The listing of Yiwu's export giant was suspended, and it once sold 1 billion yuan in one year!

For cross-border enterprises that have developed to a certain level , most will choose to go public to accelerate the capitalization process.

However, the road to IPO for many companies is often full of twists and turns.

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

Huahong Home Furnishings' listing suspended

It is understood that Huahong Home Furnishing , which is striving for a listing on the main board of the Shanghai Stock Exchange , is shown as "suspended " in the project status of the Shanghai Stock Exchange .

It is understood that Huahong Painting Home Furnishing submitted the prospectus (draft) for the initial public offering of shares on September 30, 2022 , and plans to be listed on the Shanghai Main Board . The IPO sponsor is Oriental Securities, the accountant is Lixin, and the lawyer is Beijing Guofeng .

The prospectus shows that Huahong Home Furnishing plans to raise 862 million yuan in this IPO, of which 311 million yuan will be used for mirror frame expansion projects, 307 million yuan will be used for decorative painting expansion projects, 88 million yuan will be used for R&D center construction projects, and 156 million yuan will be used for marketing and service network construction projects.

On March 2, 2023, the main board IPO status of Huahong Home Furnishing was shown as accepted.

On March 24, 2023, Huahong Home Furnishing updated its prospectus and the review status changed to inquiry.

The road to an IPO for a company was filled with numerous difficulties and challenges, and ultimately Huahong Home Furnishings failed to successfully go public.

According to public information, Huahong Hua Home Furnishing Co., Ltd. (hereinafter referred to as "Hualong Hua Home Furnishing") was established in 1997 and is headquartered in Yiwu, Zhejiang . It is mainly engaged in the research and development, design, production and sales of various home accessories such as decorative paintings, mirrors, photo frames, etc. to meet the interior home decoration needs of domestic and foreign consumers.

The most important product line of Huahong Home Furnishing is decorative paintings , which can be divided into four categories according to the materials and craftsmanship used: canvas craft paintings, glass frame paintings, hand-painted oil paintings and wood board craft paintings.

It is understood that Huahong Home Furnishing mainly adopts the ODM production model , and its products are sold to developed countries and regions such as North America and Europe . Its sales network has covered more than 60 countries and regions around the world.

Huahonghua Home Furnishing has established long-term cooperative relationships with large supermarket chains and home decoration brands such as Walmart, The Home Depot, Target, Ross Stores, Falabella, CDS, etc. At the same time, its own brands "Tyler & Finn" and "Empty Space" have begun to be deployed in overseas markets.

From 2019 to 2021, and the first three quarters of 2022, Huahong Painting Home Furnishing achieved operating income of approximately RMB 777 million , RMB 764 million , RMB 1.022 billion and RMB 651 million, respectively, and the net profit attributable to the parent company's shareholders was approximately RMB 152 million , RMB 193 million , RMB 189 million and RMB 120 million, respectively.

In the past three years, Huahong Painting Home Furnishing 's revenue has maintained a steady growth trend, and the net profit attributable to the parent company's shareholders has fluctuated slightly, but has maintained an overall upward trend.

The listing is blocked! Huahong Home Furnishing still faces many risk factors

However, it should be noted that there are still certain risk factors in the operation of Huahong Home Furnishing.

Huahong Painting and Home Furnishing 's business is mainly export-oriented, with overseas revenue accounting for a considerable proportion.

According to the report, from 2019 to 2021 and the first three quarters of 2022 , Huahong Painted Home 's export revenue was RMB 747 million, RMB 743 million, RMB 994 million and RMB 618 million , respectively, accounting for 96.54%, 97.76%, 97.76% and 95.58% of the main business income in the current period. In recent years, Huahong Painted Home's domestic business revenue has accounted for less than 5 % .

Due to its high dependence on overseas revenue, the company is also affected by multiple factors such as the international trade environment, logistics and transportation, and changes in supply and demand structure in the short term.

On the other hand, the revenue share of Huahong Home Furnishing's own brands " Tyler & Finn" and "Empty Space" is very low , the sales scale is still relatively small , and the brand awareness still needs to be improved . Compared with internationally renowned brands , there is still a huge gap .

However, Huahong Home Furnishing has certain advantages in research and development.

Huahong Home Furnishings attaches great importance to the original design and innovation of its products . It has established a R&D and design team of more than 200 people, introduced internationally popular design concepts and fashion elements, and at the same time relied on its rich R&D and design experience to accurately grasp the needs of the market and customers and gained recognition in the industry.

During the development process of Huahong Home Furnishing , the company has undergone business changes and transformations.

In 1997, Huahong Holding Group was established .

In 2017, Huahong Holding Group carried out asset restructuring, divested its operating business and established "Huahong Cultural and Creative Co., Ltd."

In 2019, "Hualong Culture and Creativity Co., Ltd." was transformed into "Hualong Home Furnishing Co., Ltd.", which consists of subsidiaries such as Zhejiang Huazhidu Culture and Creativity Co., Ltd. , Zhejiang Tianhua Home Furnishing Co., Ltd. , and American Xuanyi Company. It plans to IPO with Huahong Home Furnishing as the listed entity .

It should be noted that Huahong Painting and Home Furnishing has a strong family-run flavor .

The prospectus shows that the actual controllers of Huahong Home Furnishing, Gong Pinzhong and Gong Xinming, indirectly hold 80.4% of the company's shares, while Wang Aixiang and Wang Hexian each hold 4.7% of the shares. Gong Pinzhong and Gong Xinming are brothers, Wang Aixiang and Gong Pinzhong are husband and wife, and Wang Hexian and Gong Xinming are husband and wife. In addition, the children of the four also work in the company .

The promotion of Huahong Home Furnishing's listing process is also related to a gambling clause.

In November 2020, Huahong Co., Ltd., Huahong Holdings, Yi Fu Investment, Wang Aixiang, Wang Hexian and major investors jointly signed the "Agreement on Capital Increase and Share Transfer of Huahong Painting Home Furnishing Co., Ltd. "

This agreement contains a bet clause regarding the company's listing . The agreement stipulates that if the company fails to submit listing application materials to the China Securities Regulatory Commission/stock exchange before June 30, 2023 , and the company fails to realize its commitment to an initial public offering and listing before June 30, 2024 , investors have the right to require Huahong Holdings, Wang Aixiang, Wang Hexian, Gong Pinzhong and Gong Xinming to repurchase shares.

However, in 2021, the two parties to the agreement renegotiated that the gambling clauses and special rights clauses have been completely terminated and are invalid from the outset, and will not have an adverse impact on the company's issuance and listing .

However, the final outcome was that Huahong Painting Home Furnishing’s listing was terminated .

Moreover, the company also has many problems in its daily operations and has faced multiple penalties.

Lin Jun Culture, a subsidiary of Huahong Holdings , was once fined 8,500 yuan by the Ningbo Maritime Safety Administration in May 2021 because the error between the declared weight of the cargo container and the actual weight exceeded 5% , and the maximum error exceeded 1 ton .

The controlling shareholder Huahong Holdings was punished twice by the Yiwu City Fire Rescue Detachment in May 2021 for consumer issues, with a total fine of 20,000 yuan.

Moreover, some of the houses leased by Huahong Co., Ltd. and its subsidiaries do not have property rights certificates or have not gone through registration procedures , which will also bring certain risks to the company.

For Huahong Painting Home Furnishing , if it wants to achieve long-term development in overseas markets, it must avoid the above-mentioned risk factors. At the same time, it must pay attention to building its own market competitiveness in terms of brand and other aspects to meet consumers' growing personalized consumption needs.

IPO

Suspension