Finance Talk | Debt pressure, slowing core business, shareholder exit—can Shengtai Group save itself by selling assets?

Interface News reporter | Tao Zhixian

As a former “top student” in OEM manufacturing for the textile and apparel industry, Yim Tai Group (605138.SH) previously went public in a blaze of glory thanks to a full-industry-chain layout. However, in just four short years, the company has fallen from a fundraising frenzy into a business quagmire: revenue has declined for three consecutive years, and cumulative net profit has plunged by more than 90%. With interest-bearing liabilities of 3.2B yuan hanging overhead, the asset-liability ratio has exceeded 60%. Financial expenses have long been higher than net profit attributable to shareholders. Two major shareholders have repeatedly reduced their holdings to cash out, while reliance on core customers has kept climbing to 60%.

Amid multiple pressures such as excess industry capacity, Yim Tai Group is, on one hand, trying to raise cash by selling assets, and on the other hand struggling in the dilemma of “increasing revenue without increasing profit.”

Primary business profitability nearly “zeroed out”

The rate at which Yim Tai Group’s performance has deteriorated is faster than the market expected.

The company listed on China’s A-share market in October 2021, and completed the issuance of convertible bonds in November 2022; total funds raised across the two offerings amounted to 1.26 billion yuan. Yet right after fundraising was completed, the company’s performance entered a “free fall” mode, starkly contrasting with its growth trend before going public.

Financial data shows that in 2022, Yim Tai Group’s revenue reached a peak of 5.97B yuan, while net profit attributable to shareholders was 376 million yuan. But good times didn’t last. In 2023, the company’s annual revenue fell year over year by 22% to 4.65B yuan, and net profit plunged 72% to 104 million yuan. In 2024, the company’s results further worsened: revenue was 2.47B yuan, down another 21% year over year, and net profit dwindled to 46.65 million yuan, shrinking by 87.6% compared with 2022. In the first three quarters of 2025, revenue continued to decline by 7% to 357.2k yuan, while net profit attributable to shareholders was 38.88 million yuan, down just 2.29% year over year.

Data source: Wind, Interface News research department

“Revenue fell for three straight years, and net profit collapsed in a cliff-like manner. This kind of performance turnaround is not common in the textile OEM industry—while the industry leader ShenZhou at the same time moved forward steadily.” Li Guangnian, an analyst who has tracked the textile industry for a long time, told an Interface News reporter. “After fundraising was completed, it failed to expand its revenue-generating capacity, and instead rapidly fell into contraction. This reflects clear problems in Yim Tai Group’s strategic planning and operational management.”

More severe is that the profitability of Yim Tai Group’s core business has deteriorated sharply. In the first three quarters of 2025, the company’s net profit attributable to shareholders after deducting non-recurring items was only 28.03 million yuan. In the third quarter alone, net profit after deducting non-recurring items was just 3.572 million yuan, down 97.11% year over year. Its “core business cash-generating” capability is nearly “zeroed out.” The company expects net profit attributable to shareholders for full-year 2025 to be between 18 million yuan and 27 million yuan, down 42.12% to 61.41% compared with the same period last year—its sluggish performance is hard to reverse.

Data source: Wind, Interface News research department

The continued decline in net profit margin also directly reflects Yim Tai Group’s operational predicament. In 2022, its net profit margin was 6.44%; in 2023, it dropped to 2.09%; in 2024, it further slid to 1.1%. In the first three quarters of 2025, although it rebounded slightly to 1.63%, it still remains at a historical low.

Data source: Wind, Interface News research department

Regarding the performance decline, Yim Tai Group said it was mainly affected by factors such as increasing uncertainty in the global economic and trade environment and rising difficulty for domestic textile and apparel to compete internationally.

Industry data shows that in the first six months of 2025, the industrial value added of textile enterprises above a designated size grew 3.1% year over year. Although operating revenue and total profit declined somewhat, overall performance was better than Yim Tai Group’s.

Interface News contacted Yim Tai Group for an interview regarding what practical measures it would take to restore its core business cash-generating capacity after net profit declined year over year for three consecutive years, and how it would improve the efficiency of the funds raised to safeguard investors’ returns. As of the time of publication, it had not received a response.

3.2B yuan of interest-bearing liabilities weighing down

As performance continues to deteriorate, Yim Tai Group’s financial situation is also becoming increasingly severe. Debt pressure is like a sword hanging overhead. By the end of Q3 2025, the company’s asset-liability ratio reached 60.6%, the current ratio was only 0.85, and the quick ratio was 0.53. Both liquidity indicators are below the safety line of 1, indicating seriously insufficient short-term debt repayment capacity.

“Textile is a heavy-asset industry, with a high proportion of inventory. A quick ratio of less than 1 already reflects that the company’s short-term debt repayment risk is extremely high.” CPA Chen Xinyue told an Interface News reporter.

An Interface News reporter found that Yim Tai Group’s interest-bearing liabilities are substantial. As of the end of Q3 2025, short-term borrowings were 1.63 billion yuan; non-current liabilities due within one year were 297 million yuan; long-term borrowings were 615 million yuan; and bonds payable were 653 million yuan. Total interest-bearing liabilities amounted to 3.2B yuan. The financial expenses brought by the massive debt have become a “black hole” that erodes the company’s profits.

Data shows that Yim Tai Group’s financial expenses were 187 million yuan in 2023, 136 million yuan in 2024, and 93.44 million yuan in the first three quarters of 2025. Meanwhile, net profit attributable to shareholders in the same periods was 104 million yuan, 46.65 million yuan, and 38.88 million yuan, respectively. Financial expenses have been higher than net profit attributable to shareholders for three straight years, forming a vicious cycle of “interest swallowing profits.”

Beyond direct debt pressure, Yim Tai Group’s external guarantee scale is also worrying. As of November 2025, the guarantee balance actually provided by the company and its controlling subsidiaries was 136M yuan, accounting for 111.13% of the company’s audited net assets at the end of 2024—meaning guarantees exceeding the scale of net assets further amplify financial risk. Among them, the guarantee balance for controlling subsidiaries was 2.83B yuan, accounting for 51.33% of net assets.

Data source: Company announcements, Interface News research department

Facing debt pressure, Yim Tai Group has begun selling assets to raise cash. Its wholly owned subsidiary, Yim Tai Knitting, plans to sell its 70% equity interest in Hao Tai Textiles to Ningbo Hao Tai at a price of 1.00 yuan (established for less than a year). Hao Tai Textiles’ main business is industrial park operations and leasing to external parties, not a core business. The accounting cost for this transaction is 84.2710 million yuan, with a premium rate of 125.74%. Regarding this transaction, Yim Tai Group stated directly that it is to “focus on core business development, further optimize the company’s management structure and resource allocation, and improve the efficiency of asset operations.” However, based on the actual situation, the profitability of the company’s core business continues to deteriorate. In the third quarter of 2025 alone, net profit after deducting non-recurring items was nearly zero. Selling assets is also hard to fundamentally improve the competitiveness of the core business.

Homogenized competition in the industry squeezes survival space

With performance declining and debt remaining high, the concentrated share reductions by important shareholders could shake market confidence. Since 2025, the company’s two major shareholders have reduced their holdings one after another, with cumulative cash-out amounts exceeding 200 million yuan, reflecting shareholders’ concerns about the company’s future development.

In November 2025, Itochu Asia completed the disposal of 3% equity. The total amount of the divestment was 120 million yuan. Before this reduction, Itochu Asia held 117 million shares of Yim Tai Group, accounting for 21.00% of total share capital; after completion, its shareholding ratio fell to 18%. As a strategic investor, the reduction occurred only four years after the company’s listing.

In December 2025, Yager Apparel announced a plan to reduce its shares by no more than 3%. Yager Apparel holds 70.0792 million shares of Yim Tai Group of non-restricted tradable stock, accounting for 12.61% of total share capital. All of the shares come from holdings before the company’s listing. In the first half of 2025, Yager Apparel had already completed a 2.39% reduction in equity, cashing out 81.70 million yuan at that time. If the entire reduction plan is carried out, Yager Apparel’s cumulative reduction ratio would exceed 5%.

“Two major important shareholders have reduced their holdings intensively within a year, and the reduction ratio is large. This conveys negative expectations about the company’s operating prospects, affecting cooperation relationships across upstream and downstream and market confidence, creating a chain reaction.” Chen Xinyue told an Interface News reporter.

In fact, Yim Tai Group’s predicament also reflects the helplessness of small and medium-sized textile and apparel OEM factories. Against the backdrop of a global economy with strong supply but weak demand, excess industry capacity, and intensifying regional competition, companies relying on OEM for international brands are facing unprecedented survival pressure.

From the customer structure, Yim Tai Group has a serious risk of customer concentration. In 2024, sales from its top five customers were 1.31B yuan, accounting for 60.08% of total annual sales. When it went public in 2021, this ratio was 52.92%. The company stated at the time of listing that it would “actively explore new markets and new customers,” but in reality, customer concentration has continued to rise, and reliance on major customers has deepened.

“Customer concentration above 60% means the company’s operating performance is highly vulnerable to factors such as the operating situation of a single customer and order adjustments. Once a major customer reduces orders or terminates cooperation, the company will face tremendous revenue pressure.” Li Guangnian analyzed, “More importantly, international brands hold an absolute dominant position in the industrial chain, and OEM factories’ bargaining power is almost zero—they can only passively accept price cuts, and profit margins are continually squeezed.”

Yim Tai Group’s main customers include international well-known brands such as Nike, Adidas, and Uniqlo. These brands, leveraging strong channel advantages and brand influence, set high requirements for OEM factories’ product quality, delivery lead times, and price levels, while constantly squeezing down procurement costs. “When upstream customers are strong and downstream markets are highly competitive, OEM factories are stuck in the middle, getting squeezed from both sides. This is a common predicament in the textile OEM industry.” Li Guangnian said.

The intensification of competition in the industry further exacerbates survival pressure. The textile and apparel OEM race track shows a pattern of “the top players take it all, the middle players are trapped in internal strife, and the tail gets eliminated.” The industry’s CR5 is around 26%, and concentration continues to increase. Taking industry leader Shenzhou International as an example, in recent years its gross margin has been maintained at over 27%, while its net profit margin exceeds 21%. Yim Tai Group’s gross margin is around 16%, with a significant gap in profitability.

Intensifying regional competition also deals an extra blow to domestic OEM factories. “The rise of production capacity in Southeast Asia has further diverted orders away from domestic OEM factories. Domestic high-end markets face pressure, while low-end markets fall into price wars. Yim Tai Group is trapped in a dilemma of being attacked from both front and back.” Li Guangnian said.

In addition, severe excess capacity in the industry and product homogenization are also prominent problems. Global textile and apparel production capacity far exceeds market demand, especially low-end capacity, which is particularly oversupplied. Products have highly similar craftsmanship and lack differentiated competitive advantages. Companies can only fight for orders by cutting prices, further eroding profit space. In a context of excess capacity, OEM factories have no bargaining power and can only passively accept low-priced orders.

Under the multiple predicaments of performance decline, high debt pressure, shareholders “fleeing,” and industry squeeze, if Yim Tai Group cannot come up with an effective transformation plan in time and relies only on selling assets to stay afloat, it will fall into an even deeper crisis.

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