New Stock Preview | Meilian Stock: Revenue Doubles in the First Half of 25 Years, Can Second Application Be Successful as Expected?

Secondary disclosure, the head target of prefabricated steel structure construction is Meilian Steel Structure Construction System Co., Ltd. (Meilian Co., Ltd.) but only has a net profit margin of 4.4%, will this be successful given the performance fluctuations? It is understood that recently Meilian Co., Ltd. submitted a second disclosure to the Hong Kong Stock Exchange. It had initially submitted on February 14 this year, with Shenwan Hongyuan Group (Hong Kong) as its exclusive sponsor. The company is mainly engaged in prefabricated steel structure construction subcontracting services. According to a Frost & Sullivan report, based on the 2024 revenue calculation, the company holds a market share of 3.5% in the industrial sector of the prefabricated steel structure construction market in China, ranking third. In recent years, the real estate industry has been in a slump, with the residential and commercial construction sectors nearing saturation. The market size of the prefabricated steel structure construction industry decreased from 512.2 billion yuan in 2021 to 441.3 billion yuan in 2024, a decline of 13.8%. Due to industry demand, Meilian Co., Ltd.'s performance has shown significant fluctuations. From 2022 to 2024, revenue decreased from 1.903 billion yuan to 1.523 billion yuan. However, revenue in the first half of this year increased significantly by 179.5%. However, Meilian Co., Ltd.'s profitability fluctuates very little, with a net profit margin of 4.6%, 4.3%, 4.6%, and 4.4% respectively from 2022 to the first half of 2025. So, does this Hong Kong listing have any investment highlights for the company? Significant performance fluctuations It is understood that Meilian Co., Ltd. has three main businesses: prefabricated steel structure construction subcontracting services, professional project general contracting, and industrial environmental protection equipment. Prefabricated steel structure construction subcontracting services have always been the cornerstone of the business and continue to be the largest source of revenue. In the first half of 2025, the revenue from these three main businesses was 1.247 billion yuan, 0.142 billion yuan, and 0.035 billion yuan respectively, with revenue shares of 87.6%, 9.9%, and 2.5%, respectively. Prefabricated steel structure construction subcontracting services combine advanced design, production, and streamlined construction processes to provide a comprehensive high-performance building system for prefabricated steel structure construction. From the project side, the company mainly obtains projects by bidding. Looking at it annually, the number of bids by the company continues to increase, reaching 427 in 2024, with a bid-winning rate stable at 20-30%. In the first half of 2025, it was 32.1%, higher than the industry's 15-20% level, with the number of projects increasing significantly year-on-year to 113. After three years of revenue fluctuations, revenue from the prefabricated steel structure construction subcontracting business in the first half of 2025 increased significantly by 182.1%, mainly due to the increase in projects and the expansion demand of major customers in the automotive and automotive parts industries. The company maintains stable long-term cooperation with major customers. In the fourth quarter of last year, it signed new business contracts worth 370 million yuan. As of June 2025, the total value of contracts approved by the company was approximately 1.578 billion yuan. Additionally, Meilian Co., Ltd.'s professional project general contracting services are also growing rapidly. The company holds a first-level qualification for construction contracting and can provide services as both a general contractor and a professional subcontractor. However, the number of contracted projects is relatively small, with the revenue share continuously increasing over the past three years. In the first half of 2025, there were 8 contracted projects, achieving a revenue growth of 576.2% and a revenue share of 9.9%. The volume of environmental protection equipment business is relatively small, accounting for only 2.5% of revenue in the first half of the year. The company's client base covers multiple industries, including automotive and automotive parts manufacturing, machinery and electronics, chemical and new materials, pharmaceuticals and medical equipment, food processing, and logistics and warehousing. Among them, the automotive and automotive parts industry customers contribute the highest revenue, followed by machinery and catering, accounting for 62.8%, 10.4%, and 10.7% respectively in the first half of 2025. Overall, customer concentration is relatively high, with the top five customers contributing a high percentage of revenue, with the largest customer contributing 61.1%. However, long-term cooperation with customers ensures a certain level of revenue security. For example, in the prefabricated steel structure construction subcontracting business, capacity utilization exceeded 100%, reaching 158.7% in the first half of this year. It is worth mentioning that Meilian Co., Ltd.'s profitability is not high but relatively stable, with a fluctuation in gross profit margin between 10-12%. In the first half of 2025, it was 10.2%, slightly down from the previous year. Sales, management, financial, and research and development expense ratios have been optimized, totaling 4.2%. The net profit margin for the period was 4.4%, up 1.7 percentage points year-on-year, remaining stable at levels of 4.3-4.6% in previous years. Due to the lower profitability, operating cash flow fluctuates significantly. High customer contribution ratio From an industry perspective, according to a Frost & Sullivan report, the market size of the prefabricated steel structure construction market in China was 441.3 billion yuan in 2024, with a compound annual growth rate of 7.1% in the past five years. Since 2021, it has been steadily declining, and the growth performance in the next five years is relatively flat. It is estimated that the market size will reach 551.3 billion yuan by 2029, with a compound annual growth rate of 5.3%. Industry growth has a certain level of resistance, mainly due to differences in application scenarios, with industrial construction supporting future growth. The continuous downturn in the real estate sector has led to reduced demand for residential and commercial construction, with expected declining growth rates in the future, dragging down the overall industry scale growth. Industrial construction stands out, with a compound annual growth rate of 13% in the past five years, achieving good growth even since 2021. In 2024, its market share in the industry increased to 54.9%, and it is expected to reach 347.3 billion yuan by 2029, with a compound annual growth rate of 9.4% and a market share continuing to increase to 63%. The industry concentration is also relatively high, with the top five participants in the market holding a combined market share of 52.6% in 2024, with the largest player having a market share of 35.8%, followed by 6.5%, showing a significant gap. Meilian Co., Ltd. ranks third with a market share of 3.5%, with a small difference from the next two. Compared to the top two, the company's market competitiveness is weaker, and compared to the next two, with equal volume, the competition is relatively fierce. This market environment is not favorable for the company. However, as mentioned earlier, the company has long-term stable support from major customers, with high customer revenue concentration providing a certain level of revenue security. However, there are risks related to customer dependency, as the performance is greatly affected by the largest customer. The company's profitability is low, and if revenue is affected, it could lead to a significant decline in profitability and cash flow. Additionally, as of July 2025, the company's bank borrowings were 380 million yuan, while cash and equivalents were only 179 million yuan. In conclusion, Meilian Co., Ltd. has few investment highlights but many risks. The main highlights include the surge in revenue in the first half of this year and the acquisition of expansion orders from the automotive industry customers. However, the main risks include: 1. The outlook for the Chinese prefabricated steel structure construction market is limited, with significant differentiation in scenarios. Although industrial construction demand is supported, growth is limited, and Meilian Co., Ltd.'s market competitiveness is weaker compared to the top two, with performance clearly lagging behind the industry average. 2. High customer concentration poses a dependency risk. 3. Profit margins are low, cash flow is volatile, and the company's current bank loans are much higher than cash on hand, leading to significant debt pressure.