Big news! Cross-border blockbuster Zhiou Technology's IPO passed the review

A month ago, the IPO of the cross-border e-commerce giant Saiwei Times successfully passed the review of the Shenzhen Stock Exchange's Growth Enterprise Market Listing Committee. Now, another cross-border enterprise has received good news and successfully passed the review.

It is learned that at the 41st review of the GEM Listing Committee in 2022 held on July 20, the cross-border home furnishing giant Zhiou Technology passed the review smoothly.

The announcement shows that Zhiou Home Furnishing Technology Co., Ltd. (IPO) meets the issuance conditions, listing conditions and information disclosure requirements.

According to information, Zhiou Technology was established in 2010 and is mainly engaged in the research and development, design and sales of its own-brand home products. Its products mainly include furniture series, home series, garden series, pet series and other categories. It mainly operates three own-brands, SONGMICS, VASAGLE and FEANDREA. It is a world-renowned Internet home brand.

The latest prospectus shows that the number of shares to be publicly issued this time will not exceed 40.15 million shares, which will not be less than 10% of the total share capital of the issuer after this public offering. The funds to be raised this time are 1.486 billion yuan, which will be used for the construction of the R&D and design center, the expansion of the warehousing and logistics system, the construction of the Zhengzhou headquarters operation and management center, and the replenishment of working capital.

According to the prospectus of Zhiou Technology, from 2019 to 2021, Zhiou achieved operating income of 2.326 billion yuan, 3.971 billion yuan and 5.967 billion yuan respectively; and achieved net profits of 108 million yuan, 380 million yuan and 240 million yuan respectively.

In the first quarter of 2022, Zhiou's operating income was 1.427 billion yuan and its net profit was 51.4391 million yuan; it is expected that the operating income in the first half of 2022 will be between 2.73 billion yuan and 2.83 billion yuan, a year-on-year change of -14.68% to -11.55%; the net profit will be between 106 million yuan and 120 million yuan, a year-on-year change of -24.51% to -14.54%.

It can be seen that in the past two years, Zhiou Technology's operating performance has been unstable, with both revenue and net profit showing a downward trend. And because it is an overseas enterprise, Zhiou may be more eager for the favor of the capital market. Some industry insiders believe that "the sharp fluctuations in performance may be an important reason for its final choice of GEM IPO."

In fact, as a well-known cross-border home furnishing seller, although Zhiou Technology's cross-border business is booming, its road to listing can be described as bumpy. It is understood that from 2018 to 2020, Zhiou Technology made various preparations for listing, and started its first IPO sprint in June 2021, but failed three times.

There are many reasons for this, both company-specific and market-related, and Zhiou Technology has also exposed many problems in this process:

1. High corporate debt

2. Rising costs and falling gross profit margins

3. Over-reliance on cross-border platforms such as Amazon

4. Questioned for insufficient R&D investment

During the review of the GEM Listing Committee, the Listing Committee also raised two important questions to Zhiou Technology:

1. In 2021, the issuer's net profit fell by 55% year-on-year, and both revenue and net profit showed a downward trend in the first half of 2022. Please explain whether the adverse factors that led to the decline in performance since 2021 have been eliminated, whether it has a significant adverse impact on the issuer's ability to continue operations, and whether the relevant risk disclosures are sufficient. Please ask the sponsor to express a clear opinion.

2. During the reporting period, the proportion of revenue generated by the issuer's independent design to operating revenue was 17.35%, 26.19% and 28.37%, and the R&D expense rate was 0.45%, 0.32% and 0.41%.

Please issue:

(1) Based on the R&D investment, number of R&D personnel and independently developed products of comparable companies in the same industry, explain whether the issuer has advantages in R&D innovation;

(2) Explain whether the issuer meets the requirements of the GEM. Please ask the sponsor to give a clear opinion.

In addition, it was also noted that in the prospectus previously released by Zhiou Technology, it was disclosed that another cross-border giant, Anker Innovations, was its largest external investor and held 9.15% of Zhiou Technology's shares, which also indirectly confirmed Zhiou's overseas strength and potential.

Going public is not the end of cross-border sales. In the future, we can wait and see whether Zhiou Technology can reverse the loss-making situation.