AOKANG International Three Quarterly Net Profit Decreased By 37%, Real Controlling Shareholder Equity Pledge Rate Exceeds 98%

Last week, AOKANG International (603001.SH) released its third quarter performance report. In the first three quarters, the company's revenue was 1 billion 973 million yuan, down 9.56% compared with the same period last year. The net profit attributable to shareholders of listed companies was 106 million yuan, a decrease of 38.48% over the same period last year. The net profit attributable to shareholders of listed companies was 83 million 470 thousand yuan, a decrease of 37.32% over the same period last year. The net cash flow generated by business activities is still -2.35 billion.

Since 2016, AOKANG International's net profit has declined for four consecutive years. In 2015, AOKANG international three quarterly report showed that net profit of 270 million yuan was achieved in the first three quarters of 2015, and the net profit in 2016, 2017 and 2018 three quarter was 256 million yuan, 192 million yuan and 172 million yuan respectively. Net profit in the first three quarters of 2019 decreased by more than 60% compared with 2015.

In 2015, AOKANG international share price was at a high level, the highest price was 48.69 yuan / share, and its market value exceeded 19 billion 500 million yuan. Today (October 31st), AOKANG International reported 9.40 yuan / share, the market value was 3 billion 769 million yuan, compared with the high level, evaporation over 15 billion yuan.

For the decline in revenue and specific measures, the reporter contacted AOKANG international securities affairs department, but as of press time, did not receive a reply.

Statistics show that AOKANG international has its own brand "AOKANG", "Kanglong" and the United States sports leisure brand "Si Cage" and the German fashion sports brand "Puma". It also has strategic cooperation with Belgian shoe and clothing giant Cortina, India famous outdoor brand Woodland and international sporting goods retail giant INTERSPORT (Yichang sports). Its main sales area is the national 123 line city shopping center, shopping malls, stores and so on.

　 Revenue decline, high inventory

During the reporting period, AOKANG international own brand: AOKANG and KANGLONG both suffered a decline in revenue. Three quarterly reports show that during the reporting period, the revenues of AOKANG and Kanglong were 1 billion 254 million and 292 million yuan, respectively, down 13.43% and 6.66% respectively. The revenue of agent brand Skech and other brands was 162 million yuan and 67 million 300 thousand yuan respectively, up 10.10% and 50.51% respectively.

During the reporting period, multi-channel revenue declined. AOKANG international 2019 three quarterly report shows that channel revenue, including independent stores, shopping malls, group buying and online shopping, direct marketing, distribution, etc., all showed a downward trend, and sales channel revenue declined by over 14%.

At the same time, online and offline revenues were 248 million yuan and 1 billion 708 million yuan respectively, occupying 86.6% and 12.6% of total revenue respectively, while online sales revenue increased by 15.45% compared with the same period last year, while sales revenue dropped by 12.23% over the same period last year.

Three quarterly reports also showed that as of the end of 9 2019, the number of AOKANG's international brand stores reached 2833. In the third quarter of 2019, there were 165 outlets in Austria, 149 new stores and 16 stores.

In addition, inventory is still high. In 2016, AOKANG International's inventory amounted to 1 billion 37 million yuan. In the past two years, the company accelerated the layout of the electricity supplier and went to stock. By the end of 2018, the inventory dropped to 771 million yuan, and according to the latest data, as of September 30, 2019, it increased by 78 million yuan to 849 million yuan compared with the end of 2018.

Earlier, AOKANG international explained in its 2018 annual report that when receivables and turnover days increased, the main support for dealers increased, resulting in an increase in credit lines. Accounts receivable continued to grow in the three quarter of this year. As of September 30, 2019, accounts receivable amounted to $1 billion 286 million, an increase of 105 million yuan from the end of last year, compared with 808 million yuan at the end of 2016, an increase of 478 million yuan, an increase of nearly 60%.

Prior to this, Everbright Securities Research Report analysis that AOKANG international sales revenue short term in the retail environment is still weak under pressure, need to pay attention to the future retail environment changes. External cooperation / agent brands, including Skech, Puma and so on, do not contribute much to revenue at present.

　　 Large shareholder and real controller over 90% equity pledge

Equally noteworthy is that the top two shareholders of AOKANG International: AOKANG Klc Holdings Ltd and Wang Zhentao, the equity pledge rate reached 96.5% and 98.45% respectively.

The announcement shows that Wang Zhentao, the second largest shareholder, is the actual controller of the company, with a shareholding ratio of 15.10%, and the shareholding structure of AOKANG Klc Holdings Ltd, the largest shareholder of 27.73%, is 90% of Wang Zhentao's shareholding and 10% of Wang Chen's shareholding. Meanwhile, Wang Chen is the son of Wang Zhentao, the actual controller of the company, which is consistent with Wang Zhentao and AOKANG Klc Holdings Ltd.

From the specific data disclosed by AOKANG international, shoemaking is a synonym for AOKANG international. The company has been working hard for 30 years, and its industrial structure is relatively simple.

However, still from the earnings information, we can find that Wang Zhentao's industry is not only shoemaking.

Statistics show that in 2015, AOKANG international invested 198 million yuan to participate in the launching of the establishment of a private bank in Wenzhou. However, according to AOKANG international semi annual report in 2019, four years, as of June 30, 2019, Wenzhou civil and commercial bank has accumulated a total revenue of 38 million 588 thousand yuan.

In addition, also in 2015, AOKANG international wholly owned subsidiary Austrian Hong Kong International (Hongkong) Limited (referred to as "Austrian port international") with cash of 77 million 340 thousand U.S. dollars (about 480 million yuan) to let the Lanting Pavilion gather 24 million 550 thousand shares, after the completion of the transaction, AOKANG international has Lanting Pavilion share 25.66% stake, become the largest shareholder, but did not get the actual control.

Public information shows that Lanting Pavilion is a B2C cross-border electricity supplier platform, listed on the US NYSE in June 6, 2013, becoming the first cross-border electricity supplier in China.

However, the public financial report shows that Lanting Pavilion has been losing money for many years in recent years. In 2018, the three quarterly report showed that because of the loss of investment potential in Lanting Pavilion, the loss of AOKANG international investment income in the first three quarters of 2018 was 6 million 190 thousand yuan, down 138.97% from the same period last year.

The deficit expanded to work in 2019, and the AOKANG international bulletin showed that in the first half of 2019, AOKANG international investment loss was 14 million 580 thousand.

However, along with the second quarter of the Lanting Pavilion, the first profit in five years was achieved in the first quarter of 2019. The loss of AOKANG international investment was also reversed in the third quarter of 2019, and the investment income jumped to 21 million 380 thousand yuan in three months.

In addition, there are public information presentation in the early years. Wang Zhentao has been involved in the field of biopharmaceutical and commercial real estate, investing in biological products companies, and building high-grade commercial pedestrian streets. However, how the performance of these areas has not been publicly available.

In January 26, 2013, AOKANG international listing was less than a year ago. The controlling shareholder AOKANG investment began to implement equity pledge financing, and continued to postpone the purchase and supplementary pledge.

At the beginning of this year, AOKANG investment and real controller Wang Zhentao respectively pledged 13 million shares and 20 million shares respectively. At this point, AOKANG invested 111 million shares in the company, accounting for 27.73% of the total capital stock, 104 million shares of the pledge, 93.17% of the pledge rate, 60 million 560 thousand shares of Wang Zhentao, accounting for 15.10% of the total share capital of the company, 59 million 620 thousand shares of the pledge and 98.45% of the pledge rate.

In the announcement, AOKANG International said that the equity pledge is AOKANG investment and Mr. Wang Zhentao provides pledge guarantee for financing, and the source of repayment is its own operating income, investment income, stock dividends and so on.

Last year, AOKANG Investment Holdings transferred 5% of the shares to the natural person Xu Yongkun. Wang Chen transferred the 9.98% equity agreement to the natural person, and the discount rate was 9%, which amounted to 625 million yuan. At this point, Wang Chen completed clearance. The company did not disclose the whereabouts of the cash.

In late March of this year, Xu Yongkun first reduced the 0.5% stake in the two tier market, withdrew from the important shareholder of the company and cash in 24 million yuan.