Seven Wolves Holding Stake In Shenzhen Venture Capital Veteran Clothing Enterprises Rely On Bets Investment "Out Of The Loop"?

In January 1, 2020, the industrial and commercial information changes of Shenzhen Innovation Investment Group Co., Ltd. showed that the Limited by Share Ltd of the seven wolves holding group (Limited by Share Ltd) was added. In the original shareholders, the seven wolf Group Co., Ltd. (referred to as the "seven wolf group") is still listed. Accordingly, the seven wolves have deepened their cooperation with Shenzhen Venture capital through their subsidiary companies.

In January 3, 2020, Kai Shing capital of the seven wolves Group invested in Fujian sports marketing service provider central sports. Information from the sky showed that the Xiamen Kai Cheng and Ren Ren equity investment partnership (limited partnership) subscribed 1 million yuan, holding 8.50%.

The venture capital business of the seven wolf group has already begun to take shape. The company and Shenzhen Venture Capital have already started cooperation in 2010. According to the company's official website, in February 2010, the company invested in Shenzhen Innovation Investment Group Co., Ltd.

According to data collected from the sky eye, in June 2011, the seven wolf holding group Limited by Share Ltd invested 25 million yuan in the shares of Shenzhen red earth bio Venture Investment Co., Ltd. (Shenzhen Venture Capital), holding 10%. In March 2012, it continued to invest 55 million 680 thousand yuan in Guangdong red earth Venture Capital Co., Ltd., with a shareholding ratio of 5.57%. In December 2014, seven wolves holdings invested another 30 million yuan into Shenzhen Luohu laterite Venture Capital Co., Ltd., holding 8.33% shares.

The seven wolf group was founded in 1990. Since 2000, it has been the first market share in the Chinese jacket market since the launch of the jacket in 2000. In 2004, the seven wolf industrial Limited by Share Ltd was listed as the first company in China's apparel industry. At present, there are three major businesses in the whole group. The public is most familiar with the seven wolves industrial Limited by Share Ltd, a listed company whose clothing is the main business. The company is engaged in the equity investment of the seven wolves holding group Limited by Share Ltd, and the Real Estate Company Heng Wo land (Xiamen) (referred to as "Heng Wo land").

The seven wolf holdings was founded in 2000. It is mainly engaged in venture capital and equity investment. It has three own platforms, including seven wolves venture capital, seven wolf energy conservation and environmental protection fund and Kai Cheng capital. At the same time, there are two financial license business companies: Huixin small loan (01577.HK) and Bai Ying financial leasing (08525.HK). The two companies listed on the Hongkong motherboard and the Hongkong stock exchange gem in September 2016 and July 2018 respectively.

Founded in July 2009, the energy conservation and environmental protection fund was founded in August 2014. Kai Cheng capital was established in 2015. According to the official website of seven wolves, it has invested in Ningde times, Shang Tang technology, soft Yu technology, Wifi master key, sunshine insurance and so on.

　　 In the past 5 years, 43 companies have been launched, and 2 companies have been publicly exited.

According to enniu data, from 2015 to 2019, seven wolves held a total investment of seven wolves, which invested 23 companies. In 2015, 2016 and 2018, they invested more than three years. They invested 6, 5 and 8 respectively. Among the 23 invested companies, there were more companies in the initial stage, and the most successful investment in the five years was the Ningde era (300750.SZ).

The company has invested in the Ningde era in 2015 and 2016. The latter is the leading enterprise in the new energy power battery industry. In June 2018, it listed on the growth enterprise market, and with the fund-raising amount of 5 billion 462 million yuan, it refreshed the highest IPO record of the gem at that time. The seven wolves began investing in the Ningde era in its A round, and the shareholding ratio after the listing was 0.16%. At that time, the value of the listing in the Ningde era was 168 billion.

As early as 2006, the seven wolves began to invest in the layout. In 2013, the company invested in Jinjiang economic daily, Guo Mi Dong wine, Dragon coal group, sunshine insurance, Wanli Stone, Xun net and Fu Hui Da. Among them, Wanli (002785.SZ) was listed on the Shenzhen Stock Exchange in December 2015, and it is one of the largest private enterprises in the Chinese stone industry.

According to enniu data, in the 23 companies investing in the seven wolves venture capital, only the Ningde era and Wanli Stone successfully pulled out and achieved good investment returns.

The founder of Kai Cheng capital is Zhou Shiyuan, the son of Zhou Yongwei, chairman of the seven wolf group. The fund is mainly concerned about consumption and industrial upgrading. Since its establishment in 2015, it has invested 20 companies so far. The company invested 8 and 6 companies in 2016 and 2017, and the investment frequency slowed down thereafter. Kai Cheng capital investment projects are more early than the seven wolves venture capital, in addition to the golden ax is the D round, the other mostly A or angel round financing. Among them, Sofi technology has become a star investment case.

In addition to investment, seven wolves holding two financial companies Huixin small loan and 100 leasing financing two financial license business companies, and two companies are listed on the Hong Kong stock market.

Huixin small loan provides two kinds of products: revolving loan and regular loan. It is a short-term loan mainly based on credit, and also provides less collateral loan. In September 2016, the company listed on the Hong Kong stock exchange. Huixin small loan held small loan license, but its business scope only included loans in Licheng, Luojiang, Jinjiang and Nanan. The proportion of the net financing of the small loan company in capital net was generally not higher than 50%, and the highest was not higher than 100%.

In the case of limited operating area and loan leverage ratio, the profit margin of Huixin small loan is relatively limited, its operating income is stable at more than 100 million, and the cash flow generated by business activities is only positive in 2013, 2015 and 2018, and the remaining years are negative. The return on assets was 13% in 2013, and gradually decreased to less than 10% in 2016.

100% lease is mainly for small and medium enterprises and individual enterprises to provide equipment financing plan, with financial leasing and accounts receivable business factoring and related business qualification. Listed on the HKEx in July 2018, its revenue in 2018 was 80 million 400 thousand, the basic earnings per share was 0.099, and the average return on net assets was 10.23%. According to its 2019 two quarter earnings report, its earnings per share were 0.025 in the second quarter and 2.55% in net assets yield.

　 Clothing industry is facing bottlenecks: business models are difficult to change, and foreign acquisitions are in deficit.

According to the National Bureau of statistics, the total retail sales of clothing products in 2018 were 987 billion yuan, down 4.8% compared with the same period last year, and the retail sales volume of clothing products for the first time showed negative growth. The garment industry has entered a new adjustment period before and after 2012, so far the industry has not been very prosperous.

According to the 2018 annual report of seven wolf industry, in 2018, the company realized total revenue of 3 billion 517 million yuan, operating profit of 463 million yuan, and net profit attributable to parent company 346 million yuan, up 14.01%, 17.53%, 9.38%, compared with last year. In the first half of 2019, according to the results of the first half of the year, the group's sales volume reached 1 billion 555 million yuan, up 6.55% from the same period last year, operating profit 150 million, down 19.84% compared with the same period last year, and the net profit attributable to the listed company decreased 8.42% to 123 million yuan over the same period.

From 2013 to 2018, the annual earnings data showed that only a small increase occurred in 2017 and 2018. The profits attributable to the parent company had been hovering around 270 million in 2014 and 2016. The basic earnings per share were still at the high level of 0.5 in the market. After that, the average net asset yield has also been decreasing from the peak 8.58% of 5-6% to the level of 5-6%.

In 2004, seven wolves were listed, and the company's performance increased year by year after 8 years. In 2012, the annual revenue of the seven wolves was 3 billion 480 million yuan, and the net profit was 550 million. In 2013, with the overall industry experiencing inventory pressure and entering the adjustment period, the seven wolves also encountered a turning point. In 2012, there were 4007 offline terminals of seven wolves. After two years of customs clearance, they had dropped to 2821 in 2014.

In the 2018 annual report, the company said that since 2012, when the funds were collected, they had been buying stores. This is also true of the light asset model in the shop. The annual report shows that the seven wolves are currently using self-made production of some products such as jacket, jacket and casual pants. Most of the products are purchased by external purchasing mode.

In marketing, it is to optimize the layout of the channel as a key step forward, the annual report shows that the company's marketing network upgrade has expanded from extension to endogenous growth, enhance product strength and channel power, and actively explore new online and offline interactive mode.

According to the annual report, the garment industry is undergoing adjustment in industry, and is generally aware of the need to shift from extensive wholesale business to fine retailing transition. For domestic garment enterprises, one route is nationalization, and the other is to take the middle grade light luxury route and multi branding.

The seven wolves obviously wanted to take the next route. Outside the main brand, the seven wolves also cultivated the wolf totem "Wolf Totem", bought the brand of young brands such as Chao brand "16N", and bought Karl Lagerfeld in 2017, hoping to transform the fashion group.

According to the summary of the April conference call conference of Everbright textiles and wolves, the revenue of the main brand line in 2018 was around 1 billion 550 million, an increase of 17% over the same period, with an online income of about 800 million, an increase of 25% over the same period. However, the growth rate of the electricity supplier was peaked, and the growth rate in 2019 was limited.

In the newly acquired brand, Karl Lagerfeld had a 31 million loss in 2018 and a loss of around 40 million. According to the semi annual report this year, the sales volume of the brand was 27 million 974 thousand and 600 yuan, and its net profit was -1557.47 yuan, still at a loss. Chao brand 16N will earn about 43 million in 2018 and a loss of around 18 million, while the wolf totem series is still expanding the category and trying to open shop.

It is mentioned in this summary that the production cycle of seven wolves should be ordered 9 months in advance, 6 months ahead of schedule, and the period from the company's order to the supplier's delivery is about 100 days.

This is a big gap compared to fast fashion brands. For example, the fast fashion brand Zara can design 18 thousand new styles every year, with an average of 2 to 3 weeks' new shelves, which can be produced for 7 days, 14 days for cabinets and 30 days for cabinets.

Meanwhile, YOUNGOR, the domestic clothing brand, launched an intelligent factory in 2018. The production cycle of the large single product was shortened from 45 days to 32 days, and the volume customization cycle was shortened from the original 15 working days to 5 working days. Under the special circumstances, the customization cycle could even be shortened to 2 days.

By contrast, the seven wolves lack competitiveness in the supply chain. On the offline channel, as of 2018, the main label kept seven wolves at around 2000, while the other new brands KL, 16N and Wolf Totem all went into department stores or shopping center shops. KL now has about 15, while 16N has more than 50 stores.

The product cycle is long, the consumption end is stagnant, the terminal atrophy and other factors have led to its high inventory in recent years. In 2018, inventories were 964 million, accounting for 11.23%2017 in assets, 861 million in inventory, 10.04% in assets, and 899 million, 843 million and 743 million in 2016, 2015 and 2014 respectively, while 566 million in 2012.

　　 Investment diversification or clothing industry?

Before and after 2013, many garment groups chose the "business + investment" business structure. The seven wolves began investing in investment before and after 2010, and increased investment after 2015.

In the past few years of investment, there are only two publicly exited projects, and other projects still need to undergo more tests. Whether the return on investment can win back the profit that is not profitable in the main industry is also unknown. How to make profits in garment industry is a test for every company.

The first half of the 2019 report released by the US group (Metersbonwe) showed that its operating income was about 2 billion 799 million yuan during the period, down 31.47% from the same period last year. Net profit plunged 359.61%, or about 138 million yuan.

On the other hand, fast fashion is constantly closing up in China. In mid May, Forever21 announced its withdrawal from the Chinese market and began to deal with offline stores. Gap said in November this year that its Old Navy will quit the Chinese market from 2020.

But on the contrary, the sportswear brands Lining and Anta continued to grow. Lining realized operating income of 10 billion 511 million yuan in 2018, an increase of 18% over the same period last year, operating profit of 777 million, an increase of 74.4% over the same period last year, and net profit of 715 million, an increase of 39% over the same period last year. Anta group in 2018 revenue of 24 billion 100 million yuan, an increase of 44.4% over the same period, operating profit increased 42.9% to RMB 5 billion 700 million yuan.

Obviously, the clothing industry is not not profitable, it is just a change in the trend and the way of playing, making it harder for traditional enterprises to make money. Li Rucheng, chairman of YOUNGOR, whose clothing market has thrived in the investment market, said publicly that the idea for future development in 2020 is the fashion industry. All other irrelevant businesses should be stopped and the collection will be closed.

In April 2018, Zhou Shaoxiong, the seven wolf wolf, also made a public statement. After thirty years of development, the seven wolves after many twists and turns, finally realized that it is the most correct choice to make their own old line, "other businesses are handed over to professional teams to operate and be responsible for."

As for how to do it, we should know how to know it.