Gelonghui learned that on October 15, 2024, Samfine Creation Holdings Group Limited (“Xinghuixin Development”) was successfully listed on the US NASDAQ with the stock code SFHG.

Xinghui New Development is a holding company registered in the Cayman Islands. It mainly operates through its subsidiaries in Shenzhen and Hong Kong. Among them, Xinghui Printing (Shenzhen) Co., Ltd., the operating entity located in Shenzhen, was established in 1993.

The issue price of the common stock issued by the company this time was 4 US dollars/share, and 2 million common shares were issued to the outside world (without considering over-allotment options), which is equivalent to 10.00% of the common shares after the issuance was completed. The opening stock price on the first day of listing was 4.99 US dollars/share. The closing price on the first day was 5.3 US dollars/share, an increase of 32.5%, and the total market value was about 0.106 billion US dollars.

Stock price trend on the first day of listing (October 15, 2024), Source: Futu

Of the funds raised this time, Xinghui New Development plans to use 35% of the capital to strengthen the printing business of operating subsidiaries in Hong Kong, China, and expand market share in other international markets such as the US; 35% to purchase machinery and equipment and upgrade and improve the operating subsidiary's production equipment to improve the level of automation; and about 30% to supplement working capital and other general corporate purposes.

After the issuance is completed, the controlling shareholder Zheng Ronghua will hold 71.02% (“controlling shareholder”) of the total number of common shares issued and traded by Xinghuixin Development, representing 71.02% of the voting rights.

Company shareholding structure chart, source: prospectus

Xinghui New Development mainly provides printing services in Hong Kong and mainland China. Its operating subsidiary has more than 20 years of experience in the printing industry and can provide various printing products, including: 1. Book products, mainly children's books, educational books, notebooks, diaries and journals; 2. Novel jewelry and packaging products, mainly including handicrafts, book covers, pop-up books, stationery products, products with assembled parts, and other professional products, shopping bags and packaging boxes.

Picture source: Company promotion PPT

The company's main revenue comes from supplying printed products to booksellers in Hong Kong, whose customers are all over the world, particularly in the US and Europe.

According to statistics from the Hong Kong Trade Development Council, the vast majority of total printed goods exports from Hong Kong, China come from re-export trade in mainland China. In 2020, 2021 and the first 10 months of 2022, total printed exports from Hong Kong, China were approximately HK$13.858 billion, HK$15.769 billion and HK$8.579 billion, respectively, of which re-export trade from mainland China accounted for 80.4%, 81.6% and 79% respectively.

According to data from the National Bureau of Statistics of China, from 2016 to 2022, China's total exports of printed books, pamphlets, and other printed materials, as well as children's picture books, picture books, or coloring books, increased from about 3.613 billion US dollars to about 4.318 billion US dollars. The compound annual growth rate was about 3%. The overall growth rate was relatively moderate. Among them, 2020 showed a certain decline due to the epidemic.

Export status of printed books, pamphlets and other related products in China. Source: Prospectus

According to the prospectus, despite the emergence of e-books and electronic online learning platforms in the past few years, demand for printed books and printed materials has continued to grow steadily, indicating that printed books are expected to continue to be an important channel for knowledge transmission, especially educational books, reference books, and children's books, and are expected to become one of the key drivers of the book printing market in the future.

According to product categories, the main revenue sources of Xinghui New Development include book products, novel jewelry, and packaging products. In 2023, the above two products accounted for 54.3% and 45.7% of revenue, respectively.

Segmented revenue by major product categories, source: prospectus

In terms of financial data, revenue for 2022 and 2023 was HK$1.291 billion and HK$1.173 billion respectively, down 9.1% year on year in 2023. The overall decline in revenue was mainly due to a decline in sales of novel jewelry and packaging products, and the increase in sales volume of book products offset this decline to a certain extent. The decline in sales of novel jewelry and packaging products is mainly due to the decline in demand for novel jewelry.

The total gross margin of the company in 2022 and 2023 was 21.5% and 26.7%, respectively, and the gross margin increased by 5.2 percentage points in 2023, mainly due to falling material costs.

According to the prospectus, the industry is currently seeking a higher degree of automation in the production process (including binding and matching and other post-printing processing steps) to improve production efficiency, reduce costs, and reduce waste.

Net profit for 2022 and 2023 was HK$3.387 million and -3.387 million, down 192.8% year on year in 2023, mainly due to increases in research and development expenses, anticipated credit loss reserves and exchange losses in 2023.

The company's main financial data, source: prospectus

Notably, as of December 31, 2023, the company's accounts receivable reached HK$31.67 million, an increase of 61.4% over December 2022, mainly due to increased sales orders in December 2023 and delayed customer payments.

Furthermore, a significant portion of Xinghui New Development's revenue is dependent on a limited number of key customers, and is likely to continue to do so. In 2022 and 2023, the top three customers accounted for 74.4% and 85.5% of the company's total revenue, respectively. If any one of the major customers stops purchasing the company's products, it will have a substantial negative impact on the company's revenue, operating results, and financial position.