As a part of clothing, food, housing and transportation, the catering industry is a huge industrial chain closely related to everyone's diet. With the continuous improvement of people's living standards, consumers' demand for catering is gradually diversifying.
Behind the transformation of the industry, the important infrastructure in the catering industry, that is, commercial kitchen equipment, has also undergone a subtle transformation. Among them, when standardized fast food and health-focused customized catering have become the mainstream trend, the process of making dishes in restaurants is no longer limited to traditional stir-frying, boiling, roasting, and frying, which also puts forward higher requirements for cooking utensils, and commercial kitchenware has gradually evolved from a single energy-saving product to a customized functional product.
Recently, Wuxi-based commercial kitchen equipment maker Trinity Kitchenware (LBGJ.US) updated its prospectus to continue its attack on the Nasdaq.
According to the latest prospectus, Trinity Kitchenware plans to issue 5 million shares at a price of $4 to $6 to raise $20 million to $30 million. Under the current uncertain external conditions, can Trinity Kitchenware choose to go public in the United States?
Revenue improved in fiscal 2023, but net profit still hasn't reversed the downward trend
Zhitong Financial APP learned that Trinity Kitchenware was founded in 1992, and since its establishment, the company has been engaged in the design, research and development, production, installation, after-sales maintenance and other services of commercial kitchen equipment.
According to the company's official website, at present, Wuxi Libang Kitchen has nearly 200 employees, and has set up branches and branches in Shanghai, Hangzhou, Nanjing, Suzhou and other cities. The company has a plant area of 25,000 square meters and fixed assets of hundreds of millions of yuan. From the perspective of the layout of branches, the company mainly cultivates the Yangtze River Delta business.
In terms of product layout, the company's current series of commercial kitchen accessories include more than 80 varieties of 13 series such as steaming, cooking, baking, frying, disinfection, conditioning, refrigeration, etc., as well as more than 300 varieties of stainless steel kitchen equipment, cooking, food preparation instruments, hotel supplies, kitchen appliances, etc.
The core products mainly include stainless steel kitchen equipment, as well as flue gas emission and fresh air supply piping systems. Among them, stainless steel kitchen equipment also includes intelligent pressure cookers, intelligent soup pots and other intelligent kitchenware, equipped with intelligent controllers and displays, which can realize automatic control of the cooking process.
In addition, the waste processor is also one of the core products of Trinity kitchenware, including crushing system, conveying system, dewatering system and detection system, which is suitable for crushing and dewatering kitchen waste in all kinds of canteen kitchens.
At present, Trinity's customers are mainly hotels, companies, public institutions, educational institutions, hospitals, etc. For the fiscal year ended June 30, 2023, the company had a total of 150 customers, and the proportion of revenue contribution from different types of customers is roughly shown in the figure below. In terms of revenue ratio, schools and hotels are the company's main sources of customer income.
From the perspective of performance, in fiscal year 2022, affected by the epidemic, the company's major customers such as hotels, schools and hospitals postponed their procurement plans, resulting in a decline in the company's overall revenue in 2022, with revenue from US$15.9019 million in 2021 a year-on-year decrease of 15.2% to US$13.4791 million, and net profit from US$2.6585 million to US$845,100.
This phenomenon has improved in fiscal year 2023, in terms of revenue, the company achieved revenue of $14.0045 million in fiscal year 2023, a year-on-year increase of 3.9%, however, in terms of net profit, Trinity kitchenware has not reversed the downward trend in fiscal year 2023, and net profit fell 27.3% year-on-year to $614,100 in fiscal year 2023.
In terms of earnings performance, the Company's gross profit margin increased from 36.0% in FY2022 to 41.1% in FY2023, but the net profit margin decreased in FY2023 to 4.4% year-on-year from 6.3% in FY2022, mainly related to the increase in the Company's bad debt expenses in FY2023.
According to Zhitong Financial APP, in fiscal year 2023, the company's bad debt expenses increased from US$378,300 in fiscal 2022 to US$835,200, a year-on-year increase of 220.8%. In this regard, Trinity Kitchenware mentioned in the prospectus that the increase in bad debt expenses in fiscal year 2023 is mainly due to the negative impact of the epidemic on the financial situation of customers, resulting in the delay of payment by some customers. At the same time, Trinity Kitchenware also said that according to the nature and historical payment situation of these customers, these accounts receivable of Trinity Kitchenware can be recovered in the future.
Inventory levels are improving, but accounts receivable are under pressure
Behind the growth of Trinity kitchenware's operating income, it is also accompanied by the company's good progress in destocking in fiscal 2023.
As one of the key indicators to measure the performance of manufacturing companies, Trinity Kitchenware inventory turnover days have decreased in FY2023. Among them, the company's inventory balance decreased from 17.32% in 2022 to 10.12% of total current assets, and the inventory turnover days also shortened from 128 days in fiscal 2022 to 80 days in 2023.
However, despite the improvement in inventory levels, the company's product sales have not been fully translated into performance. Among them, due to the delay in the payment process of some of the company's customers, Trinity Kitchenware has a high dependence on major customers. In recent years, Trinity Kitchenware has also shown some pressure in terms of debt collection capacity.
According to Zhitong Financial APP, in fiscal year 2021, Trinity's accounts receivable reached US$7.747 million, a significant increase of 55.87% year-on-year, accounting for 103.6% of the company's revenue in the current period. In comparison, the company's accounts receivable accounted for only 57.4% in fiscal 2020.
In fiscal 2022 and 2023, the company has not improved this phenomenon, and even has a tendency to expand. Among them, the company's accounts receivable will reach 10.8398 million and 14.9192 million US dollars in fiscal year 2022 and 2023 respectively, an increase of 37.63% year-on-year in 2023, and the proportion of accounts receivable to revenue will be 80.42% and 106.53% respectively, and the fiscal year 2023 will reach the highest level in recent years.
At the same time, because the company's operating income is more dependent on some customers, when the customer's ability to pay is delayed, it will have an impact on the company's performance. Among them, some of the company's customers contribute more than 10% of revenue, and the balance of accounts receivable accounts for 10% or more of the company's total accounts receivable.
In FY2022, two of the company's customers accounted for about 10% of total revenue, while three companies accounted for more than 10% of accounts receivable, 35%, 18% and 12% respectively, while in FY2023, Trinity Kitchenware had one customer accounting for 20% of revenue and one customer accounting for 12% of its trade receivables.
On the one hand, due to its reliance on some major customers, future changes in the Company's relationship with major customers may damage the Company's business operations and financial performance.
Currently, with the development of the hotel and catering industry, the market for commercial kitchen equipment is still expanding. According to Fior Markets, the global commercial cooking equipment market is expected to reach $140 billion by 2028, with a forecast CAGR of 6.5% from 2021 to 2028.
Among them, the main consumer groups in the commercial kitchen appliance industry attach importance to personalized products and have high requirements for product quality and process design. In order to win in the industry competition, enterprises need to provide more diversified, humanized and intelligent products and services.
From the perspective of the entire market competition, the current competitive factors in the commercial kitchen equipment industry are mainly reflected in the competition for technology, research and development, quality, channels, brands, supporting capabilities and after-sales service, and the market is still facing fierce competition. For Trinity Kitchenware, if it fails to adapt to changes more quickly in the future and launch new products that meet market demand, its market share and performance will also be challenged. Judging from the company's current business and financial performance, if Libang kitchenware can be successfully listed this time, its future development is still unknown.