Journey to IPO: A Chinese-American Father-Son Duo's Path to Listing - III

Recently, Hubei Jiang Electric Co., Ltd. (hereinafter referred to as "Jiang Electric") updated its IPO process, with this company seeking to go public for the 10th time in 10 years.

However, according to publicly disclosed information, Jiang Electric seems to have many factors that raise concerns on the market. Can this Chinese-American father-son duo-led company successfully navigate the road to listing?

A Bumpy Road to Listing

Jiang Electric's journey to listing has been a long and arduous one. According to reports, Jiang Electric began planning its IPO as early as 2013, but it wasn't until May 2017 that the company signed an agreement with Dongguan Securities to start working on its listing.

The three-year cooperation between the two parties ended in October 2020, with Dongguan Securities releasing multiple reports on Jiang Electric's progress. However, it took a long time for Jiang Electric to submit its prospectus.

Three months later, in January 2021, Xingye Securities (600109) became Jiang Electric's second mentor, only to last for two months and then end its cooperation.

In June 2022, Jiang Electric finally found its "third mentor" Guojin Securities (600109), which marked a major milestone in the company's journey to listing.

A High Degree of Dependence on Overseas Markets

Jiang Electric is primarily engaged in the research, design, production, and sales of home appliances, with its main products including electrical appliances and non-electrical appliances for household use.

Unlike many other IPO companies, Jiang Electric's main business revenue has actually decreased. In 2020, Jiang Electric's main business revenue reached CNY14.66 billion, while in 2022, it dropped to CNY10.97 billion, a decline of 25.17%.

Jiang Electric's total revenue from January to June in each year has increased by 26.48%, 0.73%, -25.92%, and -4.44%, respectively.

In terms of regional sales, Jiang Electric mainly relies on exports, including North America, Europe, Oceania, and Africa. During the reporting period, the company's export revenue was CNY14.19 billion, CNY14.66 billion, CNY10.88 billion, and CNY5.54 billion, accounting for 96.04%, 98.50%, 98.69%, and 99.04% of its total revenue, respectively.

The United States is Jiang Electric's largest market. During the reporting period, the company sold products worth CNY10.79 billion, CNY10.41 billion, CNY7.55 billion, and CNY4.53 billion to this market, accounting for 73.01%, 69.95%, 68.48%, and 80.85% of its total revenue, respectively.

The "Crisis" Behind Contract Manufacturing

Jiang Electric does not prioritize branded products but excels in ODM/OEM business. Many well-known brands such as Wal-Mart, Philips, Amazon, Medtronic, and Carrefour are Jiang Electric's customers.

After years of contract manufacturing, Jiang Electric has accumulated a stable customer base, which also leads to a high concentration ratio among its top five customers.

According to the prospectus, Jiang Electric's revenue from its top five customers accounted for 66.04%, 62.08%, 62.08%, and 71.96% of its total revenue during each reporting period, respectively.

This business model seems to be a "weakness" for Jiang Electric. According to the prospectus, Jiang Electric's average gross profit margin over the past three years was 21.06%, which is significantly lower than that of comparable companies in the same industry, with an average margin of 30.11%.

Moreover, this business model also affects Jiang Electric's research and development investments. According to the prospectus, Jiang Electric's R&D expenses for each reporting period were CNY3.302 billion, CNY3.609 billion, CNY3.198 billion, and CNY1.508 billion, accounting for 2.23%, 2.42%, 2.90%, and 2.70% of its total revenue, respectively, which is lower than the average level of comparable companies in the same industry.

It's worth noting that Jiang Electric's actual controller, Panshi Father-Son Duo, has a significant stake in the company.

As of now, Pan Yuning directly holds 54.07% of Jiang Electric's shares and indirectly holds 18.57% and 8.11% through Qi Chenghua and Qi Chengheng, respectively, accounting for a total of 80.75%. Guangshe Pan indirectly holds 7.82% through Qi Chenghua, with the two parties combined holding 88.57% of Jiang Electric's shares.

It's worth noting that Pan Yuning has repeatedly sold his controlled companies to Jiang Electric.