Preview of US IPO: JM Group, with over 70% of revenue from the US market, can it maintain rapid growth with impressive performance?

Although the current international situation is complex and ever-changing, as the world's largest manufacturing country, China's total exports in 2024 exceeded 25 trillion yuan for the first time, reaching 25.45 trillion yuan, maintaining positive growth for 8 consecutive years, highlighting the strong resilience of China's foreign trade industry. The remarkable achievement is made possible by the "capillary network" composed of millions of wholesalers and distributors - they transport nutrients produced in China to every cell of the global market in a highly flexible, elastic, and deeply penetrating manner, contributing to China's foreign trade industry, including the JM Group, which has embarked on the journey to go public in the United States. It is reported that the Hong Kong-based procurement and supply company JM Group submitted its initial public offering (IPO) application to the US SEC on August 13th with the intention of listing on the New York Stock Exchange. The company plans to issue 3.75 million common shares in this IPO at a price of $4 to $5 per share, aiming to raise $17 million, but the ticker symbol has not been disclosed yet. At the midpoint of the offering price range, JM Group's IPO market value will reach $89 million. In terms of performance, JM Group is currently in a period of sustained growth. Data shows that in the fiscal years of 2023 and 2024 (12 months ending September 30), JM Group had revenues of 119 million Hong Kong dollars and 221 million Hong Kong dollars, with net profits of -26.28 million and 7.028 million respectively. In the first half of the fiscal year ending in 2025 (6 months ending on March 21, 2025), JM Group had revenues of 147 million Hong Kong dollars, a year-on-year growth of 13.95%, and net profits of 12.4464 million Hong Kong dollars, with a year-on-year growth rate as high as 142.6%, the half-year net profit has far exceeded the full fiscal year of 2024. With a small market capitalization and impressive performance, will JM Group's IPO be favored by investors? The answer can be found in the company's prospectus. Diverse measures support continuous growth in performance, rapid increase in net profit margin JM Group is a Hong Kong-based procurement solutions provider that aims to promote better lifestyle choices for consumers by sourcing and wholesaling a wide variety of products globally. In terms of categories, JM Group's purchased and wholesale products are mainly divided into eight categories, including sports and outdoor leisure products, toys and games, seasonal decorations and party supplies, electronic products, household and tools, school and office supplies, clothing and accessories, personal care products, and other products. According to the prospectus, clothing and accessories, sports and outdoor leisure products, and seasonal decorations and party supplies are the top three revenue categories for JM Group, accounting for 25.78%, 24.74%, and 20.27% respectively in the fiscal year of 2024, totaling over 70.79%. The next is toys and games, accounting for 14.89%, and the remaining product categories account for less than 10% of the revenue. JM Group's suppliers are mainly manufacturing companies from China, who produce products based on designs approved by JM Group and their customers or based on customer designs. JM Group's customers include retailers, distributors, and wholesalers, covering countries such as Australia, Hong Kong, Mexico, and the United States. In the fiscal year of 2024, sales to US customers accounted for 72.5% of JM Group's total sales revenue, followed by sales to Hong Kong customers at 24.3%, Mexico at 3%, and Australia at 0.2%. Clearly, the United States is a core market for JM Group. In terms of performance, JM Group's revenue increased by 85.76% to 221 million Hong Kong dollars in the fiscal year of 2024. This was mainly due to the company acquiring a new customer during the reporting period, which significantly contributed to the total sales revenue and led to varying degrees of growth in product revenues. After a significant increase in revenue, the scale effect strengthened, leading to an increase in the gross profit margin level. Coupled with the reduction in sales expenses, general expenses, and administrative expenses, JM Group's profitability significantly improved during the reporting period, achieving a net profit of 7.0284 million Hong Kong dollars, compared to a loss of 26.2823 million Hong Kong dollars in the fiscal year of 2023. The net profit margin increased from -22.1% to 3.18%. In the first half of the fiscal year of 2025 (6 months ending on March 31), JM Group's revenue increased by 14.1% to 147 million Hong Kong dollars, driven by increased market demand and acquisition of a new customer. Meanwhile, sales expenses, general expenses, and administrative expenses were significantly reduced from 12.7967 million Hong Kong dollars to 3.859 million Hong Kong dollars, accelerating profit growth. During this period, a net profit of 12.4464 million Hong Kong dollars was recorded, a year-on-year increase of 142.6%, raising the net profit margin from 4% to 8.4%. From the above analysis, it is evident that JM Group's continuous growth in performance is due to increasing market demand, continuous acquisition of new customers, and accelerated profit growth through the reduction of sales and administrative expenses, resulting in a rapid increase in the net profit margin level. Opportunities and challenges coexist, requiring adjustment in business layout From an industry perspective, the export of Chinese products is a promising track for development. As the global economy gradually recovers and consumer markets continue to expand, the international demand for cost-effective and high-tech products from China will continue to increase. According to related data, the global market for home decor, party supplies, sports and outdoor toys, and toys and games is expected to increase at compound annual growth rates of 4%, 8.6%, 4.6%, and 4.5% respectively from 2024 to 2032, indicating steady growth in demand. As a procurement solutions provider covering multiple countries and regions globally, JM Group is expected to benefit from the industry's growth. However, JM Group also faces significant challenges, with its business focused on specific countries and highly dependent on key customers. According to the prospectus, in the fiscal year of 2024, US customers accounted for 72.5% of JM Group's total sales revenue, meaning that the US market is a key factor in determining the company's performance. In 2025, the US-China tariff policy went through a rollercoaster trajectory of "sharp escalation - intense bargaining - phased easing", bringing significant operational pressures to foreign trade enterprises. Although current trade negotiations between China and the US have entered a phase of temporary easing, if future progress falls short of expectations, businesses such as JM Group with a major presence in the US market may face renewed pressures. Therefore, in the current international context, it has become imperative for JM Group to achieve overall stable business operations through diversified global positioning. While heavily relying on the US market, JM Group also exhibits a significant dependency on a single customer. According to the prospectus, in the fiscal year of 2024, revenue from Five Below, a wholly-owned subsidiary of a discount retailer in the US, accounted for 68.7%. Over-reliance on a single customer may result in weak bargaining power, extended payment terms, or significant performance fluctuations if major customers change supply chains, which is not conducive to the company's long-term stability and development. Furthermore, the "aftershocks" of over-reliance on a single customer can also be seen in JM Group's asset structure. As of the first half of the fiscal year of 2025, JM Group's total assets were 88.1648 million Hong Kong dollars, with accounts receivable amounting to 64.4454 million Hong Kong dollars, accounting for a high proportion of 73.10% of total assets. When receivables are high and payment terms are extended, expanding the business will increase liabilities, with JM Group's total liabilities reaching 118 million Hong Kong dollars, resulting in an asset-liability ratio of 133.84%. Therefore, for JM Group, reducing dependence on a single market and a single customer, balancing business layout, and subsequently lowering the level of debt to achieve more stable development are crucial plans that need to be implemented post-listing.