PE Investment Drives Real Economy and Boosts Industrial Transformation and Upgrading | JD Capital


Recently, Governor of Jiangxi Province Liu Qi hosted the Forum of Enterprise Principals of Jiangxi Province. Cai Lei, JD Capital’s Chairman, attended and addressed at the forum. According to Cai Lei, in 2016, nearly 300 JD Capital-invested enterprises collectively created an output of over RMB 500 billion, making a tax contribution of over RMB 50 billion and providing jobs for more than 500,000 people. In the future, JD Capital will continue to substantively support real economy by means of PE investment.

PE Investment Drives Local Economy

JD Capital’s investment practices in Jiangxi, a key province in central China, are a miniature of its endeavors in local economic development. By the end of 2016, JD Capital had invested over RMB 600 million in three enterprises in Jiangxi, namely Fushine, Sornid and Jiangxi Tungsten.

JD Capital focuses on three investment fields: “big consumption”, “big health”, and “big industry”. Fushine, a leading pharmaceutical enterprise successfully listed on the ChiNext, represents JD Capital’s layout in the “big health” sector; Sornid, an outstanding enterprises dealing in new energy materials, is also an industrial bellwether. JD Capital will enter into sustained cooperation with such investees to boost their growth, promote industrial restructuring and upgrading, and boost sound development of local economy.

Jiangxi Tungsten Industry Group is a large state-owned enterprise, of which JD Capital is its second largest shareholder. Since the new round of SOE reform gradually unfolded after the Third Plenary Session of the 18th CPC Central Committee, JD Capital also took an active part in SOE reform for mixed ownership, so as to help them establish modern management structures, improve management and operation level, and enhance overall competitiveness through M&As. Considering the enterprise’s remarkable resource advantages in tungsten and rare earth industries, JD Capital plans for further cooperation with SASAC of Jiangxi Province. By setting up the Tungsten Industrial Development Fund, JD Capital will help the Group with industrial integration and overseas M&As, promote transformation and upgrading of the mining industry in Jiangxi, build the area into the world’s center of non-ferrous metal industry, and contribute to “the Belt and Road” initiative.

Integrative Investment Boosts Corporate Growth

On March 29, JD Capital held the Forum of Outstanding Enterprises of Zhejiang in Hangzhou. Nine enterprises, including Jiangshan Oppein (603208.SH), Chengyi Pharmacy (603811.SH) and Maogeping Beauty, were present. At the forum, JD Capital introduced its integrative investment strategy to its investees in detail.

As Chinese economy steps into the “new normal”, economic growth is slowing down, and so is enterprises’ endogenous growth. Facing the new situation, PE institutions can no longer receive relatively high investment returns by simply relying on endogenous growth and value premium brought about by going public. Rather, M&A is also necessary for the increase of market share and comprehensive competitiveness, the enhancement of both endogenous and exogenous growth, and thus more significant scale effects.

In 2017, JD Capital put forward the “Leadership Plan” for systematic integrative investment, in which “1+N” M&A investment is the major mode. Selecting leading enterprises with development potential as investment targets, JD Capital not only boosts their endogenous growth with capital, but also further supports their M&As at home and abroad (“N” refers to those being absorbed) to improve their technology, management and brand value, and realize faster development. The fund, as one of their shareholders, is also expected to enjoy greater value appreciation.

JD Capital believes that integrative investment corresponds with changes of the macro economy, and acts as an important approach for PE institutions to support supply-side structural reform.

Since the latter half of 2016, the economy has shown clearer signs of recovery, and the operating condition of JD Capital-invested industrial enterprises was also improved. In late March, JD Capital’s core team visited Flagchem (300575.SH) and other investees in Jiangsu with overseas investors and learned about conditions of corporate development.

Flagchem, a leading enterprise in the field of new pesticides, is part of JD Capital’s systematic layout in agriculture based on consumption upgrading, green health and chemical industry development. We believe that, by fully utilizing the platform of capital market and accelerating M&As of agricultural enterprises, we can build world-class enterprises such as Monsanto and Syngenta. Through this visit, overseas investors have had a more comprehensive understanding of Chinese enterprises and stronger confidence in the sound development of Chinese economy.

Seize Historic Opportunities in Tourist Consumption

Consumption upgrading is the key motivation of China’s economic development, in which tourist consumption plays an important role. JD Capital has always regarded tourist consumption as a key area in its consumption investment, with an aim to boost the development of tourism enterprises and push the upgrading of tourism services.

In end-March, the vice president of JD Capital Huang Zhen attended the Investment and Financing Conference of Tourist Industry held by Hebei Provincial Government. At the conference, participants had discussions over tourist investment and financing with the theme of “Building a Platform for Capital and Adding Wings to Tourism”. Huang shared his innovative idea of boosting tourism development with capital power with a speech titled “Capital market drives tourism development”.

As always, the tourism industry is both a typical service-oriented economy and a heavy-asset industry. As a result, investment in the tourism industry has a long return period and a large scale. For tourism enterprises, they have to be relatively capable of financing to realize scale income and secure long-term development. JD Capital plans to build leading enterprises in the tourism sector by helping more small and scattered ones with organic integration before forming synergy and scale economy and having faster access to the capital market.

Detailed considerations in implementing the above integrative investment are as follows: JD Capital conducts M&A on excellent single tourism enterprises and help them improve visitor experience and enhance comprehensive competitiveness while upgrading consumption experience. Meanwhile, through horizontal M&As within the industry and vertical M&As down the industry chain, scale economy will be formed, operating efficiency will be improved, and successful listing will be realized. Following the listing of leading enterprises, we will continue to push forward M&As as their strategic shareholder and help them grow stronger. Uzai, China’s largest agency of outbound tourism, is a representative of JD Capital’s integrative industrial investment. With abundant operational experiences in tourism investment, JD Capital is able to carry out relevant strategies effectively.

Amidst fast upgrading amid rapid development of tourism industry, the improvement of service facilities and service level is bound to be critical for China’s consumption upgrading. With the help of capital, the tourism industry can better satisfy tourists’ individualized needs, and promote new reform in travel modes or even lifestyles.