Why are market expectations low for the leading stationery company planning to spin off a subsidiary for a Hong Kong listing?

AI Questions · Why is Kornet’s digital business considered promising enough for a standalone IPO?

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Investment Time Network, Punctuation Finance Researcher Dong Lin

Faced with traditional core growth hitting a ceiling, Shanghai M&G Stationery Co., Ltd. (hereinafter “M&G Stationery,” 603899.SH), the leading stationery brand in China, plans to rebuild its capital runway through an “A+H” dual-platform strategy.

Recently, M&G Stationery released an announcement saying the company intends to set in motion the planned spinoff and separate listing of Kornet Technology Group Co., Ltd. (hereinafter “Kornet”), a subsidiary in which M&G Stationery holds 77.78% of the shares, on the Hong Kong Stock Exchange.

According to information disclosed by the company, Kornet was established in 2012. It mainly serves enterprises and provides full-scenario, digitally enabled procurement services, including one-stop office procurement, MRO industrial goods, marketing gifts, and employee benefits. Its business covers the entire chain, including goods procurement, supply chain management, warehousing and logistics, and sales to the enterprise side.

In terms of performance, in the first three quarters of 2025, M&G Stationery achieved revenue of 17.328 billion yuan, up 1.25% year over year. Among that, Kornet achieved revenue of 9.691 billion yuan, up 5.83% year over year, accounting for 55.93% of M&G Stationery’s consolidated revenue. However, due to a decline in gross margin for its office direct-sales business (Kornet’s core business), M&G Stationery’s overall performance showed “increased revenue but not increased profits.” In the same period, attributable net profit was 948 million yuan, down 7.18% year over year.

Investment Time Network, Punctuation Finance Researcher noted that, with intensifying competition in China’s government-and-enterprise centralized procurement (collective purchasing) sector, Kornet urgently needs to build comprehensive competitive barriers around customer stickiness in the supply chain and digital systems. Continuous capital investment is especially important.

In the announcement, M&G Stationery said that Kornet’s independent listing will fully leverage the role of capital markets in optimizing resource allocation, broaden Kornet’s financing channels, and further enhance Kornet’s financial strength, corporate governance level, and core competitiveness—helping it achieve high-quality, sustainable development. At the same time, a spinoff listing will further deepen the company’s layout in the enterprise common-material digitally enabled procurement services field, strengthen the company’s overall competitiveness, and align with the company’s overall development strategy objectives. M&G Stationery also provided a risk disclosure: this spinoff and listing matter is in an early planning stage and still requires deliberation and approval by the company’s board of directors and shareholders’ meeting; there is uncertainty.

M&G Stationery Releases a Notice on the Planned Spinoff Listing of a Controlling Subsidiary

Source of information: Company announcements

M&G Stationery was jointly founded by Chen Huowen, Chen Huoxiong, and Chen Xueling, the three siblings from Chaoshan in Guangdong. The company was listed on the Shanghai Stock Exchange in 2015. From the revenue structure perspective, the company’s traditional core business includes writing instruments, student stationery, office stationery, and more; new businesses include the ToB retail e-commerce platform Kornet and the retail big-store business (Jiu Mu Miscellaneous Society, M&G Life).

In recent years, as the number of newborns in China has declined and paperless office practices have become widespread, the overall market size of the stationery industry has entered a phase of slow growth. As a result, in the first three quarters of 2025, M&G Stationery’s revenue from writing instruments, student stationery, and office stationery fell by 1.52%, 6.51%, and 6.84% year over year, respectively; only other products recorded growth of 9.26%.

In sharp contrast, the company’s office direct-sales business has maintained a growth momentum. From 2022 to 2024 and the first three quarters of 2025, Kornet recorded revenue of 7.707 billion yuan, 8.834 billion yuan, 11.444 billion yuan, and 9.691 billion yuan, respectively, accounting for 47.18%, 49.79%, 54.17%, and 55.93% of M&G Stationery’s total revenue. The revenue contribution ratio has increased year by year.

But in terms of gross margin, affected by industry price competition and customers’ bargaining power, Kornet’s office direct-sales business has become M&G Stationery’s shortcoming on profitability. In the first three quarters of 2025, this business’s gross margin was only 6.78%, decreasing by 0.34 percentage points year over year. Meanwhile, the company’s writing instruments business, which has the highest gross margin, increased by 2.03 percentage points year over year to 44.12%.

Lower gross margin drags down M&G Stationery’s overall profitability. In the first three quarters of 2025, the company’s sales gross margin decreased by 0.16 percentage points year over year to 19.62%. M&G Stationery said that the decline in gross margin is mainly due to factors including the business mix proportion. In the future, the company will improve its profit level by increasing the proportion of sales of self-operated and its own products, expanding into new customers, and optimizing the supply chain.

M&G Stationery’s Main Businesses by Product in the First Three Quarters of 2025

Data source: Company financial reports

For this spinoff listing, some analysts believe that in the A-share market, M&G Stationery’s valuation anchor has long been constrained by the industry attribute of “traditional stationery retail.” But Kornet’s core is an industrial internet business, SaaS systems, a modern warehousing and logistics system, and a digitally enabled supply chain. By separating it and listing it independently in Hong Kong, the international capital market can apply a new “technology + supply chain” valuation model to Kornet, thereby maximizing enterprise value.

From the perspective of the parent company, after the spinoff, M&G Stationery can focus even more on its traditional stationery businesses with higher gross margins, its cultural and creative business, and retail upgrades. This helps it escape the drag on the parent company’s overall gross margin and valuation level caused by low-gross-margin collective procurement business, enabling a re-rating of the parent company’s valuation.

Investment Time Network, Punctuation Finance Researcher noted that although M&G Stationery emphasized in its announcement that if implemented, this spinoff would not lead to the company losing control over Kornet, and would not cause any material adverse impact on the operation and development of other business segments of the company or on the company’s overall sustained profitability; the market has responded relatively calmly to this spinoff. On the day the announcement was released, M&G Stationery’s closing share price was 26.21 yuan per share (unadjusted). It rose only slightly by 0.04%. In the following two trading days, the company’s share price fell.

M&G Stationery’s Share Price Trend from Early 2026 to Present (yuan)

Data source: Wind

The share price decline may stem from market concerns about the post-spinoff stability of M&G Stationery’s performance and Hong Kong’s financing constraints. On one hand, if market conditions are weak at the time of listing, Kornet may face problems such as valuation falling short of expectations and insufficient financing amounts, preventing it from achieving its stated expansion targets. On the other hand, after the spinoff, M&G Stationery’s revenue scale will be significantly reduced; with growth continuing to be sluggish, can the traditional core business support the company’s current market value?

Investment Time Key Term: M&G Stationery (603899.SH)

Author’s statement: Personal views are for reference only