Alibaba-linked Sanjiang Shopping Club Shares Soar to Daily Limit

Credit: Visual China

BEIJING, January 24 (TMTPOST) – Sanjiang Shopping Club Co. Ltd. (601116.SH) share price surged to the daily ceiling on Wednesday, buoyed by rising Alibaba concept stocks and the active retail sector.

On Tuesday, there were reports that Alibaba’s co-founders Jack Ma and Joe Tsai had been buying shares in Alibaba. Tsai is Ma’s longtime business partner and the company’s chairman.

According to a filing on the U.S. Securities and Exchange Commission website, Tsai bought about $151 million worth of Alibaba’s U.S.-traded shares in the fourth quarter in 2023, via his Blue Pool Management family investment vehicle. Media reports suggested that Jack Ma also made substantial increases in Alibaba shares during the same period, although the exact amount was not disclosed.

Besides, rumors circulated that the draft of the national standard for pre-made food has been submitted to Chinese authorities, and the outcome may be available within six months at the earliest. Analysts believe that this move will significantly raise industry barriers to entry and contribute to the healthy development of the industry.

In terms of the equity structure, Sanjiang Shopping Club has a close relationship with Alibaba. Sanjiang Shopping Club’s first largest shareholder, Shanghai Hean Investment Management Co., Ltd., holds 35.42% of its shares, while Hangzhou Alibaba Zetai Information Technology Co., Ltd. holds the second-largest stake with a 32% stake.

However, Alibaba's support on Sanjiang Shopping Club might not be able to boost the latter’s revenues and profits signficantly. Despite Alibaba's involvement since 2016, Sanjiang Shopping Club's revenue has consistently hovered around 4 billion yuan, showing slow growth.

Sanjiang Shopping Club is involved in the pre-made food industry. According to public data, the company was established in 1995, went public in 2011, and is one of the largest chain supermarkets in Zhejiang Province. As of the end of the third quarter of 2023, the company had a total of 213 stores.

Zheshang Securities Co., Ltd. recently released a research report, saying that the industrial logic of the development of hard discounters in China has become quite clear. The supply side benefits from the high-quality supply chain, social inventory increases, and the decline in rental costs for stores in lower-tier cities in China. As for the demand side, with the slowdown in CPI growth, decreasing consumer expectations, and more universal cost-effective demands, more and more customers are buying things in brick-and-mortar stores. The development model of hard discounters overseas provides the Chinese counterparts with a future direction.

However, even with the advantage of hard discounters and involvement in the pre-made food industry, it’s still uncertain whether Sanjiang Shopping Club can prosper in the future.

According to the 2023 annual performance report disclosed by Sanjiang Shopping Club, the company’s operating income in 2023 was 3.9 billion yuan, a year-on-year decrease of 4.67%. The main business income was 3.81 billion yuan, a year-on-year decrease of 4.49%. Net profit attributable to the parent company was 131 million yuan, a year-on-year decrease of 15.60%.

Sanjiang Shopping Club said that the year-on-year decrease in revenue and net profit was mainly due to the decline in its store sales. Besides Ningbo, the company also tried to expand in other cities within Zhejiang Province, but the progress was not significant.

(Note: 1 yuan equals $0.14.)

(This article was first published on the TMTPost App. Author | Ma Qiong)