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What do home companies want to get together?
On April 18, the China Securities Regulatory Commission (CSRC) released a list of pre-disclosed companies for the first time in a while. This marked the first such disclosure since October 25, 2012. From April 18 to April 22, several IPO prospectuses were published, including companies in the home industry like Sichuan Imperial Sanitary Ware and Jiangsu Yazhen Furniture. For many home companies that faced tough times in 2013, what does an IPO really mean?
The industry outlook remains uncertain. According to the CSRC's "Initial Public Offering Review Process and Reporting Enterprise Situation" released on April 18, several furniture companies are at different stages of the IPO process. Red Star Meikailong Furniture Group, Op Lighting, Gujia Household, and Jiangsu Hengkang are in the "accepted" stage, while Zhejiang Yongyi Furniture, Guangzhou Luckyboy Creative Home, Hunan Love Home Textiles, and Three Tree Paints are in the "feedback" stage.
There is usually a gap between planning to go public and actually completing an IPO. In today’s challenging environment for the home industry, it may not be the ideal time for many companies to list. However, during this critical phase of industry restructuring, a successful IPO could offer significant opportunities for these firms.
Looking at the 2013 financial reports of Royal Family and JF Home, both saw declines in revenue. Royal Family's revenue dropped by 6.6% year-on-year, while JF Home's fell by 34.4%. Royal Family also reported a net loss of HK$456 million, and although JF Home managed to reduce its losses, it still recorded a HK$27 million loss.
Meanwhile, Dehua Bunny Decoration New Materials Co., Ltd., a leading domestic sheet metal manufacturer, saw a 10.84% increase in operating income to RMB 1.242 billion last year, but its net profit fell by 27.8% to RMB 240 million.
Despite the slowdown in the home industry over the past two years, most companies showed growth in their 2013 annual reports. Companies like Sofia, Xilinmen, and Nature Flooring experienced varying degrees of growth. Sofia stood out with a 46% year-on-year revenue increase to RMB 1.78 billion and a 41.4% rise in net profit to RMB 245 million.
Notably, Yixing Yi Shengsheng became the first shareholder of a home company to list on the Shenzhen Stock Exchange. Dongyin Risheng made a strong debut, closing up 44% on its first day. This success reignited interest among other companies looking to go public.
Zhong Haizhou, Assistant Director of the Board of Directors at the Federation Furniture Group, noted that before, many companies maintained growth rates of 30% to 50% annually. Now, achieving more than 30% growth is considered impressive. He added that there are no major breakthroughs for large home enterprises, and their growth rates are generally in line with China's GDP growth.
With many home companies rushing to go public, the question remains: will they succeed, and how will the market react? As Chen Hui mentioned on the first day of Dongyin Risheng's listing, "The capital market is always changing, and it's hard to predict the future."
Red Star Meikailong plans to list on the Shanghai Stock Exchange, issuing up to 100 million shares, with new shares not exceeding 530 million. The total share capital after the issue will not exceed 353 million. The company aims to raise about RMB 4.45 billion for 11 projects, including household life plaza developments and e-commerce platforms in cities like Wuhan, Chongqing, and Tianjin. The total investment for these projects is around RMB 6.11 billion.
The most heavily funded project is the Wuhan Hongxing Meikailong Expo Home Plaza, with a total investment of about RMB 1.2 billion. The funds raised from this offering will be approximately RMB 868 million.
Much Love Home Textiles, another home company, plans to list on the SME Board of the Shenzhen Stock Exchange. It intends to issue up to 30 million shares, with new shares not exceeding 30 million. The company expects to raise about RMB 280 million, mainly for marketing network expansion, IT infrastructure, and working capital. Around RMB 170 million will be allocated to expanding its marketing network.
Expanding production capacity, enhancing brand recognition, and building stronger distribution channels have become the primary uses of funds for these home-based companies. Zhong Haizhou emphasized that capital inflow will accelerate the industry's restructuring. He believes that listed companies will benefit significantly from access to capital, which is crucial for scaling up operations. With external capital entering the sector, the reshuffling of the home industry will likely be more aggressive, concentrating market share among larger players.
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