Sold 500 million in half a year, and another big sale is coming for IPO!

If you ask what products are the best-selling in 2020, pet products have a lot to say. Since the outbreak of the epidemic in 2020, home isolation has made many American families pay more attention to their pets, and the sales of pet products have also ushered in a big explosion, and this is still the case now.

Benefiting from the popularity of pet products, many companies selling pet products have made a lot of money, and many companies are seeking to go public. Jiangsu Zhongheng Pet Products Co., Ltd. (hereinafter referred to as " Zhongheng Pet ") is one of them.

With sales of 500 million in half a year, Zhongheng Pet is heading for IPO!

Recently, Zhongheng Pet submitted an application for listing on the Growth Enterprise Market of the Shenzhen Stock Exchange. It is currently in the acceptance stage. The sponsor is Essence Securities Co., Ltd. and it is expected to raise 479 million yuan in this round of financing.

Zhongheng Pet was founded in 2009. It is mainly engaged in the research , development , production and sales of pet hygiene products (pet urine pads, cleaning pads, etc.), pet household leisure products (plastic particles, steel wire, etc.) and pet food . Its products are mainly sold to North America, Europe and other markets, and its customers are mainly sellers on platforms such as Amazon and Walmart .

In terms of operating income, Zhongheng Pet 's revenue in the first half of 2021 was 550 million yuan, of which the net profit attributable to the parent company was 35 million yuan; the operating income in 2020 was 1.068 billion yuan, of which the net profit attributable to the parent company was 94 million yuan.

In terms of the main categories, in the first half of 2021, pet household leisure products accounted for 48.93%, with operating income of 263 million yuan . In terms of products, plastic products accounted for the highest proportion, which was 22.54%, with operating income of 121 million yuan; pet hygiene and cleaning products accounted for the second largest proportion, which was 41.67%, with operating income of 224 million yuan, among which pet urine pads accounted for the highest proportion, which was 30.94%, with operating income of 167 million yuan; pet food and pet supplies trade accounted for a relatively small proportion.

In terms of sales market, Zhongheng Pet mainly adopts business models such as ODM/OEM , and sells its own brands to developed countries such as North America and Europe, and cooperates with retailers and brands such as PETSMART, Amazon, Walmart and CHEWY.

In addition, the company's overseas sales revenue accounts for more than 90% of its main business, and sales in the United States are the most impressive, with sales revenue accounting for more than 80% of its main business revenue.

However, as far as the current situation is concerned, the company's ODM/OEM product sales revenue has accounted for more than 85% of its main business revenue in recent years, which is too high. If the subsequent market environment, competition pattern, etc. change, major customers reduce their purchases from the company, and the company's own brand can no longer grow rapidly, it is very likely to have an adverse impact on the company's revenue.

It is reported that with this round of financing, Zhongheng Pet will increase the construction of new projects such as pet hygiene products and pet household products to improve its own production capacity.

In addition , Zhongheng Pet also attaches great importance to technological research and development, developing more than 100 products every year. It currently owns many patents abroad. Part of the funds raised in this round will also be used to increase the construction of research and development and design centers.

Although the revenue is extremely impressive, Zhongheng Pet, like many sellers, also faces many risks due to the multiple influences of realistic factors such as trade frictions.

Increased tariffs, rising raw material prices ... Zhongheng's pet business is affected

Although Zhongheng Pet's data and performance in recent years have been very impressive, judging from the contents of the prospectus, the company still faces certain risks in some aspects.

The United States has imposed additional tariffs on some products imported from China . Products such as pet diapers and plastic pet household leisure products sold by Zhongheng Pet, which mainly sells its products in overseas markets, are all within the scope of the additional tariffs . Zhongheng Pet said that although the tariff rates on some subsequent products have been reduced or the additional tariffs have been cancelled, it still has a certain impact on the company's export business to the United States.

The impact of rising raw material prices has had a certain impact on the company's main business gross profit margin . Zhongheng Pet mentioned in its prospectus that in 2018, the company's main business gross profit margin was low due to the high prices of raw materials such as wood pulp and toilet paper; since the fourth quarter of 2020, the prices of some major raw materials including wood pulp, plastic particles, and steel wire have risen sharply , and the company has a certain lag in adjusting prices for customers, which has led to a decline in the main business gross profit margin in the first half of 2021.

In addition, Zhongheng Pets stated that the company has a certain risk of inventory depreciation losses . Data shows that from 2018 to 2020, the company's inventory account balance was RMB 180.2367 million, RMB 201.2671 million, and RMB 239.9270 million, respectively, and RMB 273.6416 million in the first half of 2021. The proportion of inventory to revenue is relatively high.

Combining a lot of data, it is not difficult to see that Zhongheng Pet has encountered many challenges in recent years, but its strong strength and huge potential are still beyond doubt. With the emergence of more cross-border companies in the industry with pet supplies as their main business, the pet industry has attracted more and more attention.

The scale of the overseas pet market has increased dramatically, and market consumption has continued to upgrade

People's living standards have improved visibly, and pets have become an emotional sustenance for many people and a member of many families. More and more families are raising pets, and the demand for various pet-related products is increasing year by year, and the pet industry is developing rapidly.

As the world's largest pet market, the United States has a large number of pet owners, and the popularity of "pet keeping" and per capita pet consumption expenditure are both high. According to data from the American Pet Products Association (APPA), from 2010 to 2020, the market size of the U.S. pet industry grew from US$48.35 billion to US$103.6 billion , and the figure of US$103.6 billion increased by 6.7% year-on-year compared to 2019.

In Europe , another major pet consumption market in the world , the size of the pet market has also been growing at a visible pace in recent years. Data shows that the total consumption of the European pet market in 2020 was 43 billion euros, of which pet food sales were 21.8 billion euros, pet service sales were 12 billion euros, and pet product sales were 9.2 billion euros . Compared with 2019, these figures have all increased.

Although Asia is an emerging pet market, the Japanese pet market still accounts for a large proportion of the Asian pet market, and the growth rate has continued to rise steadily in recent years. Overall, the future development potential of the Japanese and Asian pet markets is still huge.

At present, the majority of pet owners are those born in the 80s and 90s, but with the improvement of consumption capacity and emotional needs of those born in the 00s and 00s, as well as the support of cross-border e-commerce, the overseas pet market will usher in better development!

Big Sell

Zhongheng

pet