After March 21, GFT International, the largest OEM manufacturer of plastic and metal toys in Vietnam, submitted the Hong Kong Stock Exchange again. The company had submitted the form twice on January 28 and September 19, 2021, and both have expired.
Before the IPO, GFT International accepted a total of approximately US$18.8456 million in financing from one of its customers, including TokyoUnique, China Unique, Feiyu Technology and Apollo Capital, in 2018. The valuation of GFT of US$144 million in this round of financing is not high.
Two years later, TokyoUnique invested another US$6 million in GFT. At this time, GFT International's valuation reached US$164 million. Excluding the increased financing amount in the last round, its basic valuation has not changed much.
Profits stagnated, and cash flow was under pressure
It is understood that GFT International's revenue consists of toy product sales, tool and mold sales, consulting services and other businesses, and the most important thing is from toy product sales. From fiscal 2019 to fiscal 2021, it sold US$292 million, US$327 million and US$409 million respectively, accounting for about 93.5%, 93.35% and 95.04% of the current operating income, respectively.
Currently, GFT International’s plastic toy customers include international toy brands such as Tomy, Hasbro, Mattel, SpinMaster, YoungToys and TokyoUnique. The main metal toy customers with higher profit margins are Tomy, Hasbro and SpinMaster.
Finance 2019 to fiscal 2021, GFT International achieved revenue of US$313 million, US$351 million and US$430 million, respectively, and net profits in the same period were US$6.141 million, US$17.864 million and US$17.989 million, respectively.
Although GTF International's revenue still grew by more than 22% in fiscal year 2021, its net profit almost stagnated, which is also closely related to the decrease in the order volume of Duomei, the company's largest customer in recent years. In order to obtain new orders to make up for the profit gap, GFT International can only give up part of its profit.
In fact, Vietnam's OEM factories are labor-intensive industries and have little profit margin. According to the prospectus, as of December 31, 2021, GFT International had 9,700 employees, of which 8,500 were in Vietnam, 1,200 were in mainland China and 45 were in Hong Kong.
In addition, during the period from fiscal 2019 to fiscal 2021, GFT International had negative net operating cash flow in two years in three years, which means that the company's cash funds did not flow in for two years. Although there has been a continuous decline in recent years, GFT International's debt-to-asset ratio is still at an extremely high level, with 350.1%, 207.3% and 187.7% respectively during the reporting period.
At the same time, GFT International stated that in order to meet the requirements of working capital for daily business activities, repay shareholder loans from controlling shareholders, and settle advances paid to shareholders, the company's interest-bearing bank loans increased year by year, with US$76.562 million, US$78.421 million and US$102 million respectively during the reporting period. Nearly 90% of the revenue depends on large customers.
toys with a price of dozens or hundreds of yuan are only US$2. As mentioned earlier, the large number of orders from downstream well-known toy brands makes GFT International highly dependent on a few customers. The advantage is that large customers are receiving payments in a relatively timely manner. The disadvantage is that GFT International lacks premium space at the bottom of the value chain, and the increase or decrease in orders from large customers will greatly affect the company's profits.
In recent years, GFT International's sales to the top five customers accounted for more than 80% of its total revenue, with the dependence between fiscal 2019 and fiscal 2021 being 88.7%, 82.9% and 88.2% respectively.
Among them, sales to Tomé alone reached US$87.4 million, 75.1 million and 102 million respectively during the reporting period, accounting for 28%, 21.4% and 23.6% of the company's operating income in each period. In fact, as a veteran toy company in Japan, Tomi has own IPs such as track cars and has also obtained the sales license of official toy products such as Marvel, Pixar, Disney and Star Wars.
From the perspective of mainstream domestic e-commerce platforms, the prices of products sold in Duomei flagship stores range from around 20 yuan to thousands of yuan. The prices of toy components after splitting are not cheap, but the factory prices of related products at GFT International are not high.
Judging from the prospectus of GFT International, the average selling price of plastic toys in the 2019-2021 period was US$1.98, US$1.89 and US$2.27 respectively, while the price of metal toys was lower, only US$1, US$1.07 and US$1.3 respectively. Although the average ex-factory price of
has increased year by year, it is still at a low level overall. In fiscal year 2021, the average selling price of toys in all categories was only US$2.08, equivalent to about RMB 13.24.
It can be seen that most of the profits in the industrial chain often belong to toy brands that master IP premiums.
GFT international gross profit margin is not high at the bottom of the manufacturing and production link of the OEM smile curve. During the reporting period, the company's comprehensive gross profit margin was only 14.5%, 12.1% and 12.1% respectively. Among them, the gross profit margin of plastic toys is usually lower, and it is divided into 11.4%, 9.1% and 10.9% respectively during the reporting period.
It is worth noting that GFT International explained in its prospectus that the main reason for the decline in the company's gross profit margin is that the orders placed by major major customers Duomei and TokyoUnique have decreased, which puts pressure on the company's profitability. In addition, in order to win orders for new customers and new product lines, companies often need to make concessions, and insufficient production capacity also makes joint production occupy part of the profits.
On this basis, GFT International's net profit margin is lower and unstable, with only 1.6%, 5.1% and 3.9% from fiscal 2019 to fiscal 2021, respectively.
This article is from Mao Finance
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