Half-year revenue of 375 million yuan, another East China hot seller is going public

Influenced by the COVID-19 pandemic and consumers' enhanced fitness awareness, the sporting goods market has ushered in rapid development. Related sellers have also found new opportunities for development, and there is no shortage of news of hot-selling products.

With a half-year revenue of 375 million, Kangliyuan takes advantage of the opportunity to develop

On March 3, according to information disclosed by the Shenzhen Stock Exchange, Jiangsu Kangliyuan Sports Technology Co., Ltd. (hereinafter referred to as Kangliyuan) updated its prospectus and issued the "Responses of the Issuer and Sponsor". According to previously public information, on November 12, 2021, Kangliyuan's listing application was accepted, and on December 8, the Shenzhen Stock Exchange's status showed "inquiry has been made".

Kangliyuan is a high-tech enterprise focusing on the research and development, manufacturing and sales of multiple series of fitness equipment. It has a comprehensive fitness equipment business system dominated by comprehensive trainers and free weight trainers, combining anaerobic and aerobic, indoor and outdoor, and home and commercial use.

Specific products include comprehensive trainers, free weight trainers, treadmills, elliptical machines, space walkers and other small categories of equipment, with more than a thousand types of products. From 2018 to January-June 2021, the proportion of its household product revenue in each period of the reporting period was 97.74%, 87.62%, 83.51% and 86.37% respectively.

According to the prospectus, from January to June 2021, Kangliyuan's total assets were 646 million yuan, its main business income was 375 million yuan, its net profit was 47.9981 million yuan, and its net profit attributable to the parent company was 47.6202 million yuan . Among them, the revenue of indoor fitness equipment was 352 million yuan, accounting for 94.33%, while the revenue of outdoor fitness equipment was 19.28 million yuan, accounting for a relatively small proportion .

It is worth noting that due to the impact of the COVID-19 pandemic, consumers' enhanced fitness awareness and the company's expansion of cross-border e-commerce business, Kangliyuan's performance growth in 2020 appeared to be stronger. Among them, the sales revenue of indoor fitness equipment increased by 278 million yuan compared with 2019, an increase of 77.59%. The revenue of outdoor national fitness equipment increased by 14.791 million yuan compared with 2019, an increase of more than 77% .

In addition to the above factors, Kangliyuan's rapid development also benefits from its own business model. The company mainly adopts a sales model that combines export and domestic sales, offline and online, ODM and independent brands, which has driven the comprehensive development of its business, accounting for about 65% to 70%.

Kangliyuan mainly relies on overseas offline sales. From 2018 to 2020 and from January to June 2021 , the proportion of overseas offline sales revenue was 71.63%, 66.87%, 69.63% and 72.96% respectively .

Amazon is the main online store in foreign countries. One store was closed.

In terms of online sales, Kangliyuan has stores on JD.com and Tmall in China, and overseas online sales platforms include Amazon, AliExpress, Walmart and Alibaba International Station.

Overseas online sales are mainly on the Amazon platform. With the rapid development of cross-border e-commerce, Kangliyuan continues to open stores on the Amazon platform. Its Amazon brand is JX Fitness, and its products are mainly small and light products such as dumbbell benches and weightlifting beds. It is gradually exploring online sales of aerobic equipment such as exercise bikes and treadmills.

The sales revenue of cross-border e-commerce platforms is mainly distributed in Europe, mainly because the company first targeted the European market when developing cross-border e-commerce channels. There are many Amazon sites opened in Europe, which have been in operation for an early time and are relatively mature.

In addition, Kangliyuan also operates Amazon stores in Asia Pacific and the Americas, but the proportion is relatively low. As of January 10, 2022, Kangliyuan has 58 sites on Amazon Europe and 27 in the Americas. Kangliyuan's main operating model on Amazon is the FBA model, and a small number of products have been operated in the FBM model since 2020.

From 2018 to 2020 and the first half of 2021, the company's sales revenue on the Amazon platform was RMB 3.6832 million, RMB 16.1304 million, RMB 70.624 million and RMB 45.5921 million, respectively , showing a continuous growth.

However, on June 30, 2021, after Amazon's identification and judgment, it was found that the European store account opened by Xuzhou Bofengyuan Trading Co., Ltd., a subsidiary of Kangliyuan, was associated with a third-party account, and Amazon suspended the operation of Bofengyuan's European store.

After self-examination, the company found no related circumstances and has filed complaints with Amazon many times to request the resumption of store operations. As of January 10, 2022, no conclusion has been reached. However, due to the small proportion of sales, there is no significant impact on the company.

At the same time, in order to enhance its competitiveness in overseas markets, Kangliyuan is also committed to the research and development and innovation of various fitness equipment to match the ever-changing market demands, taking into account the intelligence of home fitness and commercial outdoor fitness equipment.

As people's health awareness continues to increase, the market demand for sports and fitness equipment will continue to increase, but as a cross-border e-commerce seller, it will also face many threats in the future.

Market squeeze, ocean freight rates soar, threats continue

First of all, there is the impact of the epidemic. From the above revenue data in recent years, it can be seen that since the outbreak of the global epidemic in 2020, Kangliyuan’s revenue has increased significantly. The new crown epidemic has continuously improved people’s health awareness, and fitness demand has increased significantly and has a certain degree of sustainability . Therefore, after the outbreak of the epidemic, the market demand for home fitness equipment has grown rapidly.

At the same time, the proportion of Kangliyuan's overseas marketing revenue to its main business revenue has been increasing . In 2020, the proportion of overseas annual revenue to its main business increased by 9.04 % compared with 2019 .

However , in the post-epidemic era, the epidemic situation has gradually eased, and outdoor activities and gyms have gradually opened. Therefore, the market demand for home fitness equipment may decline , and the demand for outdoor fitness equipment may increase. Kangliyuan may experience a decrease in orders or its revenue may not be able to maintain sustained rapid growth.

In addition, with the continuous strengthening of the strength of many fitness and sports brand companies and the gradual increase in new competitors in the industry, Kangliyuan's market share in this field may be squeezed, and it may face the risk of declining market share, slowing growth in operating performance, or even a decline.

As a major cross-border e-commerce seller , shipping costs cannot be ignored . Since the outbreak of the epidemic, overseas production capacity has been unable to meet the needs of overseas markets, overseas orders have continued to increase, trade exports have increased significantly, and the distribution efficiency of overseas ports is limited due to the epidemic, and there is a continued shortage of international logistics container ships, resulting in a continuous increase in shipping costs.

According to the China Export Container Freight Index, shipping costs have continued to rise rapidly since June 2020. Since the first half of 2021, shipping costs have increased by 56.24% in total, and the upward trend is still continuing .

Coupled with the current severe situation between Russia and Ukraine, the obstruction of container ship navigation in some parts of the world , the reduction of maritime capacity, and the increase in Suez Canal freight rates will all cause shipping costs to soar to higher levels.

The export shipping costs for cross-border orders are mainly borne by customers, and the rising freight rates will also suppress customer order demand to a certain extent , which may have a certain impact on Kangliyuan's operating performance.

At present, the global epidemic is still ongoing, and conflicts in local areas have not ended. Affected by this, shipping prices are still high, which poses a certain threat to the operating income of cross-border sellers. Relevant sellers should be prepared for the long-term continuation of the epidemic and rising freight rates.

Fitness sales

Kangliyuan