Singapore licensed fund manager
Insights
Company Insights - Zixin Group Holdings Ltd
By
Kenny Tan
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Profits tied up in the next harvest
Company description
Zixin Group Holdings Limited is an integrated sweet potato value chain operator based in Liancheng County, Fujian. The company buys raw sweet potato from farmers and either sells it into the Chinese wholesale trade or processes it into snacks sold under its own brands and as a contract manufacturer for others. FY26 sales reached RMB607mn (+43% YoY), a 3rd consecutive year of strong growth with similar levels of profit growth. The company is about to replicate its business model at Hainan County after ~3 years of investment and is also building a consumer brand in Singapore.
Investment merits & opportunities
Deep valuation discount: With net cash of RMB136mn (~SGD25mn) at nearly half the market cap and shares trading at less than half of NAV, the company trades at a major discount, despite its recent track record of operational stability at Liancheng.
Upscaling existing operations: Zixin’s processing expansion in Liancheng provides a route to earnings growth alongside its Hainan expansion. Increased use of automated production alongside broader mix of higher value products should drive improving profitability.
Strong growth prospects from Hainan expansion: Hainan has potentially 5x the cultivable farmland versus Liancheng county, providing a visible pipeline for growth.
Key risks
Cash conversion: The prepayment supply book has required significant top-ups and is capital intensive, resulting in minimal cash release back to the company. For FY26, every incremental $1 of sales required $0.64 of working capital. The expansion in Hainan might replicate this business model which will further complicate cash flows.
Governance: Given Zixin’s history amidst the S-chip saga, investors need further assurance of capital return to remove old doubts over corporate governance and capital allocation. Repeated equity issuances and the absence of distributions have not supported the case.
Execution: After 3 years, the Hainan area appears ready for planting and harvest. However, it is still uncertain whether the output can match the expectations set by management. Newer initiatives such as Singapore’s brand and marketing expansion have also not reached sufficient scale to judge on intended economics.
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