Annual net profit exceeds 200 million! Amazon's unpopular big brand sprints for IPO

With the booming development of the cross-border circle, not only are popular products booming, but the top sellers selling category products are also generating considerable revenue. In addition, the performance of categories that seem unpopular to us has not only not been affected by the epidemic, but their profits have also achieved substantial growth. Some sellers are already rushing for IPO.

Annual net profit exceeds 200 million, Taotao Automobile Industry sprints for IPO

Recently, Taotao Vehicle Industry, the parent company of Gotrax, a best-selling brand of electric balance bikes on Amazon and other platforms, has submitted a prospectus to the Shenzhen Stock Exchange and is about to be listed on the Growth Enterprise Market.

According to the prospectus submitted by Taotao Automobile, its operating income in 2018-2020 was 616 million yuan, 752 million yuan and 1.386 billion yuan respectively ; its net profit attributable to the parent company was 39 million yuan, 72 million yuan and 211 million yuan respectively. Judging from the data, its revenue and net profit in 2020 have increased significantly, especially the net profit in 2020 increased by 193.88% compared with 2019.

Zhejiang Taotao Vehicle Co., Ltd. (hereinafter referred to as "Taotao Vehicle"), founded in 2015, is a high-tech enterprise engaged in the research and development, production and sales of motor vehicles, electric vehicles and related accessories. It owns independent brands such as "TAO MOTOR", "GOTRAX", "RIVAL" and "FLUXX". Its electric scooters and electric balance bikes are mainly sold in North America and Europe through third-party platforms such as Walmart, Amazon, Target, etc. , and all categories are sold on the four websites of the subsidiary. In addition, offline wholesale and retail is also a major business of the company.

In terms of revenue data, the revenue of its motor vehicles (all-terrain vehicles and motorcycles) accounted for the largest proportion of 52.74% , reaching 720 million yuan. In terms of sub-segments, all-terrain vehicles accounted for the highest proportion of revenue, 38.72%, reaching 529 million yuan ; motorcycles accounted for 14.01% of revenue, reaching 191 million yuan.

Electric vehicles are represented by electric scooters, electric balance bikes, electric motorcycles, electric bicycles, etc. Electric vehicles accounted for 40.97% of the revenue, reaching 559 million yuan. In terms of subdivision, electric scooters are the best-selling, accounting for 25.74% of the revenue, reaching 351 million yuan, second only to all-terrain vehicles. In addition, in 2020, its electric scooters also ranked high on the sales rankings of Amazon's website, and once ranked in the top ten sales rankings of similar products.

In terms of the market population targeted by Taotao Vehicle Industry, all-terrain vehicles are mainly small-displacement and are mainly suitable for entertainment of children and teenagers; off-road motorcycles are suitable for entertainment of children and adults, and road motorcycles are a means of transportation for adults (a driver's license is required); electric scooters are divided into adult and children's versions, and the product categories cover a relatively wide range of people.

Overseas sales account for 99%, and the establishment of a cross-border e-commerce team has become a driving force

In terms of the regional share of revenue of Taotao Motors' main business, almost all of its revenue comes from overseas, accounting for as high as 99%. Among them , the United States has the highest revenue share, accounting for 69.75%, reaching 952 million yuan. It can be said that the United States is its main market. The second largest region is Europe, with a revenue share of 18.37%, reaching 251 million yuan. This is inseparable from the popularity of skateboarding culture in Europe and the United States and the rapid rise of electric scooters in Europe and the United States.

The proportion of China is relatively low, only 0.87%. In addition, its own brand revenue accounts for a relatively high proportion, which can be seen from its own brand revenue share of up to 62.85%.

As for the reasons for Taotao Vehicle's revenue growth, in addition to the well-known epidemic that has prompted people to travel alone and the continuous expansion of the market, one important reason is that the company established a cross-border e-commerce team in Shenzhen in the second half of 2019 , and the sales services and operations of overseas third-party platforms have also begun to show results. At the same time, the operations of multiple self-owned websites for American motor vehicles and electric vehicles have become more mature, and the company's online sales are also growing.

In addition, being backed by the hardware industry zone is also a major advantage of Taotao Automobile Industry. The raw materials for production can be obtained nearby, and it has the independent production capacity of core components . While effectively controlling production costs to a certain extent, it also provides the market with cost-effective products and has relatively strong profitability.

The increasing government subsidies have also had a significant impact on the company. Data from the prospectus shows that the government subsidies it received in the past three years were 5.7195 million yuan, 11.8463 million yuan, and 39.0844 million yuan, respectively, showing an increasing trend year by year.

Although the revenue data is impressive, Taotao Automobile also has some minor difficulties. In terms of R&D expenses, although it is increasing year by year, the conversion effect of its R&D is not good, and its R&D expense rate is showing a downward trend.

In addition, the high return rate is also a major problem for Taotao Automotive . Data from the prospectus shows that the return rates of the two major mainstream platforms, Walmart and Amazon, should not be underestimated. Among them, Walmart's return rates in the past three years were 8.45%, 8.8% and 7.33% respectively, while Amazon's return rates were 10.53%, 8.75% and 13.02%.

A high return rate means that there are problems with its product quality. It is reported that Taotao Motors has been involved in many disputes over product quality issues, such as product design defects that caused consumers to fall from electric scooters and get injured, and motorcycle crankcase ventilation system failures. These problems need to be resolved and product quality supervision needs to be strengthened.

With a large proportion of inventory and revenue accounts receivable, Taotao Automobile's risks are increasing

In fact, the excessive proportion of Taotao Automobile's inventory (raw materials, products and inventory goods) is a major factor affecting its performance. According to the data, the book value of Taotao Automobile's inventory during 2018-2020 was 223 million yuan, 192 million yuan and 379 million yuan, respectively, accounting for 44.71%, 29.13% and 35.58% of the company's total assets, respectively.

From the market perspective, if Taotao Automobile's forecast for product sales is not accurate enough, excessive inventory, difficulty in digesting existing inventory, and the launch of new products in the market will lead to inventory impairment risks , which will in turn have a certain impact on the company's performance.

In addition, the company's accounts receivable is also a major risk for the company . Financial report data shows that during the period 2018-2020, the book value of the company's revenue accounts was 63 million yuan, 93 million yuan and 171 million yuan, respectively, and in 2020, accounts receivable accounted for 12.35% of the operating income in the reporting period.

Such products are usually involved in infringement cases, and Taotao Automobile is no exception. Its subsidiary OLABS is involved in three patent lawsuits, and the cases have not been resolved as of the time of the release of the prospectus. In addition, the sales revenue of the products involved in the lawsuits also has a certain impact on its main business revenue.

For Taotao Bicycles, although it has strong product development and supply chain advantages, and its products are ranked high on multiple sites such as Amazon, the concerns of returns, excessive inventory, and infringement cannot be ignored. These problems need to be solved urgently if they want to develop in the long run. For sellers, it is not just the products with explosive sales that are worth paying attention to. Some unpopular products can also give you unexpected surprises. As long as you persist in cultivating them, they will become tomorrow's stars.

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