Although the clothes rack is inconspicuous in our life, it is indispensable, and every household needs to use it. In fact, the opportunity of the whole household necessities market behind such an inconspicuous product should not be underestimated. Recently, the Hong Kong stock market has ushered in an enterprise closely related to the clothes rack-the Bette Group.
According to the Hong Kong Stock Exchange on October 29th, Bette Group Holdings Limited (01491.HK) was heard through the Hong Kong Stock Exchange, with Zhifu as the exclusive sponsor. The company will issue 125 million shares from October 30th to November 5th, with Hong Kong offering accounting for 10 per cent, international placement accounting for 90 per cent, and an over-allotment of 15 per cent. The shares are priced between HK $1 and HK $1.20 per share and 2000 shares are expected to begin trading on the Stock Exchange on November 12.
According to the data, the Bette Group is mainly engaged in designing, developing, manufacturing and selling all kinds of commonly used household necessities, household cleaning utensils and kitchen utensils.Based on the export earnings of China's clothes rack manufacturing market in 2020, the company ranks second, with a market share of about 6.6%.It is worth mentioning that the Bette Group will also be the first company with a market capitalization of less than 1 billion to land on the Hong Kong stock main board since March this year. Combined with the company's fundamentals, it may be a small and sophisticated dark horse.
1 the products are sold overseas and benefit from the new opportunities of the epidemic.
Bette Group is an export-oriented enterprise, and its products are mainly sold to Europe, America and Australia. According to the financial report, as of 2018, 2019, 2020 and April before 2021, the company's overseas sales accounted for about 99.1%, 98.6%, 98.9% and 99.7% of the total revenue, respectively. The contribution of revenue from sales to the United States is about 44.9%, 44.4%, 46.3% and 26.9%, respectively.
From the perspective of the current market environment, under the severe overseas epidemic situation, the listed Beit Group is actually facing a better window for overseas market expansion, and the performance level also shows its relatively steady development momentum in recent years.
The data show that in 2018, 2019, 2020 and the first April of 2021, the company's income was 329 million yuan, 337 million yuan, 385 million yuan and 126 million yuan respectively, and the net profit was 40.996 million yuan, 34.057 million yuan, 46.252 million yuan and 118.9 million yuan respectively. It is not difficult to find that the overall performance of Bette Group has maintained good growth in 2020 when the epidemic broke out and this year when the overseas epidemic is still raging.
From the perspective of the industryBeit Group is a typical household necessities industry in China, which has the characteristics of rigid demand, so the market demand is not easily affected by the economic cycle or individual events.However, due to the relatively low barriers to entry in the early industry, the market is full of a large number of competitors, driven by the transformation and upgrading of the industry, a large number of low-quality enterprises have been eliminated, and the integration of the market and the industry has been strengthened. towards the direction of brand, refinement, capitalization, informatization and so on. Especially in recent years, in the face of the impact of the epidemic, the anti-risk ability of small and medium-sized brands is weak, under the crowding-out effect, the market share is gradually moving closer to the head brand, and the industry concentration has been improved.
By focusing on overseas business, Bette Group will not only be able to expand against the trend in overseas markets by virtue of a stable domestic production environment, but we believe that the company's performance growth will also have a good support with the subsequent easing of the epidemic and further improvement in exports.
In fact, from the perspective of overseas markets, European and American developed countries have transferred low-end manufacturing factories to other developing countries in the early days, and with their national economic development and high labor costs, whether in terms of manufacturing industry chain environment or economic benefits, it does not have much advantage in the competition of traditional manufacturing products such as kitchen utensils, household cleaning utensils and so on. Therefore, such countries are also willing to purchase from other developing countries. For example, China, as the largest trading partner of the United States, accounted for about 66% of the import value of cleaning appliances in 2020.
It is true that in recent years, trade frictions between China and the United States have also aroused market concerns about this kind of export-oriented enterprises, but in practice, the tariff costs are mainly borne by customers, and the company also has a strong competitive advantage in the industry. the overall revenue and profits of the company have not been affected.
It is worth mentioning that the company has worked with its largest customer, Bradshaw, for more than ten years, and the company is highly recognized. This prospectus specifically mentions "attaching importance to the long-term relationship with the Bette Group" and "it is impossible to easily replace Bette with other OEM or ODM suppliers", which shows the close relationship and interdependence between the two parties.
In terms of market size, take the US market in the company's core region as an example, according to the US Census Bureau and Burning knowledge Consulting, the import value of US kitchen utensils increased from about US $8.588 billion in 2015 to about US $10.45 billion in 2020, with a compound annual growth rate of about 4.0 per cent. Imports of kitchen utensils are expected to reach about $12.953 billion in 2025, with a compound annual growth rate of about 4.2 per cent in 2021-2025.
In terms of household cleaning appliances, the value of US imports increased from US $1.392 billion in 2015 to about US $1,682 million in 2020, representing a compound annual growth rate of about 3.9%. Imports of cleaning appliances are expected to reach about $1.972 billion in 2025, with a compound annual growth rate of about 3.8 per cent from 2021 to 2025.
On the whole, the track that Bette Group is in is not a minority, and the demand in overseas markets is huge and continues to grow steadily.At the same time, the company has a wide range of products, supplying more than 1800 kinds of products, which can fully meet the cross-regional and diversified market demand. With the help of this listing, the company will also seek to expand production, improve production efficiency, strengthen product design and R & D capabilities, expand sales channels and marketing network, and seize market opportunities to achieve bigger and stronger.
(2) the integration ability of the industrial chain is remarkable, and the expansion logic clearly shows the advantages of growth.
From the perspective of business model, Bette Group's overseas business is mainly carried out through OEM and ODM models, and downstream customers include wholesalers and retailers.In addition, the company has also made some achievements on OBM, mainly selling its own brand "Jiajibao" products to domestic customers.
Generally speaking, the gross profit margin of contract manufacturing enterprises in the form of OEM and ODM is relatively low in the whole industry chain, but from the point of view of Bette Group, its gross profit margin under the mode of OEM and ODM is not low, and shows a trend of increasing year by year. In particular, with the higher gross profit margin of ODM, OBM business share increase, the company's overall gross profit margin still has a large room for optimization.
In addition, Bette Group adopts the pricing strategy of cost plus.Under this strategy, the company can dynamically adjust the business strategy, market conditions and other factors, and transfer the cost of sales to customers by adjusting the selling price. At the same time, the company continues to promote enterprises to improve quality and efficiency, control production costs, and the overall interest rate remains at a stable level. The overall gross profit margin has risen steadily in recent years, from 27.7% in 2018 to 29.7% in 2020.
Behind the good profitability of the company, in fact, it is inseparable from its economies of scale and the advantages of industrial chain integration and layout. Beit Group has excellent product design and development capabilities, reduces costs through economies of scale, meets the needs of overseas customers for huge production capacity, and has strong competitiveness. It is reported thatAt present, the assembly and production of all the products of the company are carried out by the Huzhou factory building, which can realize the mass production of all kinds of products and has significant economies of scale.
In addition, as an one-stop service provider, the company has created a closed loop from market research, to product design and development, production, quality control, logistics, and then to after-sales service, which makes overseas international brands or multinational corporations more inclined to choose them as OEM or ODM suppliers.The company has customers in more than 20 countries, including the United States, Britain, Germany and Australia, and shows strong stickiness. In terms of major customers, the company has cooperated with five major customers for at least 7 years, and close cooperation has created a deep competitive barrier for the company.
Although the company belongs to the manufacturing industry, there is a certain trend of homogenization of products, but the Bette Group attaches great importance to product design and development, and the company's R & D strength is also good. The prospectus shows that as of April this year, the company has 26 utility model patents, 15 design patents, 11 innovation patents, two community design patents and one invention patent.
In addition, the author believes that the company's expansion logic is also relatively clear, according to the prospectus, the company believes that the current production capacity limits the room for business growth. The company's main customers have a clear intention to order, supporting its business expansion.It is reported that six customers, including Bradshaw Group, have indicated through the confirmation that if the company can take on a larger number of orders, it will increase the purchase quantity.According to the company's plan, the Beit Group will expand the production capacity of the injection molding process in two stages in September 2022 and September 2023 respectively. By the end of 2022, the maximum annual design capacity of laundry products and household cleaning appliances will reach 1.858 million and 10.178 million respectively, and will reach 2.658 million and 13.378 million by the end of 2023. With the release of follow-up production capacity, the company's follow-up performance growth will also have support.
In addition, it has been noted that, compared with market competitors,Among the top five market participants, Bette Group is the only company whose product portfolio covers three major product categories: laundry products, household cleaning utensils and kitchen utensils.The product portfolios of other competitors consist of drying racks or drying racks and another product category. At the same time, according to the cautionary consultation report, the price range of the company's products is also wider than that of other competitors. As a result, it also means that the Beit Group has a stronger customer base access ability and business development opportunities in the market competition, showing significant business synergy advantages.
3 conclusion
Of the fund-raising uses of the listing, about 55% of the proceeds will be used to increase production capacity through the establishment of new production plants; about 15% will be used to strengthen and expand sales and marketing teams and sales channels in overseas and Chinese markets; about 10% will be used to strengthen design and development capabilities to broaden product categories and diversified product portfolios; and about 10% will be used for general working capital purposes. About 7.9% will be used to improve the production efficiency of the Huzhou production plant, and about 2.1% will be used to develop integrated intelligent manufacturing systems. It can be seen that the company has a clear expansion strategy and enterprise development path planning.
Combined with the current point of view, the haze of the epidemic has not receded, and China leads the world in manufacturing and repair, and can continue to gain a head start in global trade. With the intensification of competition in the domestic manufacturing industry and the impact of the epidemic, Beit Group is raising funds to further consolidate its operating strength, and is expected to keep taking the lead in this window, and the follow-up performance is worth looking forward to.