Suggest investors to buy small orders

Company advantages

(1) The company has a broad brand for multiple market segments at home and abroad, which helps the company meet consumers with different preferences and needs; (2) the company's strong R&D capabilities in foam and product design enable the company to provide comprehensive slow-rebound products; (3) The company has a vertically integrated business model, which enables the company to quickly respond to changes in market demand, collaborate efficiently and innovate new types of products while maintaining uniform product quality standards; (4) Broad and international sales and distribution networks to enable more companies to reach out to more companies Diversified consumer groups; (5) The company is mainstream in the US The market and the slowly rebounding health and health products markets in Hong Kong and China have a leading position and can seize growth opportunities in various markets; (6) The company's dedicated and experienced management team has been able to achieve sustainable growth and profit in the past.

Industry Overview

Hong Kong's slow-rebound health and health products market is currently in the middle stage of the industry development cycle. In 2013, there were several health and wellness product brands that slowly rebounded on the market. The number of consumers of slow-rebound health and wellness products has increased, and suppliers have decided to develop new uses for slow-rebound materials. Total retail sales of slow-rebound health and wellness products in Hong Kong increased from HK$180 million in 2008 to HK$290 million in 2013, with a compound annual growth rate of 10.7%. According to Frost & Sullivan, based on the following impetus, Hong Kong's slow-rebound health and health products market had a compound annual growth rate of 12.8% from 2013 to 2018, and is expected to record HK$530 million in 2018.

According to Frost & Sullivan, the share of slow-rebound health and wellness products in Hong Kong's total health and wellness products market increased from 21.1% in 2008 to 24.0% in 2013, while the share of slow-rebound health and wellness products in the overall health and wellness products market is expected to increase to 26.4% in 2018. The health and wellness products market in Hong Kong remains highly concentrated due to higher entry barriers. According to Frost & Sullivan, in 2013, the company was the largest slow-rebounding health and wellness product brand in Hong Kong in terms of retail value, with a market share of 41.9%. In 2013, the market operated by the company was highly concentrated because the two largest market participants together accounted for 81.1% of the market.

As far as the industry cycle is concerned, China's slow-rebound health and health products market is in the early stages of growth. In 2013, China's slow-rebound health and health products market was fragmented. Competitors compete for greater market share, while more and more consumers are choosing health and wellness products that are slowly rebounding. In 2013, based on total retail sales, the market value of health and health products that are slowly rebounding in China was RMB 5.0 billion, with a compound annual growth rate of 25.9% since 2008. According to Frost & Sullivan, it is expected that China's slow-rebound health and health products market will experience high growth, reaching approximately RMB 12.30 billion in 2018, with a compound annual growth rate of 19.6% since 2013. In 2013, the share of the slow-rebound health and wellness products market in the overall health and wellness market increased from 12.6% in 2008 to 17.8%, indicating that slow-rebound health and wellness products are more popular than traditional products. According to Frost & Sullivan, the market share of health and wellness products is expected to rise to 20.8% in 2018.

Since China's slow rebound in the health and health products market is still in the early stages of growth, the market is still highly fragmented, and there are many participants in the market. In 2013, the five largest market participants combined accounted for only 16.2% of the total market. According to Frost & Sullivan, in terms of retail sales, the company's market share was 4.4% in 2013, ranking first among all slow-rebounding health and wellness product brands in China. According to Frost & Sullivan, the company's perfect sales network and excellent brand image made the company's slow recovery compared to China's other major players in the health and health products market even more impressive. As of 2014/3/31, the company's complete sales network includes 427 points of sale, including those operated by its own and third party distributors, covering more than 20 provinces, cities or autonomous regions in China, enabling the company to enhance brand awareness.

Profitability and financial figures

Revenue increased 20.2% from HK$1,971.5 million for the year ended 31 December 2012 to HK$2,369.5 million for the year ended 31 December 2013. Gross profit increased 33.5% from HK$464.8 million for the year ended 31 December 2012 to HK$620.6 million for the year ended 31 December 2013. The company's gross margin increased from 23.6% for the year ending December 31, 2012 to 26.2% for the year ended December 31, 2013, mainly reflecting increased sales of private label products with higher profit margins. Profit during the year increased 25.4% from HK$115.7 million for the year ended 31 December 2012 to HK$145.0 million for the year ended 31 December 2013.

Fundraising purposes

Approximately 27% of the proceeds from this capital raising was HK$171.2 million (calculated at the median sale price of HK$1.25) for brand building and promotion; about 28% for strategic acquisitions and business opportunities; about 12% for expanding the distribution network and diversifying sales channels; about 14% for upgrading and purchasing production equipment and building new production warehouses in Dongguan and Jiashan; about 6% for purchasing or establishing production facilities in the US; about 3% for design and development; generally about 10% for design and development; working capital.

valuations

According to the prospectus price of HK$1.06 to 1.43, Shengnuo Group's price-earnings ratio in 2013 was 12.88 to 17.38 times, and the market account ratio was 2.59 to 3.18 times. Shengnuo Group mainly sells slow-rebound pillows, mattresses and mattresses, and other health and household products. It has its own brand, and there are no identical peers on the market. A similar business is Casa Tianhe (2223.HK), which mainly designs, produces and sells its own bedding products, with a price-earnings ratio of 19.23 times; while Hout Health (6880.HK), which sells health and health products in Hong Kong, mainland China and Macau, has a price-earnings ratio of 31.67 times, so Shengnuo Group's valuation is reasonable. Although the press said that management has a close relationship, we believe that the company's basic factors are improving according to the data. In addition, the company has its own brands and exclusive product formulations, and the demand for health products from people in China and Hong Kong is increasing. The company's gross margin increased from 22.3% in 2011 to 26.2% in 2013, and the asset-to-debt ratio fell from 59.5% in 2011 to 28.3% in 2013. The basic factors are improving, so investors are advised to buy small orders.

Risk Factors

(1) The company's sales are concentrated on major customers, and the loss of any relevant customer will reduce the company's revenue and have a significant adverse effect on the company's operations, financial position and operating results; (2) the emergence of changes in economic conditions in the United States, Hong Kong and China will adversely affect the company's sales or growth; (3) a decline in the company's brand value may adversely affect the sales, financial position and operating performance of the sales company; (4) the company or is required to bear foreign tax liabilities, which will adversely affect the company's financial situation () 5) Third party counterfeiting, forgery and/or infringement It may adversely affect the company's reputation and brand, thereby affecting the company's sales, financial position and operating results; (6) Risks relating to the company's export sales (such as import/export restrictions) may adversely affect the company's operations, operating results and financial condition.