Li Rucheng: Youngor’s investment adjustments return to its main business

Compared to the 60th and 70th generations of entrepreneurs of the last century, there is no doubt that the conditions of the 50th generation are not so good. Therefore, they are more idealistic. They have more disasters and more difficulties in remembering their sufferings. Therefore, they dare to break through. They have always believed in a strong industrial nation. Even if capital has been made to flourish, the original entrepreneurial feelings will always be deeply rooted in the mind.

Leading apparel company in Ningbo - Youngor has been the most active period of the capital market, and investors have initiated the voting of Li Yacheng PK fund trader Wang Yawei, which shows the success of Li Rucheng in the capital market and the recognition. However, Li Rucheng repeatedly emphasized that “the main industry has never given up.” Even in the parallel investment, real estate, and clothing troika, Li Rucheng’s most complacent is to extend his footing to many reporters during the “two sessions” to show off his company’s new products. - "Hannah" socks.

Many securities companies went to the stock market to find him to raise capital. Li Rucheng only picked a full team to visit his CITIC Securities. Because Li Dongcheng, chairman of CITIC Securities, used 5 million to put CITIC Securities on a scale of several billion yuan.

Compared with the 60-year old friend investor Guo Guangchang, Li Rucheng admits to the reporter that he is different from Guo. “He is young and has an active mind. I am more stable and must be able to see through. Therefore, I would rather do a half-market. In only one year, if it is not good, you can immediately withdraw from it, that is, you will lose money and you will not lose much. Risk is a controllable area."

The United States "Business Week" once criticized him by name, "In addition to the stock investment business, Youngor's other business becomes insignificant", "Once the stock price really begins to fall, the company will have to write down these investment losses in the income statement, resulting in a decline in profits. In turn, a decline in profits may trigger a fall in the company's own stock price, which will lead to a more rapid and deeper decline in the stock market."

In this assessment, Li Rucheng calmly accepts, behind the silently wondering. He also has time to accept losses. When investing in hemp, Li Rucheng gave up the investor's standard and waited for 20 years of industrial cultivation. At this time, he became a “fool”, and he jokes himself: “The fool needs a Yugong mentality.”

“Younger’s private economy, like China, grew from small to large and experienced a primitive accumulation of capital and became a new embryonic form. I have been thinking how it can be made even bigger.” Li Rucheng told reporters in these reflections. In the approach, the investment and real estate help in a certain period of time helped Youngor achieve a multiplier effect. However, as the economy continues to decline, the “troika” model no longer adapts to the development of Youngor, so this dialogue has also taken place. At the beginning, why did Younger return?

Return to main business

"Toyota is transforming from a textile machine to a car. It is an example of a successful multi-generational transformation." Like Toyota, Youngor's clothing has also gone from one dollar to multiplexing in search of a breakthrough. “At that time we also wanted to find a bigger and more favorable industry, but in the end we still returned to the clothing because Youngor was doing the best in clothing,” said Li Rucheng.

In Youngor’s “troika” era, Youngor has achieved a remarkable record in both real estate and capital markets. However, after the financial crisis, the country's regulation of real estate and the maladies exposed by the U.S. economy led Li Rucheng to begin thinking about the persistence of this model.

"Thirty years of reform and opening up have now reached a stage of periodic adjustment. This is why the state says that the growth rate of GDP will be lowered. In addition, our past investment is too large. How will we maintain these investment infrastructure projects in the future? After completion, there will not be too many new investments, especially real estate. Under such circumstances, the economic restructuring is expected to be urgent and consumption growth has become the top priority.” These comprehensive reasons have caused Li Rucheng to adjust and return to his main business.

In fact, Li Rucheng’s predictions are more provable with the numbers.

From 2009 onwards, news of Younger's investment in investment losses and real estate revenues fell sharply. According to Youngor's quarterly report this year, during the reporting period, Youngor’s investment income was 2,601,056,600 yuan, a decrease of 61.99% from the same period of last year, including disposing of trading financial assets and available-for-sale financial assets, gaining 185 million yuan, eliminating financial investment. The business cost and interest expenses and net loss amounted to 21 million yuan, a substantial decrease from the net profit of 265 million yuan in the same period of last year. The investment income during the reporting period of 2011 was 1442.5062 million yuan, a decrease of 29.9% from the same period of last year.

Securities expert analysis: The major reason for Youngor's revenue decline is that in 2011, the company actively reduced the number of export contracting businesses with low gross profit margin (the company's comprehensive gross margin increased from 37.51% in 2011Q1 to 49.16% in 2012Q1). In the first quarter, the company's apparel segment, real estate segment and financial investment segment achieved net profit of 264,532,200 yuan, 29,834,400 yuan and -21,375.7 thousand yuan, respectively, an increase of 25.94%, 133.25% and -108.06% year-on-year. As the 2011Q1 company's financial investment business has a high net profit base of 265 million, the net profit of financial investment business in 2012Q1 has dropped significantly, which drags down the company's overall performance.

“Financial investment is a new industry in China. Youngor can participate but can not do it as a main business. Real estate is controlled year after year. Under such circumstances, we must 'return to the core'. It was originally a three-legged walk. It is now a garment industry. The Lord and the other two industries are vice presidents.” According to Li Rucheng, only by concentrating the team in one core industry can we have more advantages than other industries.

In fact, from the perspective of Youngor’s profit structure, this change has already emerged. “The ratio of financial investment, real estate, and branded apparel in the first five years was 5:3:2. Each of the three items last year accounted for 1/3 of the total profit this year. The composition is expected to account for 40% of the main business, and the other two accounts for 30%. In the future, it will adjust to account for 50% of the main business."

In terms of growth, Li Rucheng has not set excessive goals. According to its estimation, because of the macro-control, the uncertainty of real estate impact and financial investment will also be suspended. The adjusted growth rate of the company is 15%, and the profit contribution of clothing exceeds 2 billion yuan.

Investment logic

In Li Rucheng’s words, after Youngor’s “rich”, many companies came to the door, with Japan’s 3G mobile phone makers and local SMEs. He initially bought two local companies in an unintentional state of mind. As a result of the reintegration, the huge profits brought by the two companies' listings to Youngor have given Li Rucheng a lot of inspiration.

“Since then, I have nurtured a number of companies that are going to be listed and companies that are seeking private placements. For the financial services industry, the objectives of the reference are mainly the capital, team, market and price/earnings ratios of the other party, the low P/B ratio, and so on. The most important It's my intention to stay in the field. If I spend 5 or 10 years or more, I will not make such a company."

In addition, the investment related to Youngor's main business and some emerging industries, automobiles, pharmaceuticals, machinery manufacturing companies are also the focus of Li Rucheng.

Someone once used a Morgan Stanley expert to remind Youngor of such a “not-to-be” company: “Don’t overestimate the maturity of Chinese investors, and someone needs to point out that the emperor has no clothes.” One of the implications is that Such companies did not devote all their energy to the development of the main business. Second, they considered that companies such as Youngor were only “amateur” for PE investment.

Li Rucheng apparently did not recognize the label of “amateur”: “In the field of financial investment, China is also in its infancy, so no one can speak of complete professionalism. But at present, Youngor has two professional teams, one for PE investment and one for private placement. Each investment plan is passed through the budget, investigation and analysis, and auditing, and finally decided by the board of directors. Also, judging from the current situation, Chinalco and Zhongke, both previously invested by Youngor, have made more than double the investment income.”

In fact, for Youngor's controversy, it is actually a company's engine should be driven by what? Is it the expansion of the industry chain or the diversification? Or is it investment as a driving force? The changes brought about by this drive should not only be reflected in assets and net profits, but should have a substantial positive impact on the company's future sustainable development, growth space, and industrial structure. More importantly, it should not Should be affected by the environment and policies and subordinate to the Chaoyang or non-sunrise industries.

After the financial crisis, Li Rucheng gradually saw the key issues, and began to adjust the investment strategy - the main industry-related investment. At present, Youngor holds 33 A-share listed companies and bonds, including 29 A-share listed companies. The initial investment amount is 920265.75 million yuan, and the book value at the end of the period is 977835.07 million yuan, and the book floating profit is 57569.32 million yuan.

Li Rucheng told reporters: “Now, Youngor’s investment field will pay more and more attention to the fields related to the main business. The increase in the speed of China’s apparel brands will accelerate, and related industries will give us more opportunities to gather us. For his own physical industry, this will be an advantage for Youngor and it will also obey the adjustment of Youngor."

Financial dialogue - with a 50-generation private entrepreneurs look at the return to the main business.

Reporter: Why should you withdraw from Xugong Machinery?

Li Rucheng: The machinery industry is a highly cyclical industry. Its peak period is in 2009, 2010, and 2011. These three years are years of large-scale investment and construction by the government. Now we have built everything that we have done. The period has already passed.

Reporter: In the future, will you also pay attention to companies like Xugong?

Li Rucheng: Machinery companies such as Xugong and Sany Heavy Industries sell their equipment through financial leasing. When the state has a demand, many people buy the machinery of these companies for lending and investment, but now they have a high level of debt, and The large-scale projects that can use these equipment are not very common.

Reporter: You said you want to enter the industry related to the main industry. Are you specifically looking at the project?

Li Rucheng: I will pay attention to the consumer goods and retail industries. The retail industry is not the first and the resources are good. Now that some companies in this industry are not fully activated, and some are in the core areas of the city, the benefits are not very good. We will go to such enterprises. Look, this is also the main industry-related industry.

Reporter: Now is the most difficult time for real estate. Have you ever thought of leaving?

Li Rucheng: China's real estate still has a long way to go. First, urbanization, modernization of the countryside, and the formation of an urban commercial complex, training satellite cities. From this point of view, real estate actually has a lot of room for development. The problem is how to rationally allocate various resources.

Reporter: In front of you said that you like to do a half-market, because the market risk is low. How long is the average cycle of such investment from entry to exit?

Li Rucheng: This is a short-term project with an average of less than two years and a maximum of two and a half years.

Reporter: Do you prefer this kind of short-term investment?

Li Rucheng: It depends on whether this industry can invest for a long time. We also have PE investment as a mid-term project for 10 years.