Renrui Acquires Sirui

Renrui Human Resources Technology Holdings Limited

人瑞人才科技控股有限公司 (Stock Code: 6919.HK)

Renrui HR Tech Announces Acquisition of Shanghai Sirui and Strategic Upgrade

Adhere to the Development of Tech-driven Human Resources Services

Strengthen Business Layout in the Information Technology and Software Outsourcing Services Industry

8 March 2022 Renrui Human Resources Technology Holdings Limited(“Renrui HR Tech” or the “Company”, together with its subsidiaries, the “Group”) (HKEX: 6919), today announces that it has entered into a sale and purchase agreement with Dalian Neusoft Holdings Co.,Ltd. (“Neusoft Holdings”) to acquire 46.0% of the equity interests in Shanghai Sirui Information Technology Co., Ltd. (“Shanghai Sirui”) at a total consideration of approximately RMB408 million (equivalent to approximately HK$503 million). Upon completion of this acquisition, the financial results of Shanghai Sirui will be consolidated into the Group’s financial statements.Hence,it will become a non-wholly owned subsidiary of Renrui HR Tech.

As a long-term strategic planning, the Group has been adhering to thedevelopment of tech-driven human resources services and intends toconsolidate its leading position in human resources solutions sector andexpand its operation and accelerate technology productization leveraging onits existing resources, technical capabilities and strategic direction. Thisacquisition represents a good opportunity for the Group to accelerate itsexpansion in the information technology and software outsourcing servicesindustry and facilitate the Group’s strategic upgrade. This acquisition would

help the Group further promote the productization of technology and gain rapidaccess to business opportunities in light of the digital transformation ofenterprises in the PRC, and provide information technology support servicesand value-added SaaS (Software as a Services) on the side of the customersso as to establish a closer business cooperation with customers, leading to higher service value and an increase in the gross profit margin of the Group,as well as expand in specialized industry throughmergers and acquisitions. Through the combination of the Shanghai Sirui’stechnical capabilities and the Group’s expertise in the provision ofcomprehensive human resources services, the Group can quickly establish thecompetitive advantages in the industry, expand its high-quality customer base,and achieve greater economic benefits.

Shanghai Sirui is an information technology and software outsourcing service provider committed to providing digital transformation and information technology services to customers. Shanghai Sirui has provided professional information technology and software outsourcing services to over 160 customers across thePRC with business coverage in over 80 cities and about 3,800software development and technical service personnel. Shanghai Sirui boasts a broad and stable customer base, comprising a number of industry-leading customers with great growth potential across industries such as finance, high-tech, internet, healthcare and advanced manufacturing. Shanghai Sirui carries out diverse strategic cooperation with major customers, offers customized, full-cycle industry tailored solutions and actively explores innovative cooperation initiatives. Its industry tailored solution capability in the fields of neo-healthcare software development and social service network systems, mobile internet, artificial intelligence, Internet of Things, and big data. Riding on its quality solutions and stringent cost control, Shanghai Sirui is also able to achieve a relatively high gross profit margin. In 2021, Shanghai Sirui recorded an unaudited revenue of RMB719.7 million and unaudited profit after tax of RMB61.8 million.

The Group consistently seeks opportunities to expand its scale and increase its profitability with a view to optimizing shareholders’ return. We believe that the acquisition would increase the Group’s overall competitiveness and add to its growth momentum by expanding its business to meet the ever-changing demand. The acquisition is expected to help the Group to reinforce its leading market position, and continue to enhance its industry influence in the following aspects:

i)  Strengthen the business layout and implement strategic upgrade of the Group in light of the prospects of the information technology and software outsourcing services industry, with a large market size and a relatively high gross profit margin

ii) Increase the Group’s business scale, industry coverage and professional service capabilities leveraging on Shanghai Sirui’s strong competitive advantages

iii) Enhance technology capability and technology products portfolio

iv) Achieve business synergy rapidly by leveraging on the extensive experience and joint effort of the Group and Neusoft Holdings as shareholders

v) Improve profitability and achieve financial growth so as to mitigate cyclical risks

According to the CIC Report, the expenditure on information technologies in the PRC was approximately RMB3,617 billion in 2021. It is expected to reach RMB6,158 billion in 2026, representing a CAGR of 11.2%. Despite the increase in expenditure, it only accounted for approximately 3.2% of the overall GDP of the PRC in 2021, which was much lower as compared to Japan, European countries or North America, suggesting significant growth potential.

Information technology expenditure in the PRC, 2016-2026E (In RMB billion)

Source: CIC Report

With the rapid development of digitalization and informatization in the PRC, the information technology and software outsourcing market is quickly gaining traction. Yet, companies need more flexible ways to maintain their competitive advantages in such a dynamic market. According to the CIC Report, the size of the information technology and software outsourcing services market in the PRC has increased from RMB361.9 billion in 2016, to approximately RMB670.8 billion in 2021. It is expected to reach RMB1,255.8 billion in 2026, representing a CAGR of approximately 13.4% from 2021 to 2026. In addition, the gross profit margin of the information technology and software outsourcing services industry, being approximately 15% to 25%, is usually relatively higher than that of outsourcing services in other industries.

Mr. Zhang Jianguo, Chairman and Chief Executive Office of Renrui Human Resources Technology Holdings Limited,commented, “With the official implementation of the East-to-West Computing Resources Transfer project, as well as the high certainty ofdigital economy development, Chinese enterprises have been accelerating towards digital transformation. As the cornerstone of a digital economy, the information technology and software development industry will enjoy ample opportunities in the medium-to-long term. We believe the acquisition of Shanghai Sirui represents a good opportunity for us. We are confident that we can seize the development opportunity of enterprises pursuing digital transformation. We will continue to improve our outsourcing services on information technology positions, and expand our service verticals to software technology, which will be an additional growth driver for the Group.”

Mr. Rong Xinjie, Representative of Shanghai Sirui Information Technology Co., Ltd.,added, “Renrui HR Tech has always been committed to provide technology driven solutions to transform human resources services and create a one-stop HR ecosystem. This vision highly aligns with our business strategies. Through this collaboration, we can promote cross-selling opportunities and provide customers with an expanded product portfolio. Going forward, Renrui HR Tech and Neusoft Holdings will further empower the capabilities in providing education, training and human resource outsourcing services for information technology talents. The transaction will further enhance the competitive advantages of Shanghai Sirui, capturing more market share and achieving long-term growth.”

Mr. Liu Jiren, Chairman of Dalian Neusoft Holdings Co., Ltd.,commented, “We made a strategic decision to collaborate with Renrui HR Tech, as we are impressed with the vision and seamless execution of Mr. Zhang Jianguo and his team that have made Renrui HR Tech the undisputable leader in China’s rapidly growing market for human resources outsourcing services. We believe this strategic alliance will build a new eco-system of human resource development, especially facing with the need of increasing human resource demand of digital industry and digital economy, and create a new era for the development of Renrui HR Tech and Shanghai Sirui.”

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This press release is issued by DLK Advisory Limited on behalf of Renrui Human Resources Technology Holdings Limited. 

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Michelle Shi (michelleshi@dlkadvisory.com) 

Rachel Chung (rachelchung@dlkadvisory.com) 

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