Home » IPO Observation | Hongxing shares want to increase production capacity by 3 times, but its performance growth has slowed down. Product competitiveness under the “encirclement” is to be tested_Company

IPO Observation | Hongxing shares want to increase production capacity by 3 times, but its performance growth has slowed down. Product competitiveness under the “encirclement” is to be tested_Company

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Original title: IPO observation | Hongxing shares want to add 3 times the capacity performance growth has slowed down, product competitiveness under the “encirclement” to be tested

IPO Observation | Hongxing shares want to add 3 times the capacity, performance growth has slowed down, product competitiveness under the “encirclement” to be tested

From the Financial Association (Shenzhen, reporter Ding Rong),Another home apparel company will land in A shares. On July 8, Hongxing shares (001209.SZ) officially opened the subscription, and the IPO price was 29.88 yuan per share. At this moment, it has been more than a year since Hongxing shares submitted its IPO application to the China Securities Regulatory Commission in June 2020, but on the eve of its official landing in the capital market, the company’s product competitiveness is still being questioned.

A reporter from the Financial Association noticed that in recent years, Hongxing’s revenue growth rate has begun to slow down, and the overall gross profit level has shown a downward trend. Due to excessive reliance on a single brand and surrounded by many “old rivals” and new entrants, Hongxing shares’ product competitiveness and profitability are facing severe tests. On this basis, the company still plans to increase production capacity through fundraising, and whether this can alleviate the company’s current predicament is still unknown.

Production capacity will be expanded 3 times

According to the prospectus, Hongxing shares plans to issue no more than 23,486,500 shares this time to raise 640 million yuan in funds, and invest in the “annual production of 9 million sets of home furnishing industrialization project”, “information management system and logistics center construction” , “Marketing network expansion and promotion” and other three major projects and supplementary working capital.

After the project with an annual output of 9 million sets of home furnishings reaches production, the company will increase its production capacity by three times. Whether Hongxing shares can turn this into an increase in performance is a matter of great concern to investors.

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This concern is not “groundless”. From 2017 to 2020, the operating income of Hongxing shares was 652 million yuan, 860 million yuan, 1.008 billion yuan, and 1.131 billion yuan, respectively. The year-on-year growth rates of operating revenue from 2018 to 2020 were 31.92%, 17.24%, and 12.19%, respectively. Shows a noticeable slowdown. At the same time, the year-on-year growth rate of Hongxing’s net profit attributable to the parent company from 2018 to 2020 was 31.04%, 7.06% and 45.74%, and the performance is also hard to say stable.

According to the data disclosed in the prospectus, the company expects the net profit attributable to the parent from January to June 2021 to be 5,326.44 to 5,871.1 million yuan, a year-on-year change of -0.73% to 9.71%. In other words, the profit of Hongxing shares in the first half of this year does not rule out the possibility of negative growth.

In addition, the gross profit margin of Hongxing shares from 2017 to 2020 is 43.36%, 42.80%, 40.39%, and 40.66%, respectively, and the overall trend is also declining.

The changing trends of these indicators all point to the same problem: Hongxing shares have begun to fall into the dilemma of weak growth. In this context, the production capacity is still greatly increased. Where is the confidence of Hongxing?

The reporter sent an interview letter to Hongxing shares in this regard, but had not received a reply as of the time of publication. Regarding the necessity of this fundraising, the company stated in the prospectus that “limited by space and personnel, the capacity of the company’s existing production base has been basically saturated, and it is gradually difficult to meet the needs of sustainable business development. Through this fundraising investment With the implementation of the project, the company will have the production capacity to ensure that it meets the market demand, and further strengthen its scale advantages, improve the bargaining power of suppliers and the efficiency of production management, thereby reducing unit production costs.”

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Hongxing shares also reminded that there are still certain uncertainties in market demand and business expansion. If the downstream market demand for the company’s products shrinks, or the company’s product marketing is lower than expected, the newly-increased production capacity of fund-raising investment projects may not be digested in time. It will adversely affect the expected benefits of fundraising projects and the company’s performance growth.

Product competitiveness to be tested

The home service market is an important market segment in the apparel industry and has a lot of room for growth. But with more and more competitors entering the game, Hongxing shares are not under pressure as an established manufacturer.

At present, traditional underwear brands such as Urban Beauty (02298.HK), Huijie Shares (002763.SZ), Emrifang Holdings (01388.HK), Aimer Shares (603511.SH) and other traditional underwear brands have joined the home service track one after another. These companies take advantage of the original brand effect, industrial chain, and sales channel advantages, and use mature operation models to actively deploy the home service market, and form a certain level of home service product competitiveness under the impetus of R&D and design, brand promotion and channel extension. A single brand of homewear production has formed an impact.

On the other hand, Hongxing shares, although it has been deeply involved in the field of home furnishings for many years, its over-reliance on a single brand and a single channel has become more and more prominent. In 2020, the sales revenue of the “Fenteng” brand accounted for 85.38% of the company’s overall sales revenue. At the same time, in 2020, the sales revenue of Hongxing shares through the Tmall platform (including Taobao), the Vipshop platform and the JD platform will account for 35.00%, 25.36% and 5.70% of the company’s main business income respectively. During the same period, the company’s online sales accounted for more than 70%, while offline sales accounted for less than 30%. Its high dependence on e-commerce platforms also caused investors to worry.

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Even if “Fenteng” does have a relatively deep brand accumulation, the consumer trend is changing rapidly, and one brand alone will be somewhat outnumbered. Tmall’s “Double Eleven” sales list in 2020 shows that in the home service sector, “Fenteng” has been squeezed into Ubras, Uniqlo, and Jiao Nei. Among them, Ubras and Jiao Nei have only become popular in recent years. “The cutting-edge brand.

“In the past, underwear companies that mainly focused on offline channels paid more and more attention to e-commerce and Douyin channels, and home service was one of the key products for these companies to enter the e-commerce platform. Hongxing shares currently have low added value of products, and There is a relatively prominent phenomenon of homogeneity in home service products, and brands are very easy to be diverted.” A senior industry insider analyzed that the rise of new and cutting-edge brands has made Fenton’s original advantage on the e-commerce platform also face the crisis of being eroded. Whether the company can maintain its performance growth in the future, the key lies in increasing the proportion of high value-added products and broadening sales channels.Return to Sohu to see more

Editor:

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