TK GROUP HLDG aims to achieve revenue of 5 billion yuan by 2028 and hopes to complete its first acquisition within the year

Dongjiang Group (02282.HK) hired a consulting firm last year to reform the group's business. The company's chairman, Li Peiliang, stated that the target revenue for the company after the reform is to reach 5 billion by 2028, doubling from approximately 2.3 billion in 2024, and to achieve 10 billion by 2033, primarily driven by organic growth. He mentioned that this reform is to respond to changes in the international situation, hoping for sustainable growth for the company, and to "hone internal skills" in a challenging environment.

Dongjiang Group's Chief Financial Officer, Zhang Fanghua, indicated that capital expenditures are expected to reach a record high this year and will remain high in the coming years to expand business scale and meet order demands, mainly for factory expansion. He noted that the scale of the Suzhou factory had already doubled last year but is still insufficient to meet customer demand. Regarding the company's earlier announcement to cancel the purchase of land for a factory in Vietnam, Zhang Fanghua explained that it was in response to changes in customer requirements for production locations, but the company will still expand the Vietnam factory through leasing land.

Additionally, Zhang Fanghua stated that the company will actively consider mergers and acquisitions after the reform, aiming to complete the first acquisition transaction within this year, with an investment scale in the hundreds of millions, and without regional restrictions; the company holds approximately 1 billion in cash, sufficient to meet acquisition funding needs.

CEO Lu Gongshan mentioned that the company hopes to find targets that have synergistic effects with its business or extend the value chain of customer products. Specifically, Zhang Fanghua stated that in the consumer electronics business, there will be vertical acquisitions, while in the automotive sector, the focus will be on precision mass injection molding, such as automotive connectors; in the medical consumables business, acquisitions related to syringes will be considered.

Regarding customers, Zhang Fanghua pointed out that in the past, the group's customers were mainly overseas, but domestic customers have been increasing, accounting for over 30% by 2024, with the largest customer currently coming from the mainland. The change in customer structure has not significantly impacted gross profit or net cash, as the company is very rigorous in selecting customers, managing factors such as payment periods and gross profit margins.

Dongjiang Group Chairman Li Peiliang added that although the company may slightly lower gross margins when entering new markets to secure order opportunities, the overall target gross margin will continue to rise. Additionally, Lu Gongshan revealed that raw materials are generally agreed upon between customers and suppliers, so most changes in raw material costs will be absorbed by customers, and the current volatile situation has limited impact on the company's raw material costs