Hong Kong Stock Exchange IPO | Carolot (02549): One of the world's fastest-growing kitchenware brands ranks fourth in online cookware sales in China. Apply for subscription!

The performance of Midea, the leading domestic appliances company, in its IPO has brought good news to Carote (02549), which also belongs to the household appliances (kitchenware) industry. The company successfully transformed starting from 2016, leading to the conclusion: recommended for subscription! Carote was founded in Hangzhou, China in 2007 and is a global kitchenware brand. From 2013, it focused on ODM, and in 2016, it launched its own brand. Since the launch of the Carote brand in 2016, the company has established a significant position in the online kitchenware segment in major markets such as China, the United States, Western Europe, Southeast Asia, and Japan, becoming one of the fastest-growing kitchenware brands globally. The company's product portfolio includes over 2,500 SKUs covering various kitchenware categories such as cookware, kitchen utensils, and drinkware. According to reports, based on retail sales in 2023, the company ranks in the top five in the online cookware industry in major markets, ranking fourth in China, second in the United States, third in Western Europe, second in Southeast Asia, and third in Japan, with market shares of 1.2%, 13.1%, 1.3%, 8.6%, and 8.1%, respectively. I. Public Offering Information Call-back mechanism II. Financial Analysis Units: RMB'000 Financial data shows that the company's revenue in 2021-2023 was RMB 675 million, RMB 768 million, RMB 1.58 billion, with revenue of RMB 503 million in the first three months of 2024. Gross profit for the company in 2021-2023 was RMB 126 million, RMB 275 million, RMB 565 million, with gross profit of RMB 209 million in the first three months of 2024. Net profit for the company in 2021-2023 was RMB 31.7 million, RMB 108 million, RMB 236 million, with net profit of RMB 88.5 million in the first three months of 2024. Adjusted net profit for the same period was RMB 31.7 million, RMB 108 million, RMB 243 million, with adjusted net profit of RMB 97 million in the first three months of 2024 (excluding IPO expenses). The adjusted PE-TTM is approximately 11.43-11.55 times! Revenue Sources (by business segment) Between 2021-2023 and the three months ending March 31, 2024, brand business revenue was RMB 28.33 million, RMB 53.07 million, RMB 137.99 million, RMB 24.65 million, and RMB 45.0 million, accounting for 41.9%, 69.1%, 87.2%, 84.5%, and 89.5% of total revenue, respectively. The increase in brand business revenue during the reporting period was mainly due to business growth, reflecting the company's strategic focus on developing this business segment through expanding sales channels and broadening product supply. Between 2021-2023 and the three months ending March 31, 2024, ODM business revenue was RMB 39.20 million, RMB 23.78 million, RMB 20.32 million, RMB 4.53 million, and RMB 5.29 million, accounting for 58.1%, 30.9%, 12.8%, 15.5%, and 10.5% of total revenue, respectively. The overall decrease in ODM business revenue during the reporting period was mainly due to the number of ODM products sold decreased from approximately 7.5 million in 2021 to approximately 4.4 million in 2022, further decreasing to approximately 3.7 million in 2023, and further decreasing to approximately 0.9 million in the three months ending March 31, 2024. The decrease was mainly due to the higher gross profit margin of the brand business, with the company strategically shifting focus from the ODM business segment, and a decrease in demand from ODM customers in Western Europe. Between 2021-2023 and the three months ending March 31, 2024, the company introduced 520, 1,305, 1,374, and 361 SKUs of own-brand products. Cookware products accounted for the largest revenue source, currently representing approximately 88.3%. Use of Proceeds Approximately 35% of the funds raised will be used to seek acquisition and investment opportunities; approximately 25% for product research and development; approximately 20% for expanding sales channels; approximately 10% for ESG-related investments; and approximately 10% for working capital and other general corporate purposes. III. Comprehensive Analysis 1. Cornerstone Investors, 41.94%; The company introduced two cornerstone investors who subscribed for a total of USD 40 million (approximately HKD 313 million) in shares, with Matrix Partners and Unity Capital subscribing for USD 20 million each in shares, representing approximately 41.94% of the shares sold, assuming no exercise of the over-allotment option. Lock-up period of 6 months. 2. Early Investors; In July 2023, the company sold equity to Denk Trade at a discount of approximately 96.7% to the middle price, with a lock-up period of 6 months. Denk Trade is wholly owned by Mr. Hartinger. 3. Calculation of the Allotment Rate; A total of 12.9865 million shares were publicly offered, with 500 shares per board lot. The initial number of board lots for Class A and B shareholders is 12,987, with an estimated allotment rate of approximately 100%. 4. Sponsor's Historical Performance Joint sponsor FaB has no projects this year. Joint sponsor CICC has two projects this year, with EDA soaring and MOBVOI breaking, showing good performance. 5. Performance of Peers There are no peers in the kitchen and bath industry who went public this year. If we expand the industry to the home appliances industry, Midea (00300) just went public as a leading company in the home appliances sector, with the grey market and first-day closing in the green zone, showing a good performance. In conclusion: 1. One of the fastest-growing kitchenware brands globally, ranking higher in Europe and America than in China; 2. Annual compound growth rate of Carote sales from ODM to own brand is 120%; 3. Valuations of reference peers such as Zhejiang Supor, Joyoung, and Midea are not considered high; 4. Cornerstone shareholding accounts for 42%, leaving about RMB 433 million after deducting cornerstone shares; 5. Major sponsors FaB and CICC are relatively stable. This article is taken from the WeChat public account "JuA" GMTEight, edited by Li Fo.