Applying for listing for the third time, the dryer manufacturer has a bumpy road to capital.

Zhitong Financial APP observed that Bette Group Holdings Limited submitted an application for listing on the main board of the Hong Kong Stock Exchange on May 10, with Zhifu as the exclusive sponsor. This is the third time that a prospectus has been submitted since the first submission of the form in May last year.

According to the prospectus, the manufacturer and seller of household goods from Zhejiang Province was established in Linhai, Zhejiang Province in 2005, mainly engaged in the manufacture and sales of laundry products, household cleaning products and kitchen utensils. In 2008, it opened a plant in Huzhou. After the first phase was put into production in 2010, it began to do business with customers in the United States and Germany, and moved all its manufacturing operations to Huzhou in 2011.

Subsequently, the production capacity of the Huzhou plant was gradually expanded and put into production, and its business scope further covered Australia, the United Kingdom and other places. so far, Bette Group's products are export-oriented, mainly sold to Europe, the United States and Australia, accounting for more than 90% of revenue. In the subdivision of clothes dryer manufacturing, the Beit Group ranks second with 6.1 per cent market share in terms of export earnings.

The growth rate of the industry slows down and the competition pattern is scattered.

Although the Bette Group ranks first in terms of market share in the segment, considering its business composition and the current situation of the industry, its imagination in the future is relatively general.

Zhitong Financial APP observed that in the laundry products sector, products include clothes dryers, clothes hangers, ironing boards, laundry baskets, etc., of which clothes dryers are the main products, while Bette Group's products are mainly sold to the United Kingdom, Germany and Australia.

From 2015 to 2020, the global market share of clothes dryers in the UK increased from 85.9 million pounds to 91.4 million pounds, with a compound annual growth rate of only 1.2 percent. In Germany, the global market share of clothes dryers increased from 178 million euros to 184 million euros, with a compound annual growth rate of 0.7 percent. The global market share of clothes dryers in Australia is 1 per cent, with the market size rising from A $82.3 million to A $94 million, with a compound annual growth rate of 2.7 per cent.

It can be seen that in the business area of Bette Group, the growth rate of the clothes dryer market is generally not high, while the industry is affected by weather factors, living habits, housing structure and other aspects, the future growth is still expected to be general. In fact, China's clothes dryer market has maintained rapid growth, with sales growing at a compound annual rate of 8.8% from 2015 to 2020 and 12.58 billion yuan in 2020.

In the household cleaning sector, Bette Group's products are mainly sold to the United States. From 2015 to 2020, the market size of household cleaning appliances in the United States grew at a compound annual rate of 3.7 percent to about 7.9 billion US dollars, but it should be noted that its growth rate has also slowed significantly in the past three years.

In addition, it should be noted that the market size of the above-mentioned countries is not fully enjoyed by non-local enterprises, and their import scale generally accounts for 20% to 25% of the total market share, so the Beit Group needs to face strong competition from local enterprises at the sales end.

In the manufacturing side of China, Bette Group also faces fierce competition in the industry. Zhitong Financial APP observed that by the end of 2020, there were 600 clothes dryer manufacturers in China, of which about 100 were engaged in export business. Although Bette Group ranked second in terms of export earnings, the market share of the top five was 30.6%, with little difference. In the home cleaning appliance manufacturing industry, by the end of 2020, there were 8000 domestic participants and more than 2000 engaged in export business, with a CR5 of only 2.7%, and the Bette Group did not have a market share advantage.

Taking into account, laundry products, household cleaning products industry, there is no obvious moat, Beit Group's business area industry scale growth is not high and has a further slowing trend, and the industry competition pattern is scattered, Beit Group also does not have a market share advantage.

The growth rate of revenue is not high, and it is significantly affected by trade.

Returning to the fundamentals of the Bette Group, Zhitong Financial APP observed that at present, Bette Group is engaged in product manufacturing in the Huzhou plant, and its production capacity of laundry and household cleaning products is about 95%, while the capacity utilization rate of kitchen utensils is 98.5%, which is almost full production.

According to the prospectus, the main purpose of this listing is to expand plant capacity. At present, new land has been identified near the Huzhou plant to build a new plant. It is estimated that in September 2023, the production capacity of laundry products will increase by 1.6 million pieces, and household cleaning equipment capacity will increase by 6.4 million pieces, which is 157.5% and 116% higher than the current production capacity. Therefore, if the fund-raising expansion is smooth, it will not be constrained by production capacity in the future, and the performance will be mainly driven by demand.

In terms of business, the company is mainly carried out through OEM and ODM models, and downstream customers include wholesalers and retailers. From 2018 to 2020, the five major customers accounted for 77.9%, 76.9% and 80.5%, respectively, of which the largest customer, Brandshaw, accounted for 42.2%, 41.4% and 41.8%, respectively. The customer is located in the United States and is greatly affected by the epidemic and trade. In general, the company's customer concentration continues to increase. The risk is increased.

On the financial side, although the company's revenue has maintained a steady growth in recent years, the growth rate is not optimistic. From 2018 to 2020, the company's revenue increased from 329 million yuan to 385 million yuan, with a compound annual growth rate of only 8.2%. The profits during the period were 41 million yuan, 34.06 million yuan and 46.25 million yuan respectively, taking into account the non-recurrent expenditure of about 6 million yuan due to listing in 2019, representing a three-year compound growth rate of 6.2%. On the whole, the performance growth fluctuates, but the growth is insufficient.

Zhitong Financial APP observed that the company's gross profit margin from 2018 to 2020 was 27.7%, 28.1% and 29.7% respectively, with a slight increase in gross profit margin, but the net profit margin was 12.5%, 10.1% and 12%, respectively. The adjusted net profit rate in 2019 was about 11.9% lower than that in 2018. In fact, the sales expenses and adjusted administrative expenses of the Bette Group in 2019 are lower than those in 2018. The reason for the decline in the net interest rate in 2019 is not only due to other income, but also by taxes.

In terms of cash flow, Bette Group improved in 2020. Cash from operating activities reached 71.89 million yuan, far exceeding the net profit of the same period, resulting in an increase in net cash during the period and a cash flow of 69.66 million yuan at the end of the period. However, the increase in its operating cash flow, on the one hand, comes from the impact of net profit, as well as the impact of a decrease of 18.6 million yuan in financial assets and an increase of 19.8 million yuan in payables. The increase in payables indicates that the company has a certain increase in voice, while the 18.6 million brought about by the decrease in financial assets does not reflect the improvement of the company's operating ability.

In addition, it should be noted that household cleaning products are mainly sold in the United States, which needs to pay attention to trade policy changes. According to the prospectus, almost all of the products sold by the Beit Group to the United States are listed in list 4A or listing 3 with tariffs of 7.5% to 25%, and only one product (window cleaning kit) is listed in list 4B. From this point of view, the company has to pay an additional tariff of 7.5% or 25% on almost all products sold to the United States, further driving up the company's operating costs.

In the future, the performance fluctuations caused by trade can not be avoided, and export-oriented companies are obviously affected by exchange rate fluctuations, so the general pattern of product industry and large performance fluctuations have become the basic characteristics of Bette Group.