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26 Jun 2026
SAC Capital: Fuxing China (FUXC SP, S$0.99, TP:S$1.51, Initiation - BUY)
Fuxing China Group Limited was listed on the Mainboard of Singapore Exchange (SGX) in September 2007. Established in 1993, Fuxing China has systematically scaled its operations over three decades to become the fourth-largest zipper manufacturer globally measured by sales value. The Group has three key business segments, including sales of zipper chains and sliders, trading of textile raw materials, and zipper processing services, which are strategically located across mainland China and Hong Kong. Fuxing China markets its product portfolio under the proprietary "3F" brand, an acronym underscoring its commitment to high-quality manufacturing and customisation.
Direct-to-Brand Strategy to Enhance Margins. Fuxing China has been pivoting towards direct sales to brand owners, reducing its reliance on contract manufacturers and intermediaries. By engaging brands earlier in the product design process, the Group aims to shift from supplying standardised zippers to providing more engineered, value-added fastening solutions across sportswear, workwear, and outdoor lifestyle apparel. The Group has disclosed that its direct-to-brand customer base has expanded to include a broader range of international and domestic brands, including Reebok, Mizuno, ellesse, Joma, Zpacks, Bosideng, CAMEL, Santic, QIAODAN, FIRS, and Mark Fairwhale, with these customers having commenced recurring order flows. Direct engagement with brand owners should enhance operating margins, order visibility, product responsiveness, and cross-selling opportunities, while also supporting a shift towards a higher value-added product mix.
Recently Announced Formal dividend policy. On 31 March 2026, Fuxing China announced a dividend policy targeting a minimum 15% annual payout for the next three financial years, and at the 29 April 2026 AGM shareholders approved the FY25 final dividend of RMB 0.15 per share, the share buy-back mandate, and the Fuxing China scrip dividend scheme. As we expect growth in the coming years, we have forecast dividend payout to be similar to FY25. This translates to a very attractive above the market yield of 4.2% in FY26 and 6.7% in FY27.
Potential for Value Unlocking with Wide Disparity to NAV. The Company's share price of S$1 is just about 20% of the Group's net asset value per share stood at S$5.40 (as at 31 December 2025). With the formal dividend policy, we believe that it reflects the Company's confidence in its underlying business fundamentals and future growth trajectory, while signalling a more proactive and disciplined approach to capital allocation, with a clear focus on enhancing shareholder returns and unlocking long-term shareholder value.
Placement and Capital Allocation for Technological Upgrades. The Group has completed a share placement that raised S$1.25 million in gross proceeds with the issuance of 3.0 million new shares at an issue price of S$0.415 each in November 2025. Specifically, 100% of the funds will be directed towards technological research and development, alongside targeted upgrades to the Group's intelligent manufacturing equipment and assembly lines.
Technology Updates to Improve Efficiencies. The Group is accelerating its digitalisation roadmap, its AI-enabled operating model focuses on real-time monitoring of business-unit efficiency, assets and workflows, with the explicit objective of reducing manpower, improving quality and optimising resource allocation. The company also said it is exploring enhancements to its Customer Relationship Management system to improve demand anticipation, risk management and responsiveness to shifting market conditions.
Profitability expected to improve after mixed FY25 results. Fuxing China’s FY25 revenue declined by 8.6% YoY to RMB 672.3 million, mainly due to an 11.0% YoY decrease in Zipper segment revenue to RMB 412.1 million from RMB 463.4 million in FY24, driven by lower export sales following tariffs announced by the United States on foreign imports. Despite the softer topline, gross profit improved 8.1% YoY to RMB 49.5 million, while overall gross margin expanded from 6.2% in FY24 to 7.4% in FY25. This was mainly supported by margin improvement in the Processing segment, where lower production costs and reduced wastage following automation initiatives helped enhance operating efficiency. While FY25 revenue was weighed down by a decline in export sales due to trade-war-related tariffs, this impact is expected to partially reverse in FY26 as export demand normalises, helping to close the revenue gap. Fuxing China’s FY26 revenue forecast is expected to increase 7.5% YoY to RMB 722.8 million. With continued margin improvement from automation-led efficiency gains, we forecast the Group’s FY26 gross margin will increase to 13% from 7.4% in FY25. The Group’s FY26 gross profit is expected to increase 89.8% YoY to RMB 94.0 million.
Key risks ahead include credit risk and long-dated trade receivables; macroeconomic slowdowns and raw material volatility.
Investment recommendation. We initiate coverage on Fuxing China with a BUY rating and a target price of S$1.51, based on Fuxing China FY26 forward EPS of RMB 1.47 (S$0.22) and applying a 60% discount to the mean forward PER of 13.6x of its peers, representing a 52% upside from current levels. We note that our target price of S$1.51 is 72% lower than the Group’s latest NAV per share of S$5.40