According to statistics from the China Academy of Information and Communications Technology, in the first half of this year, domestic smartphone shipments were 134 million units, a year-on-year decrease of 21.7%; globally, in the second quarter of 2022, smartphone shipments also decreased by 7% year-on-year. After years of development, the competition among mobile phone brands has focused on differentiation and comprehensive improvement of user experience. At the same time, domestic mobile phone manufacturers will also go overseas as their future development direction.
According to statistics from the National Consumer Association, after-sales service issues have become the main complaints of mobile phone, PC and home appliance brands, accounting for more than 28%. After-sales service has become an important factor affecting the brand image of mobile phones, PCs and home appliances, especially when online sales are increasingly becoming the main sales channel. By cooperating with three-party maintenance service providers, while controlling after-sales costs, laying out more after-sales outlets has also become the main means for brands to solve after-sales service problems.
Therefore, a huge third-party after-sales service market has been formed, and third-party after-sales service providers such as Baibang, Geek Xiu, and Maichuang Co., Ltd. have been formed. Recently, Maichuang Enterprise Management Services Co., Ltd. (hereinafter referred to as "Maichuang Co., Ltd."), which mainly provides after-sales outsourcing services for mobile phone and PC brands such as Xiaomi (01810.HK), Lenovo, Asus, etc., responded to the inquiries from the regulatory authorities and updated the prospectus. The process of listing on its main board has also taken a step forward.
With the support of customers such as Xiaomi and Lenovo, Maichuang Co., Ltd. has entered the fast lane of development in recent years. Its revenue increased from 501 million yuan in 2019 to 1.121 billion yuan in 2021, which has more than doubled in three years; by the end of 2021, the company's net profit has also reached 107 million yuan. Under strong growth, the company has successively won the favor of investors such as Xiaomi and Fosun in 2021.
What is the investment value of Maichuang Co., Ltd., a third-party after-sales outsourcing service integrator in the electronics industry?
01 Revenue Reliance Reliance on Individual Customers
Maichuang Co., Ltd. was established in 2004. At the beginning of its establishment, the company mainly engaged in traditional supply chain business; however, as competition in the supply chain industry gradually intensified, Maichuang Co., Ltd. began to lay out the after-sales supply chain management market. Up to now, the company has become a third-party after-sales outsourcing service integrator focusing on the electronics industry, committed to providing brand enterprises with a one-stop after-sales service management platform based on digitalization, and taking into account the traditional supply chain services in the production process of brand enterprises.
Image source: Prospectus
By the end of 2021, Maichuang Co., Ltd. has established stable cooperative relationships with mobile phone and PC brands such as Xiaomi, Lenovo, and Asus. The business involves 48 countries and regions around the world, covering more than 4,500 terminal outlets authorized by the brand. According to Maichuang Co., Ltd., the after-sales management services provided by the company to Xiaomi and Lenovo are mainly spare parts operation services, and the services provided by Asus are whole package services, including spare parts operation and authorized service provider management.
The spare parts operation service in
generally adopts the buyout spare parts model to cooperate with customers. That is, Maichuang Co., Ltd. obtains product sales and activation data from the brand, and then analyzes the demand for accessories in the service area. Then the company purchases enough accessories from the brand and allocates them to the warehouse or authorized terminal of the service area according to the analysis, thereby shortening the waiting time for consumers to repair. The company will write off the replacement accessories to the brand party. If the cost is paid by the brand party during the warranty period, the cost will be paid by the consumer if the warranty period exceeds the warranty period.
With the support of brands such as Xiaomi and Lenovo, Maichuang Co., Ltd.'s revenue and net profit have shown a significant growth trend in recent years. Among them, revenue increased from 501 million yuan in 2019 to 1.121 billion yuan in 2021, an increase of 123.75% in three years; net profit attributable to shareholders also increased from 41 million yuan in 2019 to 103 million yuan in 2021, an increase of 151.22% in three years.
As the performance continues to grow, the company has also won the favor of investment institutions such as Shanghai Gufeng, Hanxing Venture Capital, and Fosun Weiying in 2021. Tianyan Check information shows that Xiaomi Technology Co., Ltd. is the only shareholder of Hanxing Venture Capital, and the ultimate beneficiary of Fosun Weiying is Fosun International (00656.SH).
It can be seen that Maichuang shares have a relatively complex relationship with large enterprises such as Xiaomi and Lenovo. Xiaomi and Lenovo are both suppliers (repair product spare parts) and large customers. At the same time, some enterprises are also investors, which has also caused some voices, believing that the company's independent operating capabilities are worth paying attention to. In early August, the regulatory authorities also mentioned in their feedback from Maichuang Co., Ltd. "The sales amount of (the company) and Lenovo and Xiaomi increased significantly, while other customers declined significantly; a detailed analysis of the sustainability and stability of the company's cooperation with major customers, and whether it is dependent on major customers."
According to Maichuang Co., Ltd., in 2019, Xiaomi and Lenovo contributed a total of 277 million yuan of revenue to the company, accounting for 55.13% of the total revenue in the current period; and by 2021, Xiaomi and Lenovo have provided the company with 833 million yuan of revenue, accounting for 74.31% of the total revenue in the current period. In the three years from 2019 to 2021, the total revenue contributed by Xiaomi and Lenovo to Maichuang shares increased by more than 2 times, and the company's revenue increased by only 123.75% during the period.
It is worth mentioning that in addition to Hanxing Venture Capital controlled by Xiaomi, which has taken a stake in Maichuang Co., Ltd., the company's former shareholder Liu Jun subscribed 3.21% of the company's shares for 10.8 million yuan in 2016. However, the next year, Liu Jun worked as an executive at Lenovo Group. According to Lenovo Group's regulations, Liu Jun eventually transferred the equity of Maichuang shares to natural person Pan Xingwu at a fair price.
02 Growth requires brand authorization
The cooperation model of Maichuang shares, Xiaomi and Lenovo, is mainly to buy spare parts, and the company needs to purchase spare parts in advance. Therefore, while occupying a large amount of the company's funds, the company also needs to bear huge risk of inventory depreciation. In 2019 and 2020, inventory accounted for more than 30% of the company's current assets. By 2021, after the company received more than 165 million yuan of investment, it was still as high as 28.64%.
In 2019 and 2020, the book balance of cash funds of Maichuang Co., Ltd. was less than 100 million yuan, of which the cash funds reserves in 2020 were only 25.4633 million yuan. In 2021, after receiving a total investment of more than 165 million yuan from investors such as Shanghai Gufeng, Hanxing Venture Capital, and Fosun Weiying, the current monetary reserves reached 132 million yuan, and the proportion of current assets rose to 12.58%. However, in the past three years, Maichuang Co., Ltd.'s short-term loan book balance has always accounted for more than 30% of current liabilities, and is still 34.9% by 2021.
It should be noted that in order to ensure that spare parts are sufficient to improve consumers' maintenance experience, Maichuang Co., Ltd. will prepare more spare parts in the process of providing spare parts operation services to brands; however, mobile phones and PCs are updated and iterated quickly, and many previous generation spare parts cannot adapt to the new generation of products. At the same time, due to the high cost of product iteration and maintenance, consumers will generally choose to buy new products rather than repairing old mobile phones or PCs. Therefore, Maichuang Co., Ltd. needs to bear a greater risk of inventory depreciation during the operation.
Data source: Prospectus
From 2019 to 2021, the amount of inventory impairment provision for Maichuang shares increased from 13.3425 million yuan to 63.4684 million yuan, an increase of 375.69% in three years, far higher than the growth of 123.75% revenue in the same period. The proportion of inventory impairment reserves in the book balance of current inventory also increased from 5.4% in 2019 to 10.52% in 2021; and in 2021, the average value of comparable companies such as Changlian Co., Ltd. (603648.SH), Oriental Jiasheng (002889.SZ) was only 2.06%.
Although Xiaomi and Lenovo contributed more than 70% of the revenue to Maichuang shares, the brand does not rely much on Maichuang shares. In addition to self-operated after-sales channels, Lenovo and Xiaomi's main after-sales services are still handed over to overseas service outsourcing providers such as Wistron and B2X that have established a complete supply chain and terminal outlet system around the world.
According to Maichuang Co., Ltd., the transaction volume between the company and Lenovo accounts for only 5% of the total demand for similar businesses in Lenovo; the total demand for similar businesses in Xiaomi also accounts for only 9%. In terms of service areas, Maichuang Co., Ltd. has only obtained Xiaomi's authorization in five domestic provinces and cities including Henan, Hubei, Jiangsu, Zhejiang, Shanghai; overseas, except India, the number of Xiaomi's after-sales terminal stores in other countries served by Maichuang Co., Ltd. is generally in single digits.Another important customer, Lenovo, Maichuang Co., Ltd., has only obtained Lenovo's PC and server spare parts operation service business in mainland China and Lenovo's mobile spare parts operation service business in several Asian countries.
According to Maichuang Co., Ltd., obtaining authorization from the brand has become an important factor in the company's revenue growth. For example, in 2019, in its cooperation with Lenovo, the company only obtained after-sales service management business for Lenovo mobile phones, servers (X86 series) and other products. By 2021, the company has obtained after-sales service management licenses for Lenovo PC (full series of Think), mobile phones, servers (X86 series, TS series) and other products. In this process, the transaction volume between Maichuang Co., Ltd. and Lenovo also increased from 133 million yuan in 2019 to 402 million yuan in 2021.
The cooperation process between Maichuang Co., Ltd. and Xiaomi is very similar to Lenovo. According to Maichuang Co., Ltd., in 2019, Maichuang Co., Ltd. only obtained Xiaomi's spare parts operation business in Henan and 7 overseas countries. By 2021, Maichuang Co., Ltd. had obtained spare parts operation business in five domestic provinces and cities including Henan, Hubei, Jiangsu, Zhejiang, and Shanghai, as well as 47 countries or regions. The transaction amount with Xiaomi also increased from 143 million yuan in 2019 to 431 million yuan in 2021.
Image source: iResearch Consulting
According to iResearch Consulting, although the total scale of the domestic mobile phone, PC and server after-sales service market has exceeded 100 billion yuan, by 2021, the domestic three-party after-sales service market has become very mature and there are many players. On the warehousing and logistics side, there are players such as JD Logistics (02618.HK), SF Express; in the terminal maintenance scenarios, there are platforms such as JD Maintenance, Baibang, and Geek Repair; in the supply chain management and after-sales service management side, there are players such as Kingdee and After-sales Bao. Comprehensive after-sales service providers similar to Maichuang Co., Ltd. include Jenbert, with a market value of up to US$8.35 billion and B2X, which has cooperated with well-known brands such as Microsoft and Xiaomi.
In this IPO, Maichuang Co., Ltd. plans to raise 474 million yuan for after-sales service management capabilities improvement projects, that is, to expand the company's after-sales service business, accounting for 75.24% of the total fundraising. However, in the company's detailed plan, the 439 million yuan is used for spare parts investment and other expenses, rather than expanding the region where the company serves and laying out the warehousing system.
Judging from the business model of Maichuang Co., Ltd., its revenue and company growth are highly dependent on cooperation with individual customers. If the number of company service brands cannot be expanded and answers the questions of the regulatory authorities and the market, it may be difficult to gain the favor of the regulatory authorities and the market.
This article is from Investors Network
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