 sports brands. Among them, converse brand of Nike group started to cooperate with it in 2007, Nike brand started to cooperate with it in 2012, puma started to cooperate with it since 2013, and VF, DEX outdoor, Columbia and other customers have cooperated for more than 10 years.