Company profile
Jetron Holdings was founded in Hong Kong in 1983, mainly engaged in OEM clothing manufacturing business, specializing in the production of pajamas and home casual wear products. The company has production facilities in Phnom Penh, Cambodia and Henan Province, China, which were put into production in 2011 and 2014 respectively.
Sino-Thai viewpoint
The market for casual home clothes will maintain steady growth in the future: the main exporters of pajamas and home casual clothes include the United States, Japan, Europe and the Middle East. According to Euromonitor, production of pajamas and household casual clothes in China is expected to continue to grow at a compound annual growth rate of about 2.7% between 2019 and 2023. It is expected that the overall production of pajamas and household casual clothes in China will reach about 45.1 billion yuan in 2023, of which about 55.6 per cent will come from household casual clothes products. China dominates yarn production, accounting for about 25% of global production capacity.
In terms of operating performance: the operating income of the company from 2016 to 2018 was 470 million yuan, 520 million yuan, 610 million yuan and 210 million yuan respectively, of which the main income came from pajamas products but decreased from 80.5% to 66.2%, while the proportion of household casual clothes products gradually increased from 16.9% to 31.7%. The company maintained a 14-year business relationship with its largest customer, Target. Revenue accounted for about 69.3%, 72.9%, 67.8% and 64.0% of the total revenue, respectively. The gross profit margin was 25.4%, 25.2%, 27.7% and 27.3% respectively, and the gross profit margin remained relatively stable, mainly because the company obtained a relatively large number of purchase orders for household casual clothing products from Target, and its gross profit margin was relatively high; the main raw materials for clothing production include fabrics and accessories, and the main raw materials for grey cloth production come from the yarns of Chinese yarn manufacturers. The purchase of raw materials accounted for about 69.3%, 62.5%, 63.6% and 65.5% of the total cost of sales; the net interest rates were 9.8%, 9.8%, 6.9% and 4.8% respectively, and the 18-year decline was due to listing expenses.
Valuation: based on 1.25 billion shares after the global public offering, the company's market capitalization is HK $5 billion to HK $625 million, which is lower than that of its Hong Kong counterparts. In 18 years, the price-to-earnings ratio of the company is about 11.8-14.8 times, which is higher than the industry average, and the price-to-book ratio is about 1.74-1.92 times, which is higher than the industry average. In terms of profitability, the 18-year ROE and ROA were 21.2% and 8.8% respectively, higher than the industry average. In terms of cornerstone, five individual investors were introduced and subscribed for a total of HK $50 million, accounting for about 35.55 per cent of the total number of shares offered at the median issue price. Consider that the recent IPO market attention is more concentrated in BABA (9988 HK), such companies pay less attention. Considering the company's industry status, performance and valuation, we give it 57 points, rated as "do not apply for purchase".
Risk tips: (1) market competition risk, (2) foreign exchange risk, (3) uncertainty of trade relations in major exporting countries, (4) dependence on the largest customer