(Yicai) Nov. 13 -- Huali Industrial Group’s shares rose after the major Chinese maker of athletic shoes for Nike, Adidas, and Converse said it plans to invest as much as USD500 million for a stake in an optical communications company amid declining footwear sales.

Huali [SHE: 300979] closed 1.3 percent higher at CNY36.91 (US5.53) per share today, while the broader Shenzhen market sank 2.1 percent. The stock is down over 26 percent this year.

Huali is seeking to acquire up to 25 percent of O-Net Technologies Group, a Cayman Islands-registered company restructuring to become a global holding platform for optical communications businesses, the Zhongshan-based firm recently announced.

O-Net Technologies Shenzhen Group will serve as the platform's global operating headquarters and is separately preparing for an initial public offering on the Star Market, Shanghai's Nasdaq-style board for science and technology companies, Huali said.

Huali plans to use idle funds to invest in optical communications, a field that uses light to transmit data at high speeds and is increasingly important for artificial intelligence data centers and telecommunications networks, it said. Huali described the deal as an investment aimed at improving capital allocation and generating reasonable returns.

Huali also warned that investing outside its main business carries risks, including insufficient knowledge of the optical communications sector and potential misjudgments about technological developments and market prospects.

The company’s move into another sector comes after earnings fell in the first three quarters of this year. Net profit plunged 35 percent from a year ago to CNY1.6 billion (USD236 million) in the nine months ended Sept. 30, while revenue fell 12 percent to CNY16.4 billion (USD2.5 billion). Athletic shoe sales dropped 7 percent to 156 million pairs.

Income at Huali's main customers has fallen or grown less quickly. Nike's revenue fell 4 percent in the first quarter of fiscal 2027, including a 22 percent drop in China, while Converse's slumped 28 percent. Hoka, which has been an important source of sales growth for Huali in recent years, has also seen its revenue growth slow to single digits for two consecutive quarters.

Despite weakening demand, Huali has continued to expand production capacity. New factories in southwestern China's Sichuan province and in Indonesia began operations last year, lifting the company's annual production capacity by 8 percent to 248 million pairs.

The expansion has proved challenging. In its interim report, Huali said new capacity had ramped up more slowly than expected, while increasingly frequent adjustments to production allocation and scheduling had reduced overall efficiency.

Editor: Emmi Laine