According to Futu News on December 4,$SHENGHUI CLEAN (02521.HK)$Today's dark market closed down 1.56% to HK$0.315, with a turnover of HK$4,0882,300, or 7,500 shares per lot. Excluding handling fees, loss of HK$37.5 per lot.

Market source: Futu Securities>

Investment highlights

Well-known cleaning service provider in Guangdong: Since its establishment in 2000, the company has steadily developed its business to provide a wide range of services to more than 700 customers, and expanded its business coverage to 14 provincial regions in China. Among them, Guangdong Province, as Shenghui Clean's “base camp”, contributed 78.7% of revenue in the first half of 2023. As of the first half of 2023, Shenghui's cleaning revenue was mainly from property cleaning. Among them, commercial building cleaning revenue accounted for 53.6%; residential building cleaning revenue accounted for 21.6%. According to the prospectus, in 2022, the market share of the top five industry participants in the commercial property cleaning market in Guangdong Province was 19.3%, and Shenghui Cleaning ranked first, with a market share of 7.3%. As of 2020, 2021, 2022 and June 30, 2023, Shenghui Cleaning Group's revenue was approximately $466 million, $564 million, $594 million, and $298 million (RMB, same below); total profit and overall income for the year/period were $31,312 million, $39.921 million, $343.89 million, and $15.308 million, respectively.

Rapid increase in market size: According to the Frost & Sullivan report, its market size increased from 5.3 billion yuan in 2018 to 7.9 billion yuan in 2022, with a compound annual growth rate of 10.7%. The market size of the property cleaning sector in Guangdong Province is expected to increase from 8.6 billion yuan in 2023 to 14 billion yuan in 2027, with a compound annual growth rate of 12.8%. The commercial property cleaning market is expected to increase from 4 billion yuan in 2023 to 6.9 billion yuan in 2027, with a compound annual growth rate of 14.1%.

Risk warning

The company's business operations are labor-intensive. The company currently has 7,121 employees, of which 7,078 are in operation. According to industry reports, one of the major challenges facing the environmental cleaning and maintenance industry is labor shortages. If a company experiences a labor shortage, a workers' strike, or a deterioration in labor relations, the company may not be able to provide superior services or otherwise fulfill its contractual responsibilities, which will adversely affect the company's business.

The company relies on employees (such as operators) and third party service providers (such as subcontractors) to perform services. If any of the company's third party service providers encounter financial or other difficulties, including labor disputes with their respective workers, they may be unable to arrange for their workers to carry out the required work on time or at all, this will incur additional costs and adversely affect the company's business.

Edit/Afina