New stock preview | Grand Holdings: The third player in the sunshade curtain industry goes to Hong Kong. Can the "small enterprise" expanding to multiple countries leverage the "big industry"?

"Big industry, small enterprises" is a characteristic of the Chinese curtain industry. The total output value of Chinese fabric curtains accounts for 70% of the world's total curtain output value. In stark contrast, the curtain industry lacks industry giants. Among the many small and medium-sized curtain manufacturing companies, few companies can capture 1% of the market share. Whether the curtain industry can produce multiple listed companies like the whole-house customization industry for wardrobes and cabinets, we do not know. But at least, a curtain enterprise from Ningbo, Zhejiang, China has started its push for an IPO. On April 11, Grand Holdings submitted its prospectus to the Hong Kong Stock Exchange for the first time, with Daiwa JiXian as the sole sponsor. The prospectus shows that the company is the third-largest manufacturer of sunshades and blackout curtains in China. In terms of performance, Grand Holdings is experiencing a decline. In the fiscal years from 2023 to 2024 (hereinafter referred to as the reporting period), the company's revenue was 259 million yuan and 257 million yuan, with a year-on-year decrease of 0.79% in 2024; gross profit was 65 million yuan and 64 million yuan, with a year-on-year decrease of 1.28%; net profit was 16 million yuan and 7 million yuan, with a year-on-year decrease of 56.38%. Surprisingly, the gross profit margin of the company's standardized products is significantly higher than that of customized products. During the reporting period, the gross profit margin of the former was 36.1% and 36.3%, while the gross profit margin of customized products was about 15.8% and 16.1%. The high-gross-margin standardized products saw a decrease in revenue, leading to a decrease in the company's gross profit. One would expect the gross margin of customized products to be higher than that of standardized products. It is reported that the gross margin of Yuma sunshades has remained above 40%. Why does Grand Holdings go against the norm? Upon closer inspection, the average selling price of the company's customized products has almost halved. During the reporting period, the sales volumes of customized products were 196 thousand pairs, and 18,169 thousand pairs, with average selling prices of 538.4 yuan and 295 yuan respectively. Exchanging price for quantity has led to a slightly weaker profitability of the company's customized products. By region, the Netherlands, the United Kingdom, Chile, and France are key markets for the company. Particularly in the Netherlands, which is the company's top-selling region. During the reporting period, it contributed revenues of 97 million yuan and 94 million yuan, accounting for 37.6% and 36.6% of total revenue, respectively. The UK contributed revenues of 51 million yuan and 41 million yuan, accounting for 19.6% and 16.1% of total revenue. In fact, the revenues of the top four markets have all declined, leading to a lackluster performance for the company. It is comforting to note that, by the end of the fiscal year ending December 31, 2023, the company achieved revenue increases of approximately 505.0%, 380.9%, and 90.4% in Australia, Argentina, and Saudi Arabia, respectively. It is worth noting that during the reporting period, the company recorded a net current liability of 9.6 million yuan and 34.2 million yuan, with debt-to-asset ratios of 15.3% and 103.5%, respectively, resulting in a situation where assets do not cover liabilities. The company acknowledged in its risk disclosure that the net debt situation may persist. Global expansion to pursue market growth How to break through under the siege of industry leaders in the complete industry chain? Sunshades and blackout curtains have excellent heat insulation properties, leading to stable growth in their market. Between 2019 and 2023, the global market for sunshades and blackout curtains grew at a compound annual growth rate of approximately 3.6%, rising from about 11.3 billion USD to about 12.9 billion USD. Specifically, sunshades and blackout curtains are the primary products in the window decoration markets of the United States, Peru, Chile, Australia, the United Kingdom, the Netherlands, and France, with market shares in overall window decoration products reaching 57.0%, 70.0%, 69.2%, 40%, 36.5%, 34.1%, and 31.2% in 2023, respectively. Driven by the vibrant development of residential construction and an increase in commercial projects, the demand for sunshades and blackout curtains is expected to increase naturally in the following year, becoming a standard feature in home decor. Considering this, it is expected that the global market for sunshades and blackout curtains will continue to grow, reaching approximately 16 billion USD by 2028, with a compound annual growth rate of about 4.3% between 2023 and 2028. By product type, standardized sunshades and blackout curtains remain the dominant products in the market, accounting for over 70% of retail sales value from 2019 to 2023. It is expected that the markets for standardized and customized products will increase to approximately 11.4 billion USD and 4.6 billion USD, respectively, between 2023 and 2028, with compound annual growth rates of about 4.0% and 5.1%. In order to gain market share, Grand Holdings plans to expand internationally. The prospectus shows that the company has a record of...During the reporting period, the United States is China's largest market for sunshade and blackout curtain exports among the newly expanded export destinations. In the past five years, it has consistently accounted for over 32% of the total value of China's sunshade and blackout curtain exports. Malaysia and the Philippines have the highest growth rates, with a compound annual growth rate of approximately 29.8% and 13.9% from 2019 to 2023, respectively. In addition, Thailand is another market that the company is entering, with a projected compound annual growth rate of 6.0% in its sunshade and blackout curtain market from 2023 to 2028.According to the Frost Sullivan report, among the top export destinations that achieved the highest sales in the previous record period, the market for blinds and shades in the Netherlands, UK, Chile, France, and Australia is expected to achieve positive market growth rates, reaching approximately $289 million, $639 million, $111 million, $205 million, and $161 million in 2028, with annual compound growth rates from 2023 to 2028 of approximately 3.0%, 3.5%, 6.0%, 2.5%, and 3.0%, respectively. Although there is still market growth, the company's performance instability cannot be ignored. During the period, the company's top five customers accounted for approximately 76.7% and 72.5% of total revenue, with the largest customer accounting for approximately 37.1% and 36.0% of total revenue during the same period. Relying on large customers leads to concerns about the company's operational independence. In addition, industry leaders are strategically positioning themselves across the entire industry chain to ensure stable profitability. For example, Zhejiang Xidamen New Material's independent brand has entered the market through a differentiated Amazon platform, benefiting from cross-border e-commerce traffic dividends, and its own fabric brings strong product and cost advantages. The continuous high growth in sales demonstrates a relatively high level of consumer acceptance, with the potential to continue to capture market share. Yuma focuses on fabrics and enters the outdoor fabric market, expanding its product line and opening up growth opportunities. Under the onslaught of industry leaders strategically positioning themselves along the entire industry chain, can Greenland Holdings break through solely by expanding markets? In conclusion, as the third player in the Chinese blinds and shades manufacturing industry, Greenland Holdings cannot avoid growth fatigue. With lackluster growth in key markets, the company plans to expand into multiple countries to gain market share. If the company can successfully go public this time, it may provide a boost to Greenland Holdings' expansion.