The actual controller cashed out 400 million yuan, Xiamen Dama is going to do big things

After the actual controller repeatedly reduced his holdings and cashed out more than 400 million yuan, Jihong shares will spend no more than 100 million yuan to repurchase the company's shares. Against the backdrop of declining net profit and a second attempt to go public on the Hong Kong stock market, what is the real purpose of Jihong shares' repurchase of shares this time?

First repurchase of company shares

Recently, Xiamen Jihong Technology Co., Ltd. (hereinafter referred to as "Jihong Co., Ltd.") issued an announcement to repurchase the company's shares for the first time.

Jihong Co., Ltd. will use special loan funds of no less than 60 million yuan and no more than 100 million yuan , the company's own funds or self-raised funds to repurchase part of the company's issued RMB common stock ( A shares) through centralized bidding transactions in the secondary market. The repurchase price will not exceed 18.20 yuan per share .

The repurchase plan was reviewed and approved on November 4, 2024, and the repurchase period shall not exceed 12 months from the date of approval .

On February 24, the company repurchased 132,100 shares of the company for the first time through a dedicated securities account in a centralized bidding transaction, accounting for 0.0343% of the company's current total share capital. The highest transaction price was 13.79 yuan per share and the lowest transaction price was 13.72 yuan per share .

Companies generally buy back shares based on confidence in future development, stabilizing share prices, and enhancing investor confidence , etc. However, there may be other reasons.

It is worth noting that during the previous period of stock price surge, the actual controller and shareholders of Jihong Co., Ltd. had repeatedly reduced their holdings to cash out.

In February 2019, Zhuang Hao reduced his holdings by 54,900 shares, cashing out approximately RMB 1.0091 million; in December 2020, Zhuang Hao reduced his holdings by 1.34 million shares, cashing out RMB 37.6942 million; on December 30, 2022, Zhuang Hao further reduced his holdings by 4.659 million shares, cashing out approximately RMB 65.9714 million; in January 2023, Zhuang Hao again reduced his holdings by 2.5063 million shares, cashing out approximately RMB 37.3439 million.

When Zhuang Hao reduced his holdings in 2020, Evergreen Health, which was held by Jihong's subsidiary , attracted much attention due to its surge in performance in mask production; in 2023, the company's stock price soared due to its access to the ChatGPT concept.

From 2019 to 2023, Zhuang Hao's cumulative cash out in five years was approximately 434 million yuan.

Not only that, Zhuang Hao's father, husband, younger brother and other family members also sold their shares to cash out. According to Wind data, from 2019 to 2023, relatives also cashed out a total of about 184 million yuan in 5 years. The Zhuang family cashed out a total of more than 600 million yuan.

As of June 30, 2024, Jihong Co., Ltd. had a total of 37,242 shareholders, a decrease of 998 from the end of the first quarter, and the top ten shareholders held 44.73% of the shares.

Jihong Co., Ltd. was established in 2003. At the beginning, it provided one-stop paper packaging products and services to fast-moving consumer goods enterprise customers. In 2016, Jihong Co., Ltd. was listed on the main board of the Shenzhen Stock Exchange. In the year of listing, the company's revenue was 570 million yuan.

Except for 2021, the company distributed dividends many times from 2016 to 2023, and the actual controllers and major shareholders made a lot of money.

From 2016 to 2020, the company distributed cash dividends of RMB 13.92 million, RMB 14.82 million, RMB 98.60 million, RMB 22.25 million, and RMB 37.54 million, respectively. In 2022 and 2023, the company distributed cash dividends of RMB 99.52 million and RMB 212.50 million, respectively.

Cross-border e-commerce performance increased significantly

After going public, Jihong shares also pushed the company into the fast lane of development by cross-border cooperation.

In 2017, Jihong Co., Ltd. seized the cross-border e-commerce opportunities brought about by the development of mobile Internet and expanded its business to cross-border social e-commerce.

By precisely placing advertisements on international social media platforms such as Facebook, Instagram, TikTok, YouTube, and X, Chinese products were pushed directly to the eyes of Southeast Asian consumers, and revenue of over 200 million yuan was achieved that year.

In 2018, Jihong Co., Ltd. added a marketing business of targeted advertising push on the basis of its e-commerce business. In that year, the company's revenue increased by 461.94% year-on-year to 1.209 billion yuan.

Today, the company's business mainly consists of two parts: cross-border social e-commerce business and paper fast-moving consumer goods packaging business. The e-commerce business covers Japan , South Korea, Thailand, Italy, Germany, the United States and other countries.

The company's products are mainly sold to Japan, South Korea and other Northeast Asian regions. The products cover more than 60 categories including home furnishings, clothing, electronics, and beauty , with more than 600,000 SKUs.

In terms of the two major business segments, e-commerce has become the bulk of the company's revenue in recent years. In 2022 and 2023, it will increase by 9.6% and 37.0% year-on-year respectively. In 2023, more than 60% of Jihong's revenue will come from e-commerce business.

From 2021 to 2023, Jihong Co., Ltd. achieved operating income of 5.18 billion yuan, 5.38 billion yuan, and 6.69 billion yuan, respectively, with corresponding net profits of 209 million yuan, 172 million yuan, and 332 million yuan.

The gross profit of the e-commerce business is also relatively good. From 2021 to 2023, the gross profit is 1.643 billion yuan, 1.837 billion yuan, and 2.685 billion yuan respectively, reaching a gross profit margin of 58.0%, 59.1%, and 63.1%.

According to data from Frost & Sullivan, in terms of revenue generated from social media e-commerce business in Asia in 2023, Jihong Holdings ranked second among China's B2C export e-commerce companies, with a market share of 2.3%.

The decline in net profit hits Hong Kong stocks

However, since the beginning of 2024, the sluggish e-commerce business has led to a significant decline in the company's performance, and the full-year net profit is expected to drop significantly.

In the first half of 2024, Jihong Co., Ltd. achieved operating income of 2.453 billion yuan, a year-on-year decrease of 21.97%; and achieved net profit attributable to shareholders of the parent company of 72.363 million yuan, a year-on-year decrease of 61.80%; among which e-commerce business revenue fell sharply by 31.53% year-on-year to 1.384 billion yuan, and gross profit margin fell by 3.97% year-on-year.

In the third quarter of 2024, the company's total operating revenue was 1.444 billion yuan, a year-on-year decrease of 19.19%. The net profit attributable to shareholders of the parent company in the third quarter was 62.3103 million yuan, a year-on-year decrease of 52.53%.

Based on the situation in the first three quarters, the company's total operating income was 3.897 billion yuan, a year-on-year decrease of 20.96%, and the net profit attributable to the parent company was 135 million yuan, a year-on-year decrease of 58.01%. The data indicators are not satisfactory. Among them, the gross profit margin was 42.88%, a year-on-year decrease of 9.33%, and the net profit margin was 3.38%, a year-on-year decrease of 45.4%. The total sales expenses, administrative expenses, and financial expenses were 1.421 billion yuan, and the three expenses accounted for 36.46% of the revenue.

In fact, as early as 2021, Jihong's net profit fell for the first time, by 62.61% to 209 million yuan. In 2022, net profit continued to fall by 17.07% to 172 million yuan.

In 2020, Jihong Holdings invested in Evergreen Health, a mask manufacturer, through its subsidiary, in an attempt to transfer the dividends from the export of epidemic prevention items. Jihong Supply Chain holds a 40% stake. In 2020, Evergreen Health had a net profit of 25.9444 million yuan. As market demand decreased after the epidemic, Evergreen Health's net profit in 2021 and 2022 was -10.1422 million yuan and -406,300 yuan, respectively, which dragged down Jihong Holdings.

As its performance declined in 2024, Jihong shares hit the Hong Kong stock market and sought a secondary listing. In August, Jihong shares submitted a listing application to the Hong Kong Stock Exchange. This was the company's second application after its application was invalid in February 2024.

In addition to cross-border e-commerce, Jihong Co., Ltd. has also expanded into multiple fields across borders, successively entering the field of blockchain technology applications and acquiring Gujiao Liquor; investing in companies related to the e-cigarette industry; participating in the establishment of equity investment funds to invest in early and mid-term unlisted companies related to the metaverse industry chain. However, the results of these investments are not ideal, and the Shenzhen Stock Exchange has issued concern letters many times, asking for an explanation of whether there is any behavior of catering to market hype, taking advantage of the "metaverse" concept, or "riding on the hot spot."

Jihong Shares

Repurchase of shares