Suddenly! Another Amazon best-selling product was suspended

Generally speaking, when cross-border enterprises develop to a certain level , they will choose to list on the GEM or main board to accelerate the capitalization process.

However, the IPO road for many companies is very tortuous.

Recently, there was news from the cross-border e-commerce capital market that another cross-border company’s listing was suspended.

Listing of Heung Kong Electric suspended

Xiangjiang Electric, which is preparing for listing on the Shenzhen Stock Exchange's main board, is shown as "suspended" in the Shenzhen Stock Exchange's project status .

It is understood that the reason for the suspension of Xiangjiang Electric's listing is that the financial information recorded in the application documents for issuance and listing has expired and needs to be supplemented and submitted before the IPO review process can continue.

Xiangjiang Electric's road to listing has been full of twists and turns.

As early as May 2017, Xiangjiang Electric started its listing guidance, and the sponsor at that time was Dongguan Securities.

From May 2017 to October 2020, in more than three years, Dongguan Securities issued more than ten coaching work reports, but later Xiangjiang Electric withdrew the coaching filing.

According to the coaching report disclosed by Dongguan Securities, the main problem of Xiangjiang Electric is that the company has established an independent director system, but has not hired independent directors. The company needs to further establish an independent board of directors corporate governance mechanism.

In January 2021, Xiangjiang Electric changed its sponsor to Industrial Securities, but the cooperation ended only two months later.

The reasons given by Xiangjiang Electric for terminating the mentoring relationship twice were both due to strategic development needs.

In June 2022, HeungKong Electric signed a sponsorship agreement and underwriting agreement with Guotai Junan Securities, stipulating that Guotai Junan Securities would serve as the company's IPO sponsor and lead underwriter.

On March 1, 2023, the Shenzhen Stock Exchange disclosed the prospectus (draft filing) of Heung Kong Electric Appliances, and Heung Kong Electric Appliances' application for listing was accepted.

On March 27, 2023, the listing review status of Xiangjiang Electric on the Shenzhen Stock Exchange was updated to inquiry.

On September 27, 2023, Xiangjiang Electric updated its listing review status on the Shenzhen Stock Exchange, disclosing the latest prospectus and response to the review inquiry letter.

It is reported that Xiangjiang Electric plans to be listed on the main board of Shenzhen Stock Exchange in this IPO, and plans to issue no more than 68.2198 million shares, accounting for 25% of the company's total share capital after the issuance. It plans to raise 576 million yuan to be used for household goods construction projects, R&D center construction projects, and to supplement working capital.

According to public information, Xiangjiang Electric was established in July 2012 and is registered in Qichun County, Hubei Province. The company is mainly engaged in the research and development, design, production and sales of household products, including small household appliances such as blenders, electric ovens, air fryers, electric kettles, waffle makers, electric deep fryers, and non-electrical products such as garden hoses.

To date, Xiangjiang Electric has established several wholly-owned subsidiaries around the world, responsible for business in more than 70 countries and regions. Among them, the company's cross-border e-commerce platform operations are mainly managed by Nuocheng E-commerce and Shenzhen Nawu, which are mainly engaged in air fryers, kettles and other products.

At present, the company's business is mainly ODM/OEM business, supplemented by self-branded business. In terms of details, ODM/OEM business mainly supplies to well-known brands such as Amazon, Walmart, and Philips, while self-branded business is mainly concentrated in online sales. Among them, "Weighmax" and "Accuteck" are mainly sold through Amazon, and their sales are good.

Xiangjiang Electric owns several self-operated brands, and most of its products are at the Best Seller level.

In terms of sales volume, Xiangjiang Electric's electric heating, electric, electronic and garden hose products have annual sales volume of millions.

Listing encountered obstacles! Xiangjiang Electric still faces many risk factors

Although Xiangjiang Electric's market performance on various platforms is good, the company's operating income has shown a downward trend since 2022.

From 2020 to 2022 and the first half of 2023, Xiangjiang Electric's operating income was approximately RMB 1.478 billion, RMB 1.489 billion, RMB 1.103 billion and RMB 560 million, respectively, and the net profit attributable to the parent company's owners was RMB 88.68 million, RMB 71.90 million, RMB 90.79 million and RMB 71.71 million, respectively.

Judging from the performance data, Xiangjiang Electric 's operating income in 2022 decreased by 386 million yuan compared with 2021, a decrease of 25.92%.

Regarding the reasons for the decline in the company's operating income, Xiangjiang Electric explained that since the sales area of ​​the company's products is relatively concentrated, mainly in the United States and Europe, since 2022, Europe and the United States have been affected by inflation, and consumer purchasing power and market demand have declined significantly, resulting in a sharp drop in the company's downstream customer purchasing demand. Xiangjiang Electric mainly exports, so in the daily operation process, it faces multiple risk factors such as trade policies and exchange rates. If the Sino-US trade friction escalates, if the United States expands the scope of additional tariffs or increases the tariff rate, it may directly affect the purchasing demand of American customers or let Xiangjiang Electric bear the corresponding tariff costs, which will have a direct impact on the company's performance.

When Xiangjiang Electric mentioned the reasons for the decline in revenue, the first thing it explained was that the company's product sales were relatively concentrated, because nearly 99% of Xiangjiang Electric's revenue came from overseas regions, including North America, Europe, Oceania, Africa, etc., of which North America's sales revenue accounted for about 85%, and the United States accounted for as much as 80.85% of sales revenue in the first half of 2023.

From the specific data, it is more intuitive. From 2020 to 2022 and the first half of 2023, the overseas business revenue of Xiangjiang Electric was RMB 1.419 billion, RMB 1.466 billion, RMB 1.088 billion and RMB 554 million, respectively, accounting for 96.81%, 99.05%, 99.21% and 99.53% of the main business revenue, respectively. Among them, the sales revenue in the US market was RMB 1.079 billion, RMB 1.041 billion, RMB 755 million and RMB 452 million, respectively, accounting for a high proportion of operating income, which were 73.01%, 69.95%, 68.48% and 80.85%, respectively.

Another risk factor for Xiangjiang Electric in its operations is that its own brand revenue accounts for a low proportion and its influence is insufficient.

From 2020 to 2022 and the first half of 2023, the revenue share of Xiangjiang Electric's own brands was only 6.19%, 6.35%, 5.59% and 5.33%.

Because Xiangjiang Electric's business is mainly ODM/OEM business, it takes the OEM route. Under this model, the company's bargaining power, risk resistance and gross profit margin are relatively low, and it is unable to accumulate brand assets, which is not conducive to the company's long-term development.

It is also worth noting that Xiangjiang Electric's R&D attributes are relatively weak. In the past three years, Xiangjiang Electric's R&D expenditures have only been around 30 million yuan, accounting for less than 3%. As of the end of June 2023, the company has 161 technical R&D personnel, but in terms of the employees' academic qualifications, only 92 of them have a bachelor's degree or above, which means that there are still dozens of R&D personnel who do not have a bachelor's degree.

On the other hand, it should be noted that Xiangjiang Electric is a family business. The actual controllers of the company are Pan Yun and GUANGSHE PAN. Among them, GUANGSHE PAN is Pan Yun's son and is now an American citizen.

Prior to this issuance, Pan Yun directly and indirectly held 80.75% of the company's total share capital through Qichun Huayu and Qichun Hengxing. GUANGSHE PAN indirectly held 7.82% of Xiangjiang Electric's shares through Qichun Huayu. The two of them together held 88.57% of Xiangjiang Electric's shares. The company is subject to certain risks of improper control by the actual controller.

To sum up, if Xiangjiang Electric wants to achieve long-term development in overseas markets and successfully go public in the future, it must avoid the above risk factors and pay attention to building its own competitiveness in the market.

Suspension of listing

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