Hangzhou's sales revenue exceeded 10 billion yuan for the first time, but net profit fell by 80 million yuan

Annual revenue exceeded 10 billion for the first time, with power tools growing fastest

The annual report just released by Giant Star Technology shows that total revenue in 2021 reached 10.92 billion yuan, an increase of 27.8% over 2020 ; it should be noted that while revenue continued to increase, the net profit attributable to the parent did not reach a new high, only 1.27 billion yuan, a decrease of 80 million yuan from 2020.

The main reasons for the change in net profit are as follows. The first is the increase in operating costs, which is also a problem faced by many sellers. In 2021, Giant Star Technology's operating costs increased by 2.25 billion yuan year-on-year, mainly due to the increase in the scope of consolidation and the increase in freight and raw material prices. Taking shipping costs as an example, the company's shipping costs increased by 224% year-on-year last year, and the actual shipping costs were about 40 million US dollars, affecting the comprehensive gross profit margin by about 2%. Secondly, financial expenses decreased by 48.77 million yuan year-on-year, mainly due to exchange rate fluctuations. In addition, derivative financial instruments have generated changes in income.

By product classification, except for personal protective equipment, the revenue of almost all products has increased, but affected by the above factors, the gross profit margin has declined compared with the previous year, down 1.72%-16.38% year-on-year. The decline in gross profit margin is exactly the same as the "high sales and low profits in 2021" situation reflected by many sellers in the industry.

Hand tools are still the largest source of revenue for Giant Star Technology (accounting for 59.9% of total revenue), with revenue reaching 6.54 billion yuan, a year-on-year increase of 14.3%. However, the fastest growth rate is in power tools, reaching 453.77% , followed by storage cabinets ( 152.36%) and laser measuring instruments (73.13%).

2021 can be said to be the first year of power tools for Giant Star Technology. The company completed the production capacity layout and optimization of electric vacuum cleaners at the beginning of last year, and resumed product sales in North America in the second half of the year. After completing the acquisition of BeA's assets in June, it quickly restored the production capacity and orders of power nail guns in Europe. At the same time, it began large-scale innovation of power tools, especially lithium battery power tools, developed a large number of related products, and put them into cross-border e-commerce channels for trial production and trial sales.

After many efforts, Giant Star Technology achieved sales revenue of 1.021 billion yuan in its power tool business in 2021. Not only that, the company expects to exceed 1.9 billion yuan this year, and in three to four years, power tools will achieve the same revenue scale as hand tools, and the paths to achieve this include mergers and acquisitions and self-research.

As for the storage cabinet and laser measuring instrument business, they also saw revenue growth in 2021. In terms of storage cabinets, the original European Lista business has recovered, and orders from the US market have continued to grow. In July, the acquisition of 100% of Keelung's shares was completed, consolidating its position as a storage cabinet manufacturer. At the same time, the company developed and expanded storage cabinet products. In addition to the original cabinet products used in garage workplaces, it also entered the cabinet products for indoor living scenes. In terms of laser measuring instruments, special laser instruments such as lidar also achieved large-scale mass production and use last year.

As for sales channels, we all know that Giant Star Technology has adopted a model of "domestic and foreign + online and offline". As for cross-border e-commerce, in addition to maintaining cross-border e-commerce direct sales channels in North America and Europe, Giant Star Technology has also expanded e-commerce direct sales channels for Southeast Asia and other regions.

After gradually launching power tool products, Giant Star Technology's revenue from cross-border e-commerce exceeded US$100 million for the first time. Giant Star Technology said it will continue to increase the product categories and service capabilities of cross-border e-commerce, and continue to maintain a growth of more than 50% in cross-border e-commerce business in 2022.

Self-development + M&A to consolidate the leading position in tool products

In recent years, Giant Star Technology has indeed put in a lot of effort to improve product quality and expand product categories. On the one hand, it has strengthened its independent research and development capabilities, and on the other hand, it has acquired companies to consolidate its leading product position.

A review of the data from the past decade shows that Giant Star Technology's R&D expenses have continued to rise, from 37 million yuan in 2011 to 310 million yuan today. Not only that, the number of R&D personnel has also increased from 701 in 2020 to 978 in 2021.

With the support of R&D funds and personnel, Giant Star Technology has carried out a number of research projects. The project types can be roughly divided into two directions: one is to reduce costs and improve efficiency; the other is to improve old products and develop new products.

For example , the research on the double extrusion casting process of aluminum alloy parts of hand-made knives with different thicknesses and the research on the fine blanking-extrusion composite forming technology of high-strength stainless steel sheets mentioned in the annual report are aimed at improving production efficiency, reducing labor costs, and thus increasing product lines. Research such as the fine blanking forming of nitrogen spring fine blanking die frames and impact accessories can improve product performance and stability.

Giant Star Technology will also improve existing products on the market to meet consumer needs. For example, the development of a large-capacity upper and lower combined tool cabinet was developed because Giant Star Technology discovered that traditional tool cabinets are all single-body cabinets with a single structure. The objects that can be stored are also limited by the space and structure of the tool cabinet, so they are relatively few and simple.

In addition, Giant Star Technology will also develop new products based on current demand gaps. For example, the development of the easy-to-maintain laser line projector is based on the company's recognition that the market urgently needs a laser line projector product that can quickly clean up plaster pollution.

In recent years, the number of new products designed by Giant Technology each year has been more than 1,000, and in 2021 it soared to 1,838.

Of course, in order to quickly expand its product categories, Giant Star will also acquire companies in the industry.

Since there are many types of tool products, each with its own specific uses and application areas, tool companies cannot rely on just one or a few types of products if they want to grow bigger and stronger. If they start all these categories from scratch, it will take a certain amount of time, whether it is production line construction or customer introduction.

It can be said that the history of tool giants is a history of mergers and acquisitions. For example, the development process of tool giant Stanley Black & Decker was accompanied by various mergers and acquisitions. The development trajectory of Techtronic Industries is also a history of various acquisitions.

Giant Star Technology has also taken the same route, continuing to use operating funds to carry out mergers and acquisitions to expand its brand and channels. Wind data shows that since its listing in 2010, Giant Star Technology has acquired more than a dozen companies around the world.

Among them, Lista, which was acquired in 2018, is a leading European storage cabinet company. Giant Star Technology took this opportunity to enter the new field of storage cabinets. By 2021, Giant Star Technology had successively completed the acquisition of BeA, Jilong, etc., thus entering the field of power fastening tools and consolidating its position as a storage cabinet manufacturer.

Although Giant Star Technology's net profit in 2021 is lower than that of the previous year, many institutions still believe that the company's net profit in 2022 can reach a new high. This also reflects the strength of Giant Star Technology. Giant Star Technology stated that it will continue to invest in cross-border e-commerce business and private brand building in the future, and strive to achieve a 40% revenue share of private brand product sales.

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