Hongdou Co., Ltd.'s "AI+" Behind the Scenes: Performance Far Worse Than Ten Years Ago, Stock Price Plummeted Over 40% in Just Over Half a Year

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《Harbor Business Observer》by Wang Lu

How traditional apparel companies relate to AI is undoubtedly a new question. Recently, Red Bean Co., Ltd. (600400.SH) announced the establishment of the “Red Bean Comfort Technology Center (AI+)”, seemingly working on solving this.

At the inauguration ceremony, Zhou Hongjiang, Chairman of Red Bean Co., Ltd., said: “We hope to use AI technology as the engine. While staying true to our ‘comfort’ gene, starting from things like fabric development and pattern database, we will connect the entire ‘idea-to-garment’ chain—from creative planning, design, to 3D patterning. By quantifying comfort experiences with data, we will continuously strengthen the differentiated advantages of ‘Comfort Red Bean’.”

Wang Changhui, General Manager of Red Bean Co., Ltd., believes: “All product upgrades are, behind the scenes, our commitment to comfort and our R&D. After the establishment of the Red Bean Comfort Technology Center (AI+), we will deeply integrate AI, big data, fabric R&D, pattern design, and functional development.”

Industry observers believe that as an old-established apparel company, Red Bean Co., Ltd. has faced significant pressure on its performance in recent years. At present, the company’s hopes may lie in explorations at the apparel + AI level. Perhaps this is an important strategy the company is using to turn things around and seek transformation. If using AI technology can promote product upgrades and better match consumer needs, the company could potentially revive. Conversely, if the process is not smooth or cannot be implemented, the company’s outlook will remain precarious.

1

Notified by the Jiangsu Securities Regulatory Bureau and the SSE

Indeed, the current situation of Red Bean Co., Ltd. is far from optimistic.

On April 4 and April 3, Red Bean Co., Ltd. received, respectively, administrative regulatory measures from the Jiangsu Securities Regulatory Bureau and a notice of criticism from the Shanghai Stock Exchange.

The “Decision No. 1” issued by the Jiangsu Securities Regulatory Bureau shows that, upon investigation, as of December 31, 2024, Jiangsu Hongdou Industrial Co., Ltd. (hereinafter referred to as Red Bean Co., Ltd. or the company) had overdue accounts receivable of RMB 110 million owed by Hongdou Group Co., Ltd. (hereinafter referred to as Hongdou Group). The relevant overdue accounts receivable were to be fully collected by April 30, 2025.

But in 2025, Red Bean Co., Ltd. again had overdue accounts receivable from Hongdou Group. As of September 30, 2025, the balance of accounts receivable owed by Hongdou Group that were beyond the credit period was RMB 45.0943 million. Given that Red Bean Co., Ltd. had already experienced overdue accounts receivable from Hongdou Group in 2024, it failed to strictly control related accounts receivable from related parties and to promptly pursue collections in 2025, which led to the recurrence of overdue accounts receivable and constituted Hongdou Group, the controlling shareholder, occupying funds of the listed company in its day-to-day business activities.

The relevant actions of Red Bean Co., Ltd. and Hongdou Group violated the provisions of Article 4 and Article 20 of the “Regulatory Requirements for Listed Companies on Funds Transfers and External Guarantees between Listed Companies—No. 8” (CSRC Announcement [2022] No. 26) (hereinafter “No. 8 Regulatory Requirements”). Pursuant to the provisions of the second paragraph of Article 170 of the “Securities Law,” and the provisions of Article 23 of the “Regulatory Requirements for Listed Companies on Funds Transfers and External Guarantees between Listed Companies—No. 8” (CSRC Announcement [2022] No. 26), the Jiangsu Securities Regulatory Bureau decided to take administrative regulatory measures requiring rectification against Red Bean Co., Ltd. and Hongdou Group.

The “Decision No. 2” shows that Jiangsu Hongdou Industrial Co., Ltd., Hongdou Group Co., Ltd., and Meng Xiaoping: upon investigation, the following violations exist: first, on November 12, 2024, Hongdou Group Co., Ltd. (hereinafter referred to as Hongdou Group) conducted two stock pledge transactions with the Wuxi branch of Pudong Development Bank. Hongdou Group failed to timely inform Jiangsu Hongdou Industrial Co., Ltd. (hereinafter referred to as Red Bean Co., Ltd. or the company) of the above stock pledge matters, resulting in inaccurate disclosure of the stock pledge information relating to Hongdou Group in the announcement disclosed by Red Bean Co., Ltd. on January 23, 2025 regarding the release of part of the controlling shareholder’s share pledges and re-pledges. Hongdou Group failed to timely provide, in writing, the relevant circumstances it came to know to Red Bean Co., Ltd., violating the first paragraph of Article 3 of the “Measures for the Administration of Information Disclosure by Listed Companies” (CSRC Decree No. 182).

Second, in May 2025, Hongdou Group non-operationally occupied RMB 12.5 million of funds of Red Bean Co., Ltd. through a prepayment arrangement, while Red Bean Co., Ltd. failed to disclose this non-operational funds occupation in its “2025 Semi-Annual Report.” The relevant actions of Red Bean Co., Ltd. and Hongdou Group violated the first paragraph of Article 3, Article 15, and the “Regulatory Requirements for Listed Companies on Funds Transfers and External Guarantees between Listed Companies—No. 8” (CSRC Announcement [2022] No. 26), hereinafter referred to as “No. 8 Regulatory Requirements”). the provisions of Article 3 and Article 5 of “No. 8 Regulatory Requirements.” Meng Xiaoping, then Secretary to the Board of Directors of Red Bean Co., Ltd., failed to perform the duty of diligence and responsibility, violating the provisions of Article 4 of the “Measures for the Administration of Information Disclosure by Listed Companies” (CSRC Decree No. 226). Pursuant to the provisions of Article 52 and Article 53 of the “Measures for the Administration of Information Disclosure by Listed Companies” (CSRC Decree No. 182) and the “Measures for the Administration of Information Disclosure by Listed Companies” (CSRC Decree No. 226), the Jiangsu Securities Regulatory Bureau decided to take administrative regulatory measures of issuing warning letters against Red Bean Co., Ltd., Hongdou Group, and Meng Xiaoping.

According to Tianyancha, as of now, Hongdou Group is the largest shareholder of Red Bean Co., Ltd., holding 59.03% of the shares. Zhou Haijiang holds 58.4929% of Hongdou Group. From December 2024 to January this year, Hongdou Group has had 13 historical cases of being a person subject to enforcement. In addition, this January Hongdou Group was also listed by the court as a restricted high-consumption enterprise.

The aforementioned industry observer noted that, based on the notices from the Securities Regulatory Bureau and the SSE, as the controlling shareholder of Red Bean Co., Ltd., Hongdou Group is suspected of infringing upon the rights and interests of the listed company, as well as the rights and interests of all investors. Moreover, Hongdou Group occupied more than tens of millions of RMB of funds of Red Bean Co., Ltd. in a non-operational manner through a prepayment arrangement, and as the main entity of a listed company, it did not disclose this, which is also, to a certain extent, considered to belong to “internal collusion.” The harm it has brought to the capital market and investors is very evident.

According to the announcement disclosed by Red Bean Co., Ltd. on February 14, the controlling shareholder Hongdou Group Co., Ltd. (hereinafter referred to as “Hongdou Group”) holds 1.35B shares of the Company, accounting for 59.03% of the Company’s total share capital; the 828M shares that were released from judicial freeze account for 61.21% of the total number of shares it holds and 36.13% of the Company’s total share capital; the 2.46B shares that were released from review-and-wait freeze account for 182.00% of the total number of shares it holds and 107.44% of the Company’s total share capital.

In total, Hongdou Group and its concerted action party Zhou Haijiang, as well as Wuxi Honghong Garment Co., Ltd., hold 1.42B shares of the Company, accounting for 62.10% of the Company’s total share capital. After the release of the freeze for the shares in this instance, the total number of judicially frozen shares is 50.0189 million, accounting for 3.52% of the total number of shares held and 2.18% of the Company’s total share capital; cumulative judicial marks are 477 million shares, accounting for 33.51% of the total number of shares held and 20.81% of the Company’s total share capital; judicial freeze and judicial marks combined total 527 million shares, accounting for 37.02% of the total number of shares held and 22.99% of the Company’s total share capital. Hongdou Group’s cumulative shares under review-and-wait freeze total 360 million shares, accounting for 26.62% of the total number of shares held and 15.72% of the Company’s total share capital. Zhou Haijiang’s cumulative shares under review-and-wait freeze total 2.0635 million shares, accounting for 4.72% of the total number of shares held and 0.09% of the Company’s total share capital.

2

Performance far worse than a decade ago; the stock price has fallen by more than 40% in over half a year

In terms of performance, Red Bean Co., Ltd.’s Waterloo is even more bleak.

Over the past decade, from 2016 to 2024, Red Bean Co., Ltd. achieved revenue of RMB 3.04B, 2.73B, 2.48B, 2.54B, 2.38B, 2.34B, 2.34B, 2.33B, and 1.96B respectively, with year-on-year growth of 13.92%, -10.41%, -8.89%, 2.31%, -6.14%, -1.72%, -0.06%, -0.47%, and -15.93% respectively. Net profit attributable to the parent company was RMB 159.4 million, 610.0 million, 207.1 million, 169.5 million, 145.0 million, 76.97 million, 15.04 million, 30.01 million, and -238.2 million respectively, with year-on-year growth of 95.52%, 282.65%, -66.06%, -18.14%, -14.44%, -46.92%, -80.46%, 99.51%, and -893.78% respectively.

In other words, in 2024, Red Bean Co., Ltd.’s revenue was more than RMB 1 billion less than ten years ago, while net profit also suffered the rare occurrence of a large negative number in many years.

In the first three quarters of 2025, the company generated operating revenue of RMB 1.49B, down 4.31% year over year; net profit attributable to the parent company was RMB 3.2928 million, down 91.60% year over year; profit excluding non-recurring gains and losses was RMB -20.4138 million, down 173.77% year over year.

Red Bean Co., Ltd. expects that in 2025, net profit attributable to shareholders of the listed company will be between -RMB 280 million and -RMB 360 million; and net profit attributable to shareholders of the listed company after excluding non-recurring gains and losses will be between -RMB 310 million and -RMB 390 million. That means the company’s loss-making situation in 2025 will continue to worsen.

Meanwhile, the company’s performance in the capital market is also not encouraging. From September 23 last year to today (April 3), over half a year, Red Bean Co., Ltd.’s stock price has fallen by more than 40%. (Produced by Harbor Finance)

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