Amazon's best-selling products generate annual revenue of 1.4 billion, but its suppliers have become "difficult to go public"!

Costs have risen sharply, overseas inflation has continued to rise, and the consumer market is in a state of pessimism. The small home appliances industry has exploded in the past two years, but now the industry's growth has shown signs of weakness and the market dividend has fallen . At this time, the hot-selling suppliers of Meiya are still insisting on listing.

The "difficulties in listing" are overwhelming, and the transition from the New Third Board to the A-share market is full of difficulties

At the 77th Listing Committee Review Meeting in early November , Ningbo Boling Electric Co., Ltd. (hereinafter referred to as " Boling Electric " ) successfully passed the meeting and ushered in the crucial battle of IPO .

Looking back over the past year, Boling Electric's road to listing was not smooth.

On April 16, 2021, it submitted its listing application and passed the guidance and acceptance of the Ningbo Regulatory Bureau of the China Securities Regulatory Commission. On April 18, the company submitted its application materials for the initial public offering and listing on the Growth Enterprise Market to the Shenzhen Stock Exchange. On April 29, its application for the initial public offering and listing on the Growth Enterprise Market was officially accepted by the Shenzhen Stock Exchange.

However, since then, due to issues such as the timeliness of financial data and the asset appraisal agency entrusted for listing being investigated by the China Securities Regulatory Commission , Boling Electric has suspended its issuance and listing review many times .

Last year's application for listing was not the first time that Boling Electric had touched the capital market. As early as November 2018, this "family-style" enterprise actually controlled by the founder and his daughter had successfully landed on the New Third Board.

According to the relevant information disclosed when it was listed on the New Third Board, Boling Electric's revenue exceeded 700 million yuan and its net profit also exceeded 100 million yuan in 2016. However , in the following years, its revenue and net profit declined year by year , so its net profit shrank to more than 16 million yuan in 2018.

However, due to the outbreak and rapid spread of the epidemic in 2020 , consumers spent more time at home, which drove a surge in demand for home furnishings, kitchen appliances and other products. Boling Electric seized the market opportunity and made a comeback , announcing its IPO a year later .

Domestic brands are "weak" and highly dependent on a single customer

It mainly engages in the research and development, design, production and sales of small kitchen appliances . Its products include food blenders, coffee machines , grills, air fryers , etc. Boling Electric 's own brand has not made a splash in the market, but it is a supplier to many first-line European and American kitchen appliance brands and many cross-border kitchen appliance brands .

It is reported that Capital Brands is the largest customer of Boling Electric Appliances. The brand 's small household appliance brand products such as Magic Bullet, Nutribullet, Baby Bullet , etc. have repeatedly appeared on Amazon's Best Seller list .

In addition, internationally renowned small appliance brands such as SEB, Princess House, Conair, and Hamilton Beach are all customers of Boling Electric.

It is worth noting that due to the low popularity of its own brand, Boling Electric currently mainly conducts order-based production in OEM and ODM models , with a high customer concentration and heavy reliance on its largest customer Capital Brands.

From its financial report, we can see that from 2019 to 2021 , Boling Electric's sales revenue to its top five customers was 698 million yuan, 1.435 billion yuan, and 1.518 billion yuan, respectively, accounting for 80.15%, 84.65%, and 76.94% of the total revenue in the current period. As of the first half of this year , Boling Electric's sales revenue to its top five customers was 530 million yuan, accounting for 74.56% of the total revenue .

In recent years, sales revenue to Capital Brands has accounted for almost half of Boling Electric's total revenue, with a minimum of 49.62% and a maximum of 68.39%.

In this regard , some senior industry experts said that heavy reliance on large customers will lead to a surge in business risks for businesses, because once the cooperation ends, the company's revenue will drop significantly.

Boling Electric also admitted in its prospectus: If there are major adverse changes in the cooperative relationship between the two parties, such as the issuer being replaced by other suppliers, the customer adding traditional product suppliers, or the contract expires and cannot be renewed or is terminated early, it may have a significant adverse impact on the stability of the company's business.

It is worth mentioning that Boling Electric was previously the exclusive supplier of Capital Brands , which means that as long as the brand can continue to receive positive feedback from the market, Boling does not need to worry too much about revenue issues.

However , in July this year, the previously signed agreement expired, and after the new agreement was signed, Boling Electric lost its status as " Capital Brands' exclusive supplier . "

At the same time, the new cooperation agreement between Boling Electric and Capital Brands is only valid for one year (previously three years), and the agreement also stipulates that " unless either party sends a written notice of termination to the other party four months before the expiration of the agreement, the agreement shall be automatically renewed for one year each year . " This means that Capital Brands can unilaterally cancel the cooperation eight months after the contract takes effect .

The largest customer contributed more than half of the revenue, but after its qualification as exclusive supplier was revoked, the new agreement is still so strict. Boling Electric, which was highly dependent on it , has obviously become the weaker party and is in a very bad situation.

Single product accounts for 75% of annual revenue, and market challenges continue

In the past three years, the revenue contributed by food processing and mixers accounted for more than 75% of Boling Electric's total revenue , and is the company's main source of income.

In 2020 , 2021 and the first half of 2022 , the revenue of food processing and blenders was RMB 1.4 billion, RMB 1.411 billion and RMB 522 million, respectively.

In addition, in the second quarter of this year, the sales performance of products such as frying machines, air fryers, ovens, and coffee machines was also quite good.

Looking at the gross profit margins of these products in the second quarter, the gross profit margin of food processing and blenders was 21.13%, up 43.37% from the same period last year; the gross profit margin of fryers was 15.69%, up 34.66% year-on-year; the gross profit margin of air fryers and ovens was 11.22%, up 1180.07% year-on-year; and the gross profit margin of coffee machines decreased to -0.13%, a year-on-year decrease of 101.82%.

Regarding the situation where revenue increased but profits did not last year, Boling Electric explained that due to the continued rise in commodity prices since 2021, the U.S. dollar/RMB exchange rate continued to hover at a low level since the end of 2020, and labor costs continued to increase, resulting in a significant decline in the gross profit margin of the main business in 2021.

As for the decline in revenue this year, Boling Electric said that it was due to the outbreak of the epidemic in the factory's location, which resulted in a nearly half-month shutdown to fight the epidemic, coupled with the impact of holidays, which led to a decrease in production and sales; in addition, after experiencing a surge in the purchase of small kitchen appliances during the epidemic, the European and American small kitchen appliances market has a high stock level, and market demand in 2022 will show a short-term decline.

As the world's largest market for small household appliances and one of the main markets for Boling Electric's customers, the US small household appliances market is expected to reach US$32.3 billion by 2023 .

The market demand performance of different categories is also different. In 2019, the top three small household appliances in the United States were food processing small appliances, electric heating appliances, and coffee machines, and the ownership of each category exceeded 100 units per 100 households, indicating that the market penetration was relatively sufficient.

This adds to the market challenges faced by Boling Electric, a company that specializes in small food processing appliances and coffee machines.

At the same time, due to the continuous international trade friction, Boling Electric's main export business is still concentrated in Europe and the United States, and the tariff increase involves multiple industries. Take the United States as an example. Previously, the United States imposed tariffs on air fryers, ovens, and coffee machines exported from China. The tariff rate for air fryers and ovens was 25%, and the tariff rate for coffee machines was 7.5%.

Although in March this year, the Office of the United States Trade Representative announced that it would re-exempt tariffs on 352 items imported from China, including air fryers and ovens, if international trade frictions escalate in the future and related products are re-included in the tariff list, which will cause an increase in purchasing costs for export customers, this may lead to a decrease in customer orders or a decrease in order profit margins, and its performance may be adversely affected.

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