US stock IPO outlook | Maycris: "Small and beautiful" in the customized consumer goods track, but suffering from "lacking funds syndrome"

As everyone knows, against the backdrop of consumer upgrades, consumers are no longer satisfied with generic products. Their demands for personalization continue to increase, from the appearance, color, material, to the function, structure, etc., they hope to be able to customize according to their unique needs and preferences. For related consumer products, this is the trend, as well as an excellent development opportunity. According to Frost & Sullivan, the growth of small-batch customized consumer goods in China in recent years is mainly attributed to the rise of fashion and designer brands driven by personalized demands, as well as investments from small and medium enterprises. The market size of small-batch customized consumer goods has increased from 6.3 billion yuan in 2017 to 10.2 billion yuan by 2023, with a compound annual growth rate of 8.2%. In addition, the demand for personalized consumer goods will continue to accelerate in the future, with the market for batch customized consumer goods expected to grow from 10.9 billion yuan in 2024 to 16.1 billion yuan by 2028, with a compound annual growth rate of 10.2%. At this moment, some manufacturers specializing in customized consumer goods in this field are becoming more active in the capital market. On November 14th, Chinese customized consumer goods manufacturer MaxsMaking filed its prospectus with the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO) to raise up to $9 million. The company plans to issue 2 million shares of stock at a price range of $4 to $5 per share. Based on the mid-price of the offering range, MaxsMaking's market value will reach $77 million. So, the question arises, can MaxsMaking seize the trend of product customization? And what is the investment value of the company? Revenue is declining, high debt may lead to "insufficient capital" crisis It is observed that MaxsMaking is a manufacturer of customized consumer goods, primarily producing customized products such as bags, aprons, pillows, flags, chair covers, tablecloths, suitcases, etc. It has multiple subsidiaries that focus on different business areas, including digital production, software development, product design, brand management, online sales, and international trade, forming a relatively complete industrial chain layout. For a manufacturer specializing in customized products, the increase in small-batch customized orders is essential for profit generation. In other words, the company's sales revenue is directly influenced by customers' decisions on whether to purchase in small or large quantities. Therefore, for MaxsMaking, attracting more small-batch customized customers and maintaining flexibility in production planning are crucial. However, it is important to note that although small-batch customized products have certain flexibility and innovation compared to mass production, the production scale of small-batch customization is smaller and thus it is difficult to achieve significant economies of scale, which is also evident in the financial condition of MaxsMaking. According to the prospectus, as of April 30, 2023, and the six months ended April 30, 2024, the company achieved revenues of $15.38 million and $9.73 million respectively, a year-on-year decrease of 36.7%; and net profits were $980,000 and $1.24 million respectively, a year-on-year decrease of 20.59%. It can be seen that the company's recent revenue and net profit are showing a certain downward trend. With declining growth potential and no economies of scale yet formed, the financial pressure on MaxsMaking seems to be growing increasingly tight. According to the prospectus, as of April 30, 2024, MaxsMaking had approximately $3.64 million in outstanding short-term bank loans, mainly from Bank Of Ningbo, Zhejiang Mintai Commercial Bank, Zhejiang Yiwu Rural Commercial Bank, and Zhejiang Yiwu Rural Commercial Bank. In addition, the company also received about $420,000 in outstanding loans from third-party individuals, although these loans have no interest or repayment terms. At a time of high debt, the company's cash flow is not sufficient as of April 30, 2024, MaxsMaking had approximately $230,000 in cash, mainly from its operations, bank loans, related party loans, and third-party loans. During the same period, the company's net cash provided by operating activities was about $1.7 million, mainly due to a reduction of about $1.7 million in accounts receivable attributable to the decrease in revenue, a reduction of about $650,000 in deferred IPO costs, and a reduction of about $380,000 in customer prepayments due to the decrease in sales. Currently, MaxsMaking mainly improves liquidity and capital sources through operational cash flow, debt financing, and financial support from major shareholders or investors. If additional funds cannot be raised when needed or if there is a lack of sufficient funds to expand operations or otherwise take advantage of the company's business opportunities, the company's operations, operating performance, financial condition, and cash flow will be adversely affected. Customization as an industry trend, competitiveness still needs improvement In recent years, with the Z generation gradually becoming a consumer force, some personalized and customized products have begun to show a trend of consumer enthusiasm. According to the Frost & Sullivan report, most orders in the Chinese customized consumer goods industry come from large enterprises. As companies focus on corporate culture building, China's customized consumer goods market has been growing rapidly. From 2017 to 2023, the market size of the Chinese customized consumer goods market increased from 138.7 billion yuan to 217.3 billion yuan, with a compound annual growth rate of 7.8%. The industry is expected to maintain a high growth rate, with the market size expected to increase from 236.2 billion yuan in 2024 to 343 billion yuan by 2028, with a compound annual growth rate of 9.8%. Taking the luggage market as an example, with the development of the economy and the increase in travel demand, the luggage industry in China has been growing significantly. Customized luggage, as an important category, has grown rapidly in recent years. From 2017 to 2023, the market size of the small-batch customized luggage industry in China increased from 542.9 million yuan to 1.1817 billion yuan, with a compound annual growth rate of 13.8%. It is expected that with the disappearance of the epidemic, demand for small-batch customized luggage overseas will increase, leading to further market growth. Meanwhile, with the upgrading of consumption conceptsCustomized products will be more favored by the market. It is expected that from 2024 to 2028, the market size of China's small-batch customized luggage industry will increase from 13.886 billion yuan to 25.726 billion yuan, with a compound annual growth rate of 16.7%.However, in contrast to the market situation, the competition in the custom consumer goods track where Mickris is currently placed is also very intense. Specifically, there is a diversity of participants in the custom product industry, including large enterprises, medium-sized enterprises, small businesses, and studios. Mickris belongs to the "small and beautiful" category of the custom track. Although the company is able to flexibly meet the unique needs of customers and provide distinctive products, its small size may lead to shortcomings in production capacity, supply chain management, and brand promotion. Additionally, it may also face competition pressure from resources, technology, and funds from medium and large enterprises. Given this, Mickris, with a "weak" fundamental basis, needs to enhance its competitive strength from multiple dimensions to achieve economies of scale. On one hand, the company needs to increase product added value and profit margins: customized products usually have higher added value, and consumers are willing to pay a higher price for products that meet their personalized needs. Therefore, the small-scale custom consumer goods industry can obtain higher profit margins. Compared to mass-produced standardized products, the uniqueness and scarcity of custom products give them stronger bargaining power in the market. On the other hand, the company may also need to promote innovation and technological upgrades: in order to achieve small-scale customization, enterprises need to continuously improve production technology and processes, enhance production flexibility and efficiency. This drives enterprises to invest in technology research and development and innovation, not only improving the company's own production efficiency but also promoting technological upgrades and development in the industry. In conclusion, being "small and beautiful" in the custom consumer goods sector, Mickris' fundamentals are not invincible, which may also be a negative point for its IPO. Furthermore, with challenges such as rising industry costs and intensifying competition, investors may discount their confidence in investment. Therefore, this also means that Mickris still needs to prove its true strength with more impressive data.