With a net profit of 380 million yuan a year, the IPO of Zhiou was accepted due to its huge sales!

Recently, many big seller accounts have frequently encountered problems, and bad news has frequently appeared in the cross-border circle. However, on June 29, good news came from the circle that Zhiou has already taken the path of capitalization process - listing!

With revenue of 4 billion in 2020, Zhiou Home Furnishing plans to list on the GEM

Yien.com learned that the listing of Zhiou Home Technology Co., Ltd. on the Growth Enterprise Market has been accepted by the Shenzhen Stock Exchange, and the estimated financing amount is 1.48577 billion yuan. According to the prospectus, in addition to the development needs of the main business, the rest of the funds raised will be used to build a research and development center, expand overseas warehouses, and build and upgrade the Zhengzhou headquarters operation and management center.

Founded in 2011 and headquartered in Zhengzhou, Zhiou Home Furnishing is a world-renowned Internet home furnishing brand, mainly engaged in the research and development, design and sales of private-label home furnishing products. Its products are mainly divided into categories such as furniture, home furnishing, garden, pet series and other products. It has three private brands, SONGMICS, VASAGLE and FEANDREA, and sells its products to the world through well-known overseas e-commerce platforms such as Amazon, ManoMano, Cdiscount, eBay and its own official website platform.

In recent years, with the rapid development of the home furnishing industry, Zhiou's performance has also maintained a high growth trend. In 2018-2020, the company achieved operating income of 1.595 billion yuan, 2.326 billion yuan and 3.971 billion yuan, respectively, and realized net profits attributable to shareholders of the parent company of 41 million yuan, 108 million yuan and 380 million yuan, respectively.

Revenue accounted for 49.62%, and the furniture series was the most popular

Zhiou owns three self-owned brands, SONGMICS, VASAGLE and FEANDREA, which are responsible for the research and development, design and sales of home furnishings, furniture and pet home furnishings, respectively. This is an important reason why it has become a popular home furnishing brand among consumers in the European and American markets. In addition, the revenue proportion of each category is also different:

Furniture series: It is divided into living furniture and office furniture. Its representative products are coffee tables, TV cabinets, hallway racks, office desks, etc. Its revenue in 2018-2020 was RMB 649 million, RMB 1.007 billion, and RMB 1.969 billion, accounting for 40.71%, 43.37%, and 49.62% of the total revenue, respectively.

Home series: divided into storage, appliances and decoration categories, with representative products including storage cabinets, shoe boxes, coat racks, dressing mirrors, etc. The revenue in 2018-2020 was RMB 612 million, RMB 891 million and RMB 1.363 billion, accounting for 38.38%, 38.39% and 34.35% of the total revenue respectively.

Garden series: divided into garden home furnishing, leisure and sports categories, representative products include garden rattan tables and chairs, outdoor hammocks, swings, etc. Pet series : divided into pet furniture and pet home furnishing , representative products include cat climbing frames, pet mats, dog cages , etc. Other products: mainly include window display props and lighting products, representative products include clothing display props, multi-functional storage lamps, etc.

The above three series of products account for a relatively low proportion. Looking at the data from the past three years, the courtyard series accounted for the highest proportion of 11.76%, reaching 187 million yuan; the pet series accounted for the highest proportion of 7.50%, reaching 120 million yuan; and other products accounted for the highest proportion of 1.65%, reaching 26 million yuan.

In addition to its products being ranked at the top of the best-selling lists of third-party e-commerce platforms such as Amazon all year round, Zhiou's product design has also won many honors:

In October 2020, the company's coat rack design won the "China Design and Manufacturing Award";

In December 2020, the company's cat climbing frame, side table, coat rack and other design works won the "Contemporary Good Design Award" issued by the German Red Dot Award organization;

In April 2021, the company's design works such as the objective mirror and cat tree lookout won the Italian A'Design Award and other awards.

Focusing on Amazon's mainstream market, Europe's revenue accounted for 60.26%

Public information shows that Zhiou’s products are mainly sold through B2B and B2C models, using overseas online B2C platforms such as Amazon, Cdiscount, ManoMano, and eBay to sell products to countries and regions such as Europe, North America, and Japan . It is not difficult to see where Zhiou’s high revenue comes from.

Looking at its main business by region, Zhiou's revenue in Europe and North America accounted for the highest proportion in recent years, while the revenue in Japan and other regions accounted for less than 10%.

Among them, the sales revenue in Europe was RMB 977 million, RMB 1.374 billion and RMB 2.391 billion respectively , accounting for 61.29%, 59.17% and 60.26% of the main business income in each period respectively.

The sales revenues achieved in North America were RMB 600 million , RMB 931 million and RMB 1.545 billion , respectively , accounting for 37.60%, 40.07% and 38.94% of the main business revenues in each period, respectively .

The online B2C channel is Zhiou’s main sales channel, with sales revenues of RMB 1.506 billion, RMB 2.020 billion and RMB 3.291 billion respectively, accounting for 94.46%, 86.99% and 82.93% of the main business revenue respectively.

In addition, the company's sales revenue through Amazon's B2C platform accounted for 89.32%, 81.13% and 71.80% of its main business revenue, which is relatively high, but it is decreasing year by year. We don't know whether this phenomenon is gradually reducing Zhiou's dependence on Amazon. After all, relying on Amazon will face the consequences of a single move affecting the whole body.

Zhiou's inventory assets account for as much as 47.83%

According to the contents of the prospectus, at the end of each period from 2018 to 2020, the book value of Zhiou Company 's inventory was RMB 175 million, RMB 253 million and RMB 859 million, respectively, accounting for 41.58%, 38.68% and 47.83% of the total assets, respectively. That is to say, the scale of Zhiou's inventory is increasing year by year with the expansion of the company's business scale.

High inventory levels will, to a certain extent, increase the company’s inventory depreciation risk and capital utilization pressure.

In other words, if the market environment for Zhiou's products undergoes major adverse changes in the future, market competition intensifies, or the company is unable to optimize inventory management and reasonably control inventory size, it is very likely that products will be unsalable and inventory backlogs will occur. The company will then need to make large provisions for impairment of such inventories or report them as losses, which will have an adverse impact on the company's financial condition and operating results.

In addition, Zhiou adopts a cross-border warehousing and logistics system of "domestic and foreign self-operated warehouses + platform warehouses + third-party cooperative warehouses", which leads to its inventory being mainly stored in overseas self-operated warehouses, platform warehouses, etc. If there are problems such as poor management, inventory losses are likely to occur, which will have an adverse impact on the company's operating performance.

It has to be said that the 2020 epidemic has fueled the cross-border home furnishing e-commerce market, making the already hot home furnishing market soar. Home furnishing-related products in many parts of Europe and the United States have seen a surge in sales, and are even out of stock. This is an opportunity for Zhiou, driving its 2020 performance growth to almost double, and also adding momentum to Zhiou's IPO.

From early exploration to current maturity, Zhiou has fought its way out of the siege and become the biggest dark horse in cross-border home furnishing e-commerce. It is undoubtedly a good example in the cross-border circle. It has caught the fastest train at the best time, which is in line with the saying that those who are foresighted will meet their prime early!

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