The &#34;A+H&#34; dual listing is becoming the goal of some companies.
Recently, JHGF (002803.SZ) has submitted an IPO application to the Hong Kong Stock Exchange.
JHGF is mainly engaged in paper packaging and cross-border social media e-commerce, with a significant scale of performance during the reporting period. The revenue for the years 2021 to 2023 is 5.178 billion yuan, 5.376 billion yuan, and 6.695 billion yuan respectively, with the net profit attributable to the parent company for the same period being 227 million yuan, 184 million yuan, and 345 million yuan.
The cross-border social media e-commerce business is the main source of revenue, accounting for over 50% during the reporting period.
However, in 2023, JHGF's net profit margin is only 5.15%.
This is related to the high customer acquisition cost of JHGF's cross-border social media e-commerce business, with total sales expenses reaching over 5 billion yuan from 2021 to 2023.
With this IPO, JHGF plans to further expand the cross-border social media e-commerce market in regions that have not yet been explored.
Whether JHGF can secure a substantial amount of fundraising is eagerly awaited by the market.
<h2>The &#34;A+H&#34; Trend</h2>
Recently, A-share companies have sparked a trend of listing on the Hong Kong Stock Exchange.
Leading home appliance company Midea Group (000333.SZ, 0300.HK) has successfully raised 31.014 billion Hong Kong dollars in Hong Kong; many companies such as Baili Tianheng (688506.SH), Chifeng Gold (600988.SH), Kangle Weishi (833575.BJ), SF Holdings (002352.SZ), Junda Shares (002865.SZ), and others are advancing their listing on the Hong Kong Stock Exchange.
Many companies listing in Hong Kong aim to develop global business.
Midea Group plans to use 35% of the Hong Kong stock fundraising amount to improve global distribution channels and sales networks, as well as enhance overseas sales of its own brands; Baili Tianheng plans to raise funds for the construction or acquisition of new production facilities for biopharmaceuticals in overseas regions.
According to data from Wind as of September 18th, the Hong Kong Stock Exchange has raised 51.101 billion Hong Kong dollars (equivalent to 46.523 billion yuan) and had 45 projects since the beginning of the year.
This fundraising scale has already exceeded the 44.764 billion yuan in the A-share market during the same period.
Charles Li, CEO of the Hong Kong Stock Exchange, pointed out at the listing ceremony of Midea Group that large new stocks will follow one after another.
In this wave, JHGF has launched a sprint towards the Hong Kong Stock Exchange.
JHGF's business is divided into paper packaging and cross-border social e-commerce.
Before going public in 2016, JHGF's main business was paper packaging, but after listing, it began to seek transformation and increased investment in the &#34;cross-border social e-commerce&#34; business.
The so-called &#34;cross-border social e-commerce&#34; business is where JHGF uses data analysis capabilities to accurately place advertisements on overseas social platforms such as Facebook, Instagram, TikTok, attracting users to visit transaction web pages that pop up due to clicking on ads, ultimately leading to purchase behavior conversion, covering specific categories such as home, fashion, and electronics products.
In 2017, JHGF conducted online B2C sales through its holding subsidiary Xiamen Jike Yin E-commerce Co., Ltd., selling various products across borders to countries or regions such as Japan and Southeast Asia
Back in the day, the revenue from cross-border social e-commerce business was only 215 million yuan, while the revenue from paper packaging exceeded 1 billion yuan. Now, the former has taken up half of JHGF's revenue.
From 2021 to 2023, JHGF's cross-border social e-commerce business generated revenues of 2.834 billion yuan, 3.107 billion yuan, and 4.257 billion yuan respectively, accounting for 54.7%, 57.8%, and 63.6% of the total.
The gross profit margin of the cross-border social e-commerce business is quite considerable, reaching 63.1% in 2023, while the paper packaging business was only at 18.8% during the same period.
This is thanks to JHGF's control over costs.
JHGF mainly purchases goods from merchants within its self-built supplier management system and merchants on Alibaba's online wholesale platform 1688. In 2023, the inventory turnover days were only 49.1 days.
This is lower than some A-share cross-border e-commerce companies. According to Wind data, in 2023, the inventory turnover days of the cross-border e-commerce company Seewo Era (301381.SZ) were 71.26 days.
&#34;We manage our supply chain for our cross-border social e-commerce business by maintaining a certain level of inventory for specific products and purchasing products from suppliers after receiving customer orders (if our warehouse does not have the ordered products),&#34; JHGF pointed out.
In terms of categories, JHGF's cross-border social e-commerce business mainly generates revenue from home, electronics, and apparel categories, with revenues of 1.111 billion yuan, 766 million yuan, and 1.033 billion yuan respectively in 2023, accounting for 26.1%, 18%, and 24.3% of the business.
In terms of regions, JHGF's products are mainly sold to Northeast Asia and Southeast Asia, contributing 2.527 billion yuan and 846 million yuan respectively in 2023.
This time, one of the purposes of JHGF's IPO is to expand its cross-border social e-commerce business to other Asian regions where it has not yet entered, as well as in Europe and Latin America.
However, looking at the situation of Midea Group's Hong Kong discounted issuance, JHGF may not be able to escape this fate either.
On September 9th, Midea Group announced a Hong Kong issuance price ranging from HKD 52 per share to HKD 54.8 per share, which was discounted by 18.46% to 22.63% compared to the A-share closing price on the same day.
As of September 18th, JHGF's closing price was 9.52 yuan per share, with a P/E ratio of 16.1 times during the same period.
<h2>Sales Expenses Exceeding 5 Billion in 3 Years</h2>
Despite finding a second growth curve and achieving a considerable revenue scale, JHGF's overall performance still faces challenges.
Firstly, the cost of acquiring customers is not low.
From 2021 to 2023, JHGF's sales and marketing expenses were 1.451 billion yuan, 1.575 billion yuan, and 2.342 billion yuan respectively, accounting for 28%, 29.3%, and 35% of the revenue, totaling 5.368 billion yuan.
This is mainly used to pay for expenses related to advertising on social media platforms.
As a result, although JHGF's revenue reaches tens of billions, the net profit in 2023 was only 345 million yuan, with a net profit margin of 5.15% during the same period.
Secondly, influenced by factors such as market competition, JHGF's performance has seen a significant decline
Looking back at historical performance, JHGF's net profit in 2023 has basically returned to the level of 2019, which was only 346 million yuan.
However, the performance is still declining.
In the first half of 2024, JHGF's revenue and net profit attributable to shareholders were 2.453 billion yuan and 72 million yuan respectively, down by 21.97% and 61.80% year-on-year.
During the same period, the cross-border social e-commerce business only generated revenue of 1.384 billion yuan, a decrease of 31.53% year-on-year.
&#34;Due to intensified market competition in the cross-border e-commerce business, the company has taken measures such as reducing the unit price to cope with it and made strategic adjustments,&#34; JHGF pointed out. &#34;For sales regions with significant exchange rate fluctuations such as Japan and South Korea, the company has moderately controlled the scale of advertising, leading to a decrease in business orders and revenue, while further increasing investment in brand building and sales region expansion, resulting in increased costs affecting profits.&#34;
Just looking at the number of new cross-border e-commerce businesses, the industry is indeed fiercely competitive.
According to the Ministry of Commerce, by the end of 2023, the number of cross-border e-commerce entities in China has exceeded 120,000, an increase of over 20,000 from 2022.
However, it cannot be ignored that China's cross-border e-commerce import and export volume is also increasing.
According to the General Administration of Customs, in the first half of this year, China's cross-border e-commerce import and export reached 1.22 trillion yuan, a year-on-year increase of 10.5%.
Many peers are still maintaining high growth rates. For example, in the first half of 2024, Saivs Times achieved revenue of 4.177 billion yuan, an increase of 50.65% year-on-year; during the same period, the home furnishing cross-border e-commerce company Zhio Technology (301376.SZ) achieved revenue of 3.721 billion yuan, an increase of 40.74% year-on-year.
&#34;Although the competition is fierce, with the change in overseas market consumption habits due to the pandemic, the growth rate of the online shopping market is still relatively fast,&#34; pointed out an industry professional in the cross-border e-commerce sector.
In terms of current fundamentals, it may still be challenging for JHGF to achieve the desired valuation for its Hong Kong listing

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- Some companies are targeting dual listings in the "A+H" markets, with Ji Hong Group (002803.SZ) recently submitting an IPO application to the Hong Kong Stock Exchange. Ji Hong's main businesses include paper packaging and cross-border social media e-commerce, with significant revenue projections from 2021 to 2023. The company aims to expand its cross-border e-commerce market with the IPO, despite facing challenges like high customer acquisition costs affecting profit margins.
- The trend of A-share companies listing in Hong Kong for global business development is on the rise, with companies like Midea Group successfully raising funds. Ji Hong Group, focusing on cross-border social e-commerce, aims to leverage its data analytics for targeted advertising on international platforms. Despite revenue growth, Ji Hong faces challenges like high sales expenses impacting profitability and intense market competition affecting performance.
- Ji Hong Group's revenue growth is notable, but challenges persist, including high customer acquisition costs and intense market competition leading to declining profits. The company's net profit margins remain low, and despite significant revenue, profitability is affected. With the competitive landscape intensifying in the cross-border e-commerce sector, Ji Hong faces hurdles in achieving desired valuations through its Hong Kong listing.

Wallstreetcn

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Hong Kong Exchanges and Clearing (HKEX)

JIHONG CO

Burning over 5 billion in investment in 3 years, cross-border e-commerce JHGF is heading to HKEX