Author: Dong Yin
Listing: Insight IPO
On January 6, Marg Home Furnishing Co., Ltd. (hereinafter referred to as "Marg Home") disclosed the prospectus (filing draft) for the initial public offering of shares on the official website of the China Securities Regulatory Commission, which intends to land on the main board of the Shenzhen Stock Exchange. Guotai Junan Securities acted as the lead underwriter.
In this IPO, Marg Home intends to issue no more than 25 million shares to the public for the first time, accounting for no less than 25% of the total share capital of the company after the issuance, and intends to raise 700 million yuan.
Affected by the epidemic and real estate regulation, the operating efficiency of Mag Home has declined in the past two years. Overall, the company's gross profit margin is higher than the industry average, but the net profit margin is low, and the business scale is small, and the increasingly fierce competition in the industry makes the company face greater competitive pressure.
The performance of 2020 began to decline, and the future needs to pay attention to the impact of regulation
Founded in 2013 and registered in Chongqing, Marg Home furnishing is mainly engaged in the research and development, design, production, sales and service of whole house custom home products. The company is positioned to provide one-stop whole house custom home solutions for high-end users, and the existing products mainly include custom wardrobes, indoor wooden doors, and overall cabinets.
As of June 30, 2021, the company has 685 dealers and 728 distribution stores nationwide, and the sales areas of the company's products are mainly concentrated in East China and Southwest China, mainly including the Yangtze River Delta and Chongqing and Sichuan regions, and the sales revenue in these areas accounts for nearly 60% of the company's total revenue.
Custom home furnishing industry belongs to the "real estate post-cycle" industry, market demand and the development of the real estate market is closely related, the past two years by the real estate regulation and control, coupled with the outbreak of the new crown epidemic, Marg home since 2020 performance declined.
According to the prospectus, from 2018 to 2020 and the first half of 2021, the company achieved operating income of 762 million yuan, 824 million yuan, 839 million yuan and 416 million yuan, and net profit was 70.4474 million yuan, 100 million yuan, 98.5327 million yuan and 29.6629 million yuan, respectively.
The company's main operating data
Source: Prospectus
From the above data, it can be seen that the company's operating income in 2019 and 2020 increased by 8.12% and 1.82% respectively over the same period of the previous year, with a decline in growth rate and negative growth in net profit in 2020.
Due to the obvious seasonal characteristics of the company's main business income, the sales revenue in the second half of the year is relatively high, and the data shows that the sales revenue from 2018 to the second half of 2020 accounted for 56.44%, 59.25% and 63.9% of the whole year, respectively.
According to the data for the first half of 2021, it is estimated that the company's revenue in 2021 may be about 100 million yuan, a slight increase over 2020, and the net profit may not be much different from 2020.
Marg Home also prompted investors in the prospectus to pay attention to the impact of real estate regulation on the company's profit decline.
The company pointed out that since 2021, the debt default events of real estate enterprises have appeared frequently, and if the state increases the regulation and control of real estate in the future or changes in the macroeconomic situation, real estate enterprises have failed to better respond to the regulation and control policies including the "three red lines", resulting in a decline in the prosperity of the real estate market, which will adversely affect the custom home furnishing industry and the company's production and operation.
In extreme cases, it is impossible to completely rule out the decline in the company's operating profit due to the above factors, or even the year-on-year decline of more than 50% in the operating profit of the listing year or the loss in the year of listing.
High gross margin, low net interest rate, asset-liability ratio higher than the peers
From the perspective of revenue structure, custom wardrobes, as one of the main products of Marg Home, contribute most of the revenue and are the most important source of profit for the company.
The data shows that from 2018 to 2020 and the first half of 2021, the revenue of the company's customized wardrobe accounted for 94.43%, 89.3%, 87.56% and 88.18% respectively, the indoor wooden door and the overall cabinet accounted for about 4%-5% respectively, and the revenue of other products accounted for only 1-2%.
Company revenue structure
The gross profit of the company's main business was greatly affected by the customized wardrobe, during the reporting period, the gross profit margin of the company's main business was 35.84%, 39.18%, 39.18% and 36.63%, respectively, of which 2018 to 2020 showed a growth trend. The gross profit margin decreased from January to June 2021, mainly due to the impact of the decline in the unit price of customized wardrobe products.
Product gross margin
Compared with comparable companies, the gross profit margin level of Mag Home's main business is slightly higher than the industry average, but the net profit margin remains at about 10% on average, which is relatively low.
In addition, because Mag Home mainly adopts the dealer sales model, it faces certain dealer management risks. During the reporting period, the company's sales revenue through the existing dealer model accounted for more than 98%.
With the expansion of the company's operating scale, the dealer sales network is also expanding, which puts forward higher requirements for dealer management capabilities.
In the future, if the company cannot carry out continuous and effective management of the dealer sales network, it may lead to a negative impact on the company's channel construction and brand image, which in turn will adversely affect the company's operating performance.
In the dealer model, the company adopts the settlement method of "first payment and then goods", which makes the company's advance collection and contract liabilities larger, resulting in the company's asset-liability ratio being higher than the average level of the same industry.
Asset-liability ratio compared to the industry
The scale of the enterprise is small, the market competition is fierce, and some of the equity is pledged, and there is a risk of change
Under the background of domestic consumption upgrading, custom home furnishing is favored by consumers with its advantages of personalized design, high space utilization, and uniform style, and the market scale is growing rapidly.
According to the data of the National Bureau of Statistics and third-party agency iResearch Consulting, the scale of China's customized home furnishing market reached 360.76 billion yuan in 2020, with a compound annual growth rate of 20.69% in the period from 2015 to 2020.
However, the scale of enterprises in the industry is generally small, there are many industry brands, the homogenization of low-end products is more serious, the overall concentration is low, showing the competitive characteristics of "large industry, small enterprise", and the industry growth rate is much lower than the market scale growth rate.
According to Yiou data, from 2017 to 2020, the industry concentration (CR9) of the top 9 enterprises in the industry, including Oupai Home, Sophia, Shangpin Home Delivery, Zhibang Home, Gold Medal Kitchen Cabinet, etc., decreased from 13.17% to 11.53%.
With the entry of more traditional furniture companies, the degree of competition in the custom home market will further intensify and upgrade.
Compared with listed companies in the same industry, the current overall business scale of Mag Home is also small, if the company can not quickly grow the financial strength, and in brand marketing, channel construction, product research and development, customized services, information system applications and other aspects of increased investment, the intensification of market competition may lead to a decline in the market competitiveness of products, affecting its future operating performance.
From the perspective of shareholder structure, due to the pledge of part of the equity of Marg Home, the company also faces a certain risk of equity pledge.
The prospectus discloses that 6.86% of the shares of the issuer held by Tianma Consulting, one of the shareholders of the company, are currently in a state of pledge, and the pledgee is the Foshan branch of China Minsheng Bank Co., Ltd., which is a pledge guarantee measure provided by Tianma Consulting for applying for a bank loan.
Because Tang Bin, the actual controller of the company, indirectly holds 3.5% of the shares through Tianma Consulting, if Tianma Consulting is unable to repay the debt on time according to the agreement in the future, it may lead to a change in the ownership of the above-mentioned pledged shares, and the total shares held by Tang Bin will drop from 55.04% to 51.54%.
Tang Bin currently serves as the chairman and general manager of Marg Home, which directly holds 51.16% of the company's shares, indirectly holds 0.38% of the shares through Jinma Consulting, and indirectly holds 3.5% of the shares through Tianma Consulting, holding a total of 55.04% of the shares of the issuer, and is the actual controller of the company.
The Company's existing shareholding structure
For the progress of the listing of Marg Home, Insight IPO will continue to pay attention.