Tuyere financial reporter Zhao Chong
Recently, Xiaoxiong Electric announced that its chief financial officer applied for resignation as chief financial officer for personal reasons and no longer held any position in the company. Just last year, the company's previous chief financial officer resigned for personal reasons.
Xiaoxiong Electric, known as the "first share of creative small household appliances", will have a "change of face" drama in the first quarter of this year after its revenue and net profit both rose sharply in 2023, and both revenue and net profit declined. As of the close of trading on July 2, the price per share of Xiaoxiong Electric was 46.98 yuan, and the market value was only 7.369 billion yuan, down nearly 7% from the peak.
The small household appliance industry has slowed down, the profitability bottleneck of Xiaoxiong Electric has gradually emerged, and the financial director has been replaced twice in less than two years.
The chief financial officer has been changed in two years
Since landing in the capital market in 2019, less than 5 years after listing, the position of financial director of Xiaoxiong Electric has ushered in two changes.
Source: Company announcement
According to the announcement, the board of directors of Xiaoxiong Electric recently received a written resignation report submitted by Feng Yongwei, chief financial officer, Feng Yongwei holds 20,000 shares of Xiaoxiong Electric's equity incentive restricted shares, and the company will repurchase and cancel in accordance with the "Measures for the Administration of Equity Incentives of Listed Companies" and the company's "2022 Stock Options and Restricted Stock Incentive Plan (Draft)" and other regulations.
According to public information, Feng Yongwei only joined Xiaoxiong Electric in June last year, and was hired as the chief financial officer on December 18 of the same year, and when he applied for resignation, he was only in office for about half a year. The company's previous chief financial officer, Zou Yonghui, resigned on April 18 last year for personal reasons, which means that the position of chief financial officer was vacant for 8 months.
Xiaoxiong Electric landed on the Shenzhen Stock Exchange in 2019 with the halo of "the first share of creative small household appliances", and the company achieved operating income of 4.712 billion yuan last year, a year-on-year increase of 14.43%; The net profit attributable to shareholders of the listed company was 445 million yuan, a year-on-year increase of 15.24%. However, in the first quarter of this year, Xiaoxiong Electric experienced a decline in revenue and net profit.
According to the financial report, the company will achieve operating income of 1.194 billion yuan in the first quarter of 2024, a year-on-year decrease of 4.58%; net profit was 151 million yuan, down 8.53% year-on-year. In addition, in the first quarter of 2024, the net cash flow generated by Xiaoxiong Electric's operating activities was 129 million yuan, a year-on-year decrease of 38.57%.
Source: Company's Q1 2024 report
As for the reasons for the decline in the performance of Xiaoxiong Electric in the first quarter, Founder Securities Research Report believes that the decline in the performance of Xiaoxiong Electric in the first quarter may be mainly affected by the high base in the first quarter of 2023 and the continued fierce competition between e-commerce platforms and manufacturers.
The financial reporter sent a letter to Xiaoxiong Electric on the company's stock price, performance and expense ratio, but as of press time, no reply has been received.
The heavy marketing model is facing challenges
Xiaoxiong's market share of small household appliances in the past mainly relied on appearance and product storytelling, as well as strong marketing thrust, and lacked certain core competitiveness in technology.
In addition to being easy to be plagiarized and surpassed, the disadvantages of not being strong enough technology have also been named many times due to product quality problems. For example, the results of the 2021 Shanghai Municipal Product Quality Supervision and Random Inspection released by the Shanghai Municipal Administration for Market Regulation showed that the Xiaoxiong breast pump produced by Xiaoxiong Electric was found to be unqualified with signs and instructions.
The reporter found that Xiaoxiong Electric had a total of 741 complaints on the black cat complaint platform, and the complaints were mainly focused on product quality.
Source: Black Cat Complaint
Therefore, in recent years, Xiaoxiong has also been actively seeking breakthroughs and increasing R&D investment, and since 2018-2022, R&D expenses have increased from less than 50 million yuan to 137 million yuan. In 2023, Xiaoxiong Electric's R&D expenses will be 142 million yuan, an increase of 3.93 percentage points year-on-year.
Source: Company's 2023 Annual Report
Although R&D investment has been increasing year by year, its sales expenses have always been much higher than R&D expenses. In 2022 and 2023, its sales expenses will increase significantly, to 730 million yuan and 884 million yuan, respectively, and the sales expense ratio will be 17.72% and 18.76% respectively.
In the first quarter of this year, the sales expenses of Xiaoxiong Electric were 213 million yuan, and the sales expense ratio was 17.85%, an increase of 2.29 percentage points year-on-year.
Compared with other small household appliance enterprises, the sales expense rate of Xiaoxiong electrical appliances is at a high level. In 2023, the sales expense ratios of Supor, Xinbao and Joyoung will be 10.79%, 3.96% and 14.84% respectively, which are generally lower than those of Xiaoxiong Electric.
The small household appliance industry slowed down
In the past, Xiaoxiong Electric quickly opened up the market by relying on differentiated positioning and strong marketing of online channels. However, the technical threshold of the small household appliance industry is generally not high, so there are many players on the track, the competition is extremely fierce, and the product homogeneity is serious. In the major appliance industry, brands such as Chinese and American electrical appliances, Haier Smart Home, and Supor are rapidly changing, competing to lay out smart homes.
In terms of Haihua expansion, although Xiaoxiong Electric's overseas revenue will achieve a significant growth of 105.66% in 2023, reaching 370 million yuan, compared with the domestic market's revenue of 4.342 billion yuan, a year-on-year increase of 10.27%, overseas sales account for only 7.84%, which means that most of Xiaoxiong Electric's revenue depends on the domestic market.
Source: the company's official website
In the face of the challenge of customer loss caused by fierce competition in the domestic market, as well as the balance between cost control and brand building encountered in overseas expansion, Xiaoxiong Electric is taking the initiative to adjust its strategy to deal with it.
Li Yifeng, chairman and general manager of Xiaoxiong Electric, said at the 2023 annual performance briefing that the company's next strategic direction is to strengthen the mainstream category and increase the market share of Xiaoxiong in the mainstream category.
In addition, the company should develop more products with high customer unit price, not limited to products with low customer unit price, and open a wider price band. In the near future, the company will also launch products with high unit prices, and has launched a thousand-yuan double-drum washing machine, and there will be more and more products with more than 1,000 yuan on the market in the future. The company's overall average price has moved up, and low-priced products and imported products will continue to be maintained to keep the original user group. He said.
It can be seen that Xiaoxiong Electric has achieved rapid growth in performance with the help of creative small household appliances. However, with the fierce competition in the small household appliance market, in order to pursue growth, Xiaoxiong Electric has gradually entered the home of traditional white appliance giants such as washing machines and personal care appliance leaders. Under the more fierce market competition, it is still worth paying attention to whether this kind of business can drive the overall business recovery.