Report summary
Company Overview
Xunxiu Industrial is a leading global manufacturer of hair accessories. Its main products include full wigs, half wigs, lace wigs, hair accessories, men's wigs, high-end human hair extensions, and Halloween products. The main sales markets are the US, Europe and Asia, which contributed 76%, 7.2% and 14.3% to the company's revenue in 2016, respectively. The company currently has 5 production lines in China and 30 production lines in Bangladesh. According to Frost & Sullivan data, in 2016, the company ranked fifth in sales of synthetic fiber hair accessories in the world, accounting for about 40% of the revenue market share of global hair accessories manufacturers.
At FY2014-FY2016, the company's revenue continued to grow steadily, at HK$533.9, 554.5 and HK$595.7 million, respectively, mainly due to an increase in sales of products classified by hair accessories in other countries. In the same period, net profit of HK$64.8, 67.3 and 86.1 million, respectively, excluding listing expenses and changes in the fair value of preferred shares, was 15.3%.
Status and prospects of the industry
Benefiting from the economic recovery of the major hair accessories market and the increase in disposable income of the consumer audience, the global hair accessories market grew from US$2,488 billion in 2011 to US$5.039 billion in 2016, with a CAGR of 15.2%. Considering the continued popularity of hair accessories as fashion accessories, the total scale is expected to reach US$11.01 billion in 2021.
The US is the world's largest hair accessories market. The market size increased from US$1,031 million in 2011 to US$1,964 billion in 2016, with a CAGR of 13.7%, and is expected to grow to US$3,909 billion in 2021.
Advantages and opportunities
A broad product portfolio helps to occupy different markets and lead fashion trends.
Has an experienced management team.
We cooperate closely with customers in product development and design, continuously expand the product range, and maintain long-term stable relationships.
Set up a production base in Bangladesh to drastically reduce production costs.
Weaknesses and risks
The lack of long-term commercial cooperation, such as suppliers of raw materials, makes it difficult to ensure stable income or human supply.
Competition in the industry is extremely fierce, and its products are sold at high prices, and may be replaced by other competitors in the same industry.
Sales are too dependent on the US and other international markets and are affected by the risk of adjustments in their US monetary or economic policies.
valuations
The prospectus did not disclose performance forecasts. The IPO pricing corresponds to the 2016 A price-earnings ratio (excluding the impact of listing expenses) of 11.8-13.6 times, and the valuation is slightly lower than that of peers (comparable peers: 13.4 times natural beauty, 23 times L'occitane). We believe the company's business is stable, but it continues to face the challenges of overall US economic policy adjustments and other competitors. We gave the IPO an exclusive rating of “4.”