New stock prospects | 90% of revenue comes from the United States, how long can Universal Horticulture continue to benefit from going global?

The "backyard economy" is reshaping the global consumer market as never before. This trend is particularly prominent in European and American countries, where the widespread single-family housing format comes with backyard spaces, giving rise to a complete product ecosystem ranging from cleaning tools, decorative items to outdoor furniture. Data shows that the global Lawn & Garden e-commerce market is entering a phase of rapid growth. According to Statista's forecasts, the market size is expected to reach approximately $80.9 billion in 2024 and surpass $115 billion with a compound annual growth rate of over 7% by 2029. Supporting this market is a stable base of nearly 180 million household yards in Europe and Americaapproximately 100 million in the United States and around 80 million in Europe. Against this backdrop, Global Gardening Limited, a company specializing in decorative plastic flower pots and deeply rooted in the North American home retailing giant, recently submitted its listing application to the Hong Kong Stock Exchange, with CMB International acting as the sole sponsor. However, in stark contrast to the diversified growth patterns in the global market, this enterprise, claiming to be the top earning company in the global decorative plastic flower pot industry, depends on over 90% of its revenue from the U.S. market, with a performance decline in the first half of 2025. While China's domestic "backyard economy" is rapidly rising due to policy support and consumer upgrades, this leading enterprise is almost absent from the domestic market. This raises the question in the market: is Global Gardening's listing in Hong Kong a timely move to capitalize on the expanding global gardening consumption, or does it reflect concerns about its growth model being overly reliant on a single market? Stable growth in the global gardening market, with Asia-Pacific emerging as a new engine Looking at the industry first, the global gardening market has flourished in the past few years. By retail sales size, the global gardening market has grown from $91.6 billion in 2020 to $104.6 billion in 2024, with a compound annual growth rate (CAGR) of 3.4%. This growth trajectory reflects the continued enthusiasm for home beautification and the "backyard economy" across the world, especially in the post-pandemic era. In the future, the continuous expansion of the backyard economy will drive stable growth in the global gardening market, with the overall market expected to grow from $104.6 billion in 2024 to $128 billion in 2029, with a CAGR of 4.1%. Among all product categories, gardening flower pots account for about 7.1% of market share, with a projected CAGR of 6.9% from 2024 to 2029, serving as the core driver of overall market growth. With the rise of the backyard economy and increasing demand for home environment beautification, decorative gardening products are increasingly favored by global consumers. The global market for decorative gardening products reached $34 billion in 2024 and is expected to grow to $47.1 billion by 2029, with a compound annual growth rate of approximately 6.7%, demonstrating strong and sustainable growth momentum. North America, as the main core market, accounts for about 45.0% of the global market share. Furthermore, due to the increasing level of urbanization, lifestyle-driven home decoration demands, and the growing popularity of gardening as a leisure activity, the global market for decorative gardening flower pots has been steadily expanding. The global market for decorative gardening flower pots is expected to increase from $4.4 billion in 2024 to $6.9 billion in 2029, with a compound annual growth rate of 9.1%. North America and Europe account for the majority of the market share. It is worth noting that in recent years, the Asia-Pacific region has seen an increasing growth rate, with a compound annual growth rate expected to increase from 13.1% in 2020-2024 to 15.5% in 2024-2029. However, the balance of growth is inclining towards the East, with the Asia-Pacific region showing the most rapid growth momentum, becoming a key force driving the evolution of the global market landscape. As the world's largest manufacturer of decorative plastic flower pots and the largest exporter among Chinese flower pot manufacturers, Global Gardening has established its unique industry position. Significant performance fluctuations, highlighting the "North American dependence" According to the prospectus, the company is a top-tier manufacturer and exporter of decorative gardening products, focusing on decorative plastic flower pots for indoor and outdoor use. Through long-term stable supply chain relationships with North American retail giants, the company has achieved significant sales concentration. In terms of financial performance, the company's revenue and profits have fluctuated significantly. From 2022 to 2024, revenue was HK$423 million, HK$358 million, and HK$474 million, with corresponding net profits of HK$82.61 million, HK$79.73 million, and HK$126 million. The decline in 2023 was mainly due to inventory adjustments by North American customers, which was followed by a rebound, confirming its strong connection to the North American market. In the first half of 2025, revenue and profits both fell year-on-year, reaching HK$186 million and HK$33.88 million, respectively. It is worth mentioning that from 2022 to 2024, the company's gross profit margins were 50.0%, 55.9%, and 59.5%, reaching 60% in the first half of 2025. The company's high gross profit margin is mainly due to its unique integrated operating modelthe company covers the entire industry chain from product design, mold development, material procurement to manufacturing, operating five factories in China, and building a new production base in Cambodia. This vertically integrated global production layout not only effectively controls production costs but also enhances the resilience of the supply chain and the export flexibility, serving as an important moat for its profitability. However, this structural advantage has not completely offset concerns about the weakening growth momentum. In terms of regional markets, while Global Gardening's product sales network covers multiple countries including Canada, Mexico, Australia, the United Kingdom, Chile, its revenue structure is highly concentrated in the U.S. market. According to the prospectus, from 2022 to the first half of 2025, the share of revenue from the U.S. market was as high as 90.1%, 94.8%, 93.5%, and 93.9%, staying above ninety percent for four consecutive years, serving as the "mainstay of revenue" and core source of profit for the company. In specific amounts, revenue from the U.S. market increased from HK$381 million in 2022 to HK$443 million in 2024, with a slight drop in 2023 due to overall demand fluctuations, followed by a rapid recovery. In the first half of 2025, revenue from the U.S. reached HK$175 million, still accounting for nearly ninety percent of total revenue, demonstrating strong customer loyalty and channel stability. In contrast, contributions from other markets are limited and show a structural shrinkage trend. For example, revenue from Canada decreased from HK$14.075 million in 2022 to HK$7.947 million in 2024, further dropping to HK$5.536 million in the first half of 2025, accounting for less than 3%; while Mexico achieved growth against the trend in 2024, it only recorded HK$2.198 million in the first half of 2025, indicating that its market potential has not been fully realized yet; Australia and other countries including the UK, Chile, combined revenue was less than HK$20 million, with a relatively low and continuously narrowing share. This highly concentrated regional layout reflects Global Gardening's successful deep integration with North American home retail giants, but it also exposes its systemic risks in the face of geopolitical risks, trade policy changes, and fluctuations in single market demand. As global supply chain patterns adjust and consumer preferences evolve, how to consolidate the U.S. base while orderly expanding into diversified international markets will be a key issue for its sustainable development in the future. With China's rural revitalization strategy deepening and the "backyard economy" being included in the central government's policy document for the first time, the gardening consumption market potentials in rural and urban areas are enormous. At the same time, Asia-Pacific has become the fastest-growing region for decorative gardening flower pots globally. However, according to the prospectus, Global Gardening has virtually no presence in the Asia-Pacific market, including China. Its fundraising purposes include acquiring factories, expanding production capacity in China and Cambodia, developing high-end products, and expanding into European and Australian markets. However, what the capital market may be more concerned about is: how can the company break free from its dependence on a single market? Can it transform its listing financing into strategic capital for exploring new markets, especially the high-growth Asia-Pacific domestic market? In conclusion, Global Gardening's IPO presents a story of a Chinese manufacturing company rising to the top in a global niche sector with cost and supply chain advantages, while also revealing structural weaknesses in its growth model. Against the backdrop of an overall industry upturn and regional growth differentials, whether the company can leverage the listing opportunity to transform from a "North American supplier" to a "global gardening solution provider" with balanced development will be the key to gaining long-term recognition in the capital market. The current performance fluctuations and market concentration sound alarm bells for the company and indicate potential directions for transformation.