|
There was a popular saying in Shenzhen's 3C circle: "If Huaqiangbei sneezes, the entire national electronics market will catch a cold." It can be said that when talking about China's 3C electronics concentration camp, Huaqiangbei is a place that cannot be avoided. Today's Huaqiangbei no longer has the glory of its former heyday. When mentioning it, perhaps the first impression that comes to most people's mind is the synonym of "copycat". Countless imitation consumer electronics products have come out of here and are sold at home and abroad. However, Huaqiangbei is not only a gathering place for counterfeit 3C products, but also a fertile ground for grassroots counterattacks. Many millionaires were born here, and there are also many well-known companies, such as UGREEN Technology. Starting from selling data cables and chargers worth dozens of yuan, UGREEN Technology, which emerged from the "copycat stronghold" of Huaqiangbei, has now become a 3 billion-level 3C sales giant. However, the story of UGREEN Technology does not stop there. Can a cheap data cable lead to an IPO worth tens of billions? UGREEN Technology is searching for the answer. With nearly 800 million yuan in dividends in three years, a young man from Shenzhen made a 3 billion yuan sales with a data cable In the eyes of most people, data cable business is a small business that can be found everywhere. It has low technical barriers and strong substitutability, and it does not have the qualifications to create a wealth-making outlet. However, some people seize the business opportunity from such an inconspicuous small incision and soar to the top. The story of UGREEN Technology starts with a young man born in the 1980s who moved to Shenzhen. In 2007, Zhang Qingsen, who graduated with a degree in international finance, went to Shenzhen alone to seek opportunities and joined an export trading company as a foreign trade salesperson. In this prosperous coastal city, he saw a consumer electronics market with booming business opportunities. Two years later, Zhang Qingsen resolutely resigned and started his own business. Cheap data cables costing dozens of yuan led him to join the then-thriving 3C industry. With experience in foreign trade, Zhang Qingsen initially mainly manufactured data cables for foreign manufacturers. However, the limitations of price-cutting and involution in the foreign trade OEM business determine that it is not a long-term solution. With the advent of the smartphone wave, Zhang Qingsen transformed into Taobao e-commerce and transformed himself from a OEM supplier to the "UGREEN" brand. In an environment where public molds are rampant and brand awareness is lacking, UGREEN created its own molds to make its own products. Relying on the business strategy of "using the strength of a five-star hotel to open a Shaxian snack bar" , it created a competitive barrier for its data cable products that seemed to have no technical content, and soon became one of the top products in the same category on Tmall and JD. UGREEN, which has established a firm foothold in domestic e-commerce, has continued to move forward, taking advantage of Amazon's cross-border e-commerce to enter overseas markets. It is reported that it took only half a year for its daily sales on Amazon to exceed 20,000 US dollars. UGREEN, which has achieved success both domestically and abroad, has thus embarked on a road of rapid development. From Tmall and JD.com to Amazon and AliExpress, UGREEN's performance has soared since its initial expansion into charging cables. In 2013, UGREEN's annual revenue was about 60 million yuan, and in the second year after expanding into overseas markets, its sales exceeded 200 million yuan. By 2021, UGREEN has entered the 3 billion level, which is about 57 times more than in 2013. Now, after eight years of hard work, Amazon has become UGREEN's largest revenue channel. According to the latest data disclosed by it, UGREEN delivered 5.6208 million orders on Amazon in the first half of 2022, with a total revenue of 684 million yuan. In 2021, the total sales of the top ten SKUs of UGREEN Technology on Amazon reached 158 million yuan, among which charging products mainly based on travel chargers/desktop chargers ranked first with annual sales of 23.2453 million yuan. The remaining hot-selling SKUs include 3C digital products such as docking stations, shared switches, audio cables, and Bluetooth headsets. ▲ The picture comes from the prospectus of GreenLink Technology Since 2019, the net cash flow generated by UGREEN's operating activities has been approximately RMB 750 million. With stable and improving performance and abundant cash flow, UGREEN has also organized dividends many times in recent years. ▲ The picture comes from the prospectus of GreenLink Technology From 2019 to June 30, 2022, UGREEN's cash dividends were 50 million, 170 million, 120 million and 59 million, respectively, with a cumulative dividend of approximately 400 million in cash. The main recipients were Chairman Zhang Qingsen, Vice Chairman Chen Junling, and employee shareholding platforms UGREEN Consulting and UGREEN Heshun. It is worth noting that Zhang Qingsen and Chen Junling, the first and second in command of UGREEN, privately cashed out 300 million yuan last year. In 2021, GreenLink welcomed its first external shareholder. In April last year, Zhang Qingsen and Chen Junling transferred their 3.70% and 1.85% shares to Hillhouse Capital for RMB 200 million and RMB 100 million respectively. In June, Hillhouse Capital added another RMB 250 million in investment, and also attracted a total investment of RMB 50 million from Shenzhen Shiheng, Yuanda Fanglue, and Nut Capital. The successive influx of external capital seems to have sent a signal that UGREEN is about to apply for a listing. UGREEN is knocking on the door of listing after jumping out of the foundry and parasitizing on the third-party platform
The booming consumer electronics industry has always been full of outstanding industry leaders. In August 2020, Anker Innovations, a leading 3C brand, was listed on the ChiNext board, and its market value exceeded 70 billion in just three months. UGREEN Technology, which was founded at about the same time, also embarked on the IPO road in June two years later. Will it be the next Anker? The prospectus shows that from 2019 to 2021, UGREEN achieved revenue of 2.045 billion, 2.738 billion, and 3.446 billion, respectively, with an average annual compound growth rate of 29.80%. The net profit attributable to the parent increased from 225 million in 2019 to 297 million in 2021. ▲ The picture comes from the prospectus of GreenLink Technology After more than a decade of development, UGREEN Technology has expanded from its initial cheap data cables to five major categories including transmission, audio and video, charging, mobile peripherals, and storage. It covers domestic sales channels such as Tmall, JD.com, Amazon, and AliExpress, and is rooted in global markets led by China, the United States, Britain, Germany, and Japan. At present, UGREEN mainly relies on the three major platforms of Amazon, Tmall and JD.com. In 2021, its order amounts on the above platforms were 1.374 billion, 607 million and 178 million respectively, among which Amazon is currently the largest source of income. ▲ The picture comes from the prospectus of GreenLink Technology It can be seen that the average transaction amount of UGREEN on the Amazon platform is much higher than that of the other two platforms. For the same 6-in-1 docking station, its price on Amazon and Tmall and JD.com is 169 yuan and 139 yuan respectively. Therefore, UGREEN's Amazon orders with a single transaction amount of 100 to 500 yuan account for more than 40%, which is significantly higher than other platforms. From the perspective of gross profit margin, UGREEN's main business gross profit margins were 35.71%, 38.10%, and 37.21% from 2019 to 2021, respectively. Although there have been some fluctuations, they are still higher than the industry average. For example, compared with its competitor Anker, UGREEN's overseas sales gross profit margin in the first half of 2022 was 3.86 percentage points higher than Anker. ▲ The picture comes from the prospectus of GreenLink Technology Looking at UGREEN's business model, it is highly dependent on online sales and overseas markets, and has flourished both at home and abroad. What did it rely on to transform from an OEM to a 3 billion-level 3C seller today? One answer must be a money-burning strategy. UGREEN's brand thinking and single-store business model determine that it stays away from fake order evaluation methods, and product promotion relies more on paid advertising marketing inside and outside the site, as well as linkage with social media such as Youtube and TikTok. For this reason, UGREEN's annual related service fees have also soared. During the reporting period, UGREEN's promotion expenses were RMB 142 million, RMB 181 million and RMB 208 million respectively. With the increase in product and sales scale, it has also continuously increased its investment in promotion channels inside and outside the site. ▲ The picture comes from the prospectus of GreenLink Technology At the same time, UGREEN's e-commerce platform service fees have also been increasing year by year, soaring from 128 million yuan in 2019 to 234 million yuan in 2021, and the proportion of sales expenses has increased from 20.97% to 40.09%. However, another contrasting data is that during the reporting period, UGREEN's net profit attributable to the parent company reached 225 million, 298 million, and 297 million yuan, respectively. In other words, the rising platform service fees and promotion expenses have brought about a sharp increase in revenue, but UGREEN's net profit has also been greatly eroded. In 2021, when the revenue exceeded 3 billion, the profit did not increase but decreased. Not only that, UGREEN's logistics costs are also high. In the first half of 2022 alone, UGREEN spent 215 million yuan in logistics expenses, accounting for 19.04% of its main business costs. ▲ The picture comes from the prospectus of GreenLink Technology Obviously, behind UGREEN's steady growth in performance lies the dilemma of increased revenue but not increased profits, and pressure on both cost and profit ends. Restricted by outsourced suppliers, UGREEN is repeatedly involved in quality disputes In the fast-growing and fast-dying 3C industry, it is hard not to compare UGREEN with Anker. Born in the first year of smartphones , they both took the path of branding, and their main categories also overlapped a lot.
Anker has already entered the capital market, and UGREEN, which has finally stepped onto the IPO stage, may not have a hard time going public with its own accumulated strengths over the years. However, looking at its current development status, its future prospects are still highly uncertain, and it will be a long and arduous journey to become the next Anker. The consumer electronics industry has the characteristics of short iteration cycles and strong substitutability. Therefore, if strong technological barriers are not built, it will soon be eliminated by the highly homogenized market. However, UGREEN is clearly lagging behind its peers in building product technology moats. As mentioned above, UGREEN spends a lot of money on product promotion every year. In such a marketing-heavy model, it is inevitable that it will be infected with the drawbacks of neglecting research and development. In 2019-2021, UGREEN's R&D investment was 64.8853 million yuan, 95.127 million yuan and 157 million yuan respectively, accounting for only 3.17%, 3.47% and 4.54% of its operating income. For reference, Anker's R&D investment accounted for 5.92%, 6.07% and 6.19% respectively during the same period. It can be said that UGREEN's R&D efforts are not only far behind Anker, but also lower than the industry average. From the perspective of patents, as of the date of signing of the prospectus, UGREEN has 750 domestic patents, but 547 of them are foreign patents, and there are only 12 invention patents with higher gold content. Anker, a peer, has 55 authorized invention patents in 2021 alone. The secret of UGREEN's rise lies in "substitution", but its weak R&D and innovation capabilities have become a major constraint on its long-term and stable development. If you search on major platforms, you can find a lot of "UGREEN's same style". UGREEN, which wins by low prices, is likely to be strangled by its peers with even better low prices. In terms of production model, UGREEN adopts a strategy of outsourcing as the main method and independent production as the auxiliary method based on its own R&D. From 2019 to 2021, the proportion of outsourcing production of UGREEN Technology reached 75.78%, 76.10% and 75.62% respectively, and the proportion of independent production products was less than 30%. Over-reliance on outsourcing and lack of independent production capacity also make UGREEN subject to multiple constraints from suppliers in terms of pricing, quality control, product delivery and overall supply chain management, facing certain operating risks. The key point is that product quality is limited by the level of suppliers and is difficult to be effectively controlled. Since 2019, UGREEN has had five cases where its products did not meet national standards, and three other violations occurred. For example, in 2020, UGREEN was fined 93,765 yuan for its PB132 UGREEN mobile power bank, which did not meet national mandatory standards. The value of the products involved was 31,255 yuan. During the reporting period, UGREEN was repeatedly complained by consumers for product quality issues, including damage to the interface of a customer's laptop computer due to the Type-C docking station and insufficient length of the audio cable. The two lawsuits were awarded compensation of 5,318.50 yuan and 560.08 yuan respectively. On the Black Cat complaint platform, UGREEN has received 99 complaints so far, including mismatched goods, data cables catching fire, abnormal charger use and other risk accidents. After the lawsuit, UGREEN still has cases where the docking station causes damage to users' laptops. Product quality disputes will undoubtedly undermine customer confidence, and UGREEN has not yet properly handled such issues. If things continue like this, it will inevitably have a negative impact on the brand's reputation and will be detrimental to the brand's long-term development. In addition to quality disputes, GreenLink's leased properties also have defect risks. As of the date of signing of the prospectus, some of the properties leased by GreenLink and its subsidiaries had not yet completed the renewal procedures for real estate certificates, had not obtained property ownership certificates, had not completed the corresponding construction approval procedures, and had not completed the leasing registration procedures. This involves UGREEN's office, storage and production and operation leased premises, with a total area of approximately 31,200 square meters, accounting for 31% of the total area of UGREEN and its subsidiaries' leased premises. If the company is unable to continue leasing the above-mentioned premises, the overall relocation cost is estimated to be approximately RMB 2.6 million, which is likely to have an adverse impact on its normal production and operation. Lacking core competitive barriers, weak independent innovation capabilities and repeatedly involved in quality disputes, UGREEN has obvious advantages but also obvious shortcomings. Whether it can successfully break through the current constraints will determine how far UGREEN can go in the future. UGREEN was born in the stronghold of copycats and rose to prominence in the 3C replacement trend. It transformed from an OEM to a brand, and climbed the IPO door along a data cable. After breaking through that door, what kind of world will finally greet UGREEN?
|
