New Stocks Analysis of US Stock Market | Fierce and Highly Fragmented Industry Competition, Can the Specialized and Innovative Enterprise Sride Environmental Protection (HARD.US) Break Through?

The national-level specialized and innovative "small giant" enterprise in the solid waste treatment equipment industry, Suruid Environmental Protection, is making full efforts to sprint for an IPO. It was learned that as early as August 4th, 2021, Suruid Environmental Protection secretly submitted an application for listing to the SEC. By February 14th of this year, the company had submitted its first public version of the prospectus. On September 6th, Suruid Environmental Protection made its fourth update to the prospectus, pushing the company's listing process forward. According to the prospectus, Suruid Environmental Protection has applied to list on NASDAQ under the code "HARD". The company plans to issue 2.5 million common shares at a price between $5 and $7 per share, with a maximum fundraising amount of $17.5 million. From the profit statement, Suruid Environmental Protection's performance has declined. The data shows that its revenue in 2022 was $30.61 million, a 3% decrease compared to the previous year, and the net profit was $990,400, a significant 43% drop. Will the significant drop in net profit affect the IPO valuation level of Suruid Environmental Protection? Can the company's future development return to a growth track? By analyzing Suruid Environmental Protection's prospectus in depth, detailed answers can be found. Diversified product portfolio covering all-scenario clients Suruid Environmental Protection has been deeply involved in the solid waste treatment equipment industry for 13 years. After years of accumulation, the company has formed a diversified product portfolio. According to the company's official website, Suruid Environmental Protection's products are mainly divided into two categories: crushing equipment and supporting equipment. Among them, the crushing equipment includes single-shaft crushers, double-shaft crushers, four-shaft crushers, coarse crushers, mobile crushers, etc. The corresponding supporting equipment includes multi-angle disc power screens, air separators, bag breakers, drum screens, etc. The rich product portfolio is a specific manifestation of Suruid Environmental Protection's continuous research and development investment, which helps enhance the overall competitiveness of the company's products in the market. It is worth noting that in the middle of 2022, Suruid Environmental Protection successfully developed a fixed high-speed crusher, thus obtaining the recognition of a national-level specialized and innovative "small giant" enterprise. With a diverse product portfolio, Suruid Environmental Protection's crushing equipment has achieved multidimensional coverage in usage scenarios, including industrial solid waste, large waste, municipal solid waste, biomass, hazardous waste, paper waste, stale waste, scrap tires, kitchen waste, medical waste, construction waste, etc. This also makes Suruid Environmental Protection a one-stop provider of solid waste treatment solutions. According to the prospectus, as of December 31, 2022, Suruid Environmental Protection has provided products to a total of 238 customers. Among them, 134 customers are in the industrial waste industry (industrial hazardous waste, medical waste, and factory dumping waste), accounting for about 56.3% of the total customers. 44 customers are in the urban waste industry (municipal solid waste, catering waste, large waste, organic waste, etc.), accounting for about 18.5% of the total customers. The remaining 60 customers are engaged in other solid waste treatment industries, such as old document media, agricultural waste, and forestry waste, accounting for about 25.2% of the total customers. From the perspective of customer types, Suruid Environmental Protection covers various scenario customers and is not limited to a single field. The revenue share of the largest customer in 2022 is 7.2%, and the company is not heavily reliant on individual major customers, indicating a relatively good customer structure and quality. However, even so, Suruid Environmental Protection's performance in 2022 has encountered challenges. Specifically, in 2022, Suruid Environmental Protection's total revenue was $30.61 million, a 3% decrease compared to the previous year. Among them, equipment sales revenue was $26.739 million, which remained flat compared to the previous year. Although the number of equipment sales increased significantly from 225 units in 2021 to 265 units, the decrease in customized equipment resulted in a decline in equipment unit price, leading to no growth in equipment sales revenue. New customer revenue accounted for 85% of equipment sales revenue. Clearly, equipment sales focus on developing new customers. Accessory revenue decreased by 28% due to a decrease in orders from existing customers, and new customers accounted for 26% of accessory revenue. It is evident that accessory revenue mainly relies on replacements by existing customers. Revenue from warranty services was $1.2477 million, which remained flat compared to the previous year. Therefore, it can be seen that the decline in Suruid Environmental Protection's total revenue is mainly due to a decrease in accessory orders, while equipment sales and warranty service revenue remained stable. However, due to the incremental-driven sales strategy with low prices, the profitability of equipment was impacted. The gross profit margin of the company in 2022 declined to 28.67%, a 2 percentage point drop from 30.51% in 2021. Under the combined effect of declining revenue and gross profit margin, the company's gross profit in 2022 decreased by 9% to $8.777 million. The decline in net profit is much higher than the decline in gross profit. In 2022, Suruid Environmental Protection's net profit plummeted by 43%. This is mainly due to a significant increase in interest expenses and a year-on-year increase in total operating expenses. From the balance sheet, Suruid Environmental Protection had total assets of $24.5016 million and total liabilities of $14.2747 million in 2022, with an asset-liability ratio of 58.26%. Its current assets were $21.5286 million, current liabilities were $12.8641 million, and the current ratio was 1.67, indicating relatively good liquidity. The industry has low barriers, and market competition is particularly fierce. In terms of industry trends, both the domestic and global markets in the solid waste treatment industry are still in a phase of continuous and stable growth. According to data from the international market research firm IBISWorld, China's solid waste recycling industry has developed rapidly in the past five years, with a compound annual growth rate of 9.6%. By 2022, the market size of this industry in China has reached $25.2 billion. In addition to the Chinese market, the global waste management market in developed and developing countries is also growing rapidly. According to data from Allied Market Research, a US-based market research company, the global waste management market is expected to grow from approximately $1.6 trillion in 2020 to around $2.5 trillion in 2030, with a compound annual growth rate of 3.4%. In terms of domestic solid wasteThe development speed of the recycling industry is significantly faster than the global market, and the domestic market size is as large as hundreds of billions. There are numerous opportunities in this industry, but it is worth noting that the relatively low barriers in the solid waste treatment equipment industry have led to a large number of market participants, intense industry competition, and a relatively scattered competitive landscape. According to incomplete statistics, there are as many as 80 A-share listed companies involved in the solid waste treatment equipment business, indicating the fierce competition in this market.In addition to domestic competition, international players are still gradually eroding the domestic market, with European equipment manufacturers being the main competitors, including Germany's Vecoplan AG, Denmark's Metso Denmark A/S, and Austria's Linder Recyclingtech GmbH. In order to achieve sustainable development in the fiercely competitive market, SREED Environmental Protection provides detailed introduction of the company's development strategy in its prospectus. Firstly, the company will continue to expand its domestic business network to increase market share, and in the long term, it will enter important overseas markets such as the United States and Europe. Secondly, the company plans to acquire high-quality targets. Thirdly, the company will seize the opportunities of domestic substitution in the industry. Although the development path is clear, the growth of the enterprise is not always smooth. From the analysis of performance mentioned earlier, the expansion of new customers plays an important role in the company's revenue growth. In 2022, the proportion of revenue from new customers accounted for 77% of the company's total revenue. If industry competition intensifies, it will not only affect the expansion of new customers but also directly impact the profitability of the company's products. In addition, upstream commodities such as steel and copper are key raw materials for the production of solid waste treatment equipment. If the prices of steel and copper rise and the company is unable to transfer the price increase to downstream, it will have a significant impact on the profitability of SREED Environmental Protection. Overall, the solid waste treatment industry in which SREED Environmental Protection operates is currently in a phase of sustained and stable growth. However, the low barriers to entry in the industry have led to intense competition and a fragmented market structure. Although SREED Environmental Protection has certain advantages in terms of product diversification, customer distribution, and liquidity, the significant decline in net profit indicates limited short-term growth potential for the company. Whether it can break free from the constraints of market competition and continue to grow will still require continuous observation.