Recently, the market has been keenly observing the listing application of Juzi Technology Innovation Co., Ltd. (hereinafter referred to as Juzi Tech) on the Hong Kong Stock ExchangeThe company's domestic operating entity is Juzi Technology (Hubei) Co., LtdAccording to the report, an overwhelming majority—over 90%—of Juzi Tech's revenue comes from a single product: the baby monitorFurthermore, the company's sales heavily depend on the American market, which has increasingly become a significant contributor, accounting for more than 70% of their revenue, a trend that shows consistent upward momentum.

Juzi Tech has established itself as a manufacturer of electronic products aimed at infants and young children, with its flagship product being the baby monitorThe prospectus reveals insights from a report by Frost & Sullivan, highlighting the staggering concentration of baby monitor exports to the United States from ChinaNotably, the top five exporters accounted for approximately 89.3% of total exports by volume, encompassing both online and offline sales in 2023. Juzi Tech claimed the third spot among these exporters, boasting a market share of 14.6% of the total baby monitors exported from China to the U.S. in that year.

Interestingly, Juzi Tech's online sales demonstrate even higher market concentrationIn 2023, the top five exporters dominated with a remarkable 94.5% market share for online sales aloneAmong these, Juzi Tech led the pack with 36.5% market share for online baby monitor exports to the U.SIn terms of unit sales, the company ranked third amongst exporters, with the key players in 2023 having market shares of approximately 44.4%, 15.6%, 14.6%, 13.3%, and 1.4% respectively.

From a performance perspective, Juzi Tech reported revenue milestones for the periods of 2022 to the first nine months of 2024, achieving revenue of 190 million, 348 million, and 349 million respectively, alongside profits of 34.73 million, 63.25 million, and 71.76 million during the same periods.

Breaking down this data further, revenue from baby monitors alone accounted for 91.5%, 95.4%, and 96.8% of Juzi Tech's total revenue for 2022, 2023, and the first nine months of 2024, respectively

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Sales volumes for baby monitors reached 402,000 units, 858,000 units, and 859,000 units during these years, with average selling prices recorded at 433.6 RMB, 386.8 RMB, and 393.1 RMB.

It is noteworthy that the average selling price of baby monitors saw a decline of roughly 10.8% from approximately 433.6 RMB at the end of 2022 to about 386.8 RMB at year-end 2023. Juzi Tech attributed this drop to strategic price adjustments for certain models as a part of their market penetration efforts.

Juzi Tech plans to utilize funds raised from their potential public offering to expand their sales channels and geographical reach, enhance brand recognition, invest in research and development for new products, upgrade existing offerings, and procure equipment necessary for new production facilitiesThey also aim to bolster their warehousing capabilities, particularly through the implementation of smart warehousing systems, alongside maintaining general operating capital.

In the lead-up to their filing, Juzi Tech has set forth dividends totaling around 18.3 million and 7.9 million expected to be distributed in cash in November and December of 2024.

Diving deeper into market dynamics, the American market has emerged as Juzi Tech's principal revenue source, contributing 108 million, 247 million, and 264 million across the reporting periods from a total revenue perspective of 56.8%, 70.9%, and 75.7% respectively.

However, Juzi Tech has candidly acknowledged the potential risks posed by varying trade policies, treaties, and tariffs, which could adversely affect their operations and financial performanceThe American government has initiated several measures to limit trade with China, complicating the landscape with implications for import tariffs, data transfer, and intellectual property protectionThe extent of future tariff implementations remains uncertain, particularly in terms of whether their exports to the U.S. might incur additional costs.

Moreover, Juzi Tech cautions that escalated trade restrictions may exacerbate existing tensions between China and the US, raising the possibility of further economic fallout not only for the two nations but for the global economy at large

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Consequently, the company's operational performance, financial condition, and overall prospects could sustain negative repercussions.

Prominent enterprise technology and strategic management consulting expert Zhang Xinyuan provided an analysis to the ‘Port Business Observer,’ noting that Juzi Tech's revenue share from the American market surged from 56.8% in 2022 to 75.7% in the first nine months of 2024, showcasing an increasing reliance on this key marketThis strategy of dependence invites considerable market risks; should the U.S. experience an economic downturn, governance changes like tariff hikes, shifts in consumer preferences, or intensified competition arise, the repercussions on Juzi Tech's revenue and profitability could be substantialAdditionally, fluctuations in exchange rates may also impose significant pressure on the company's financial outcomesZhang advises that diversification of market approaches is crucial for mitigating reliance on a single geography.

During the same timeframe, Juzi Tech recorded sales amounting to approximately 16.4 million, 21.26 million, and 19.43 million to Canada, comprising 8.6%, 6.1%, and 5.6% of total revenueBy September 2024, the North American revenue accounted for over 81.3% of the company’s total income.

Juzi Tech's revenue contributions from Europe showed ratios of 22.1%, 15.6%, and 15.2% in the respective fiscal periods, while distributions to Hong Kong accounted for 10.9%, 5.8%, and 2.2%, and the mainland saw allocations of merely 0.9%, 1.0%, and 0.6%.

Key successes in penetrating markets such as the U.S., Germany, and the UK can be largely attributed to three factors: the company's strategic focus on high-potential products and markets, a diverse range of popular baby monitors tailored to various customer needs and preferences, and increased branding efforts aimed at bolstering market presence and brand recognition.

However, Juzi Tech's increasing dependency on Amazon raises several concerns

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During the reporting periods, their sales and marketing expenditures ballooned to 39.33 million, 60.64 million, and 67.92 million, with marketing and advertising costs reflecting proportions of 43.1%, 48.3%, and 52.5%. Commission expenses incurred from e-commerce platforms hovered around 49.1%, 45.1%, and 41.4% respectively.

Juzi Tech cited heightened marketing and advertising costs as a result of intensified promotional activities primarily directed at third-party e-commerce platforms, aiming to elevate product visibility and market share.

In a similar trend, research and development spending increased to 4.75 million, 53.01 million, and 68.75 million, with R&D expenditure rates documenting at 2.50%, 1.52%, and 1.97% respectivelyWith nearly all of Juzi Tech's income—1.64 billion, 3.08 billion, and 3.29 billion—stemming from third-party e-commerce platforms accounting for approximately 86.2%, 88.4%, and 94.2% of total income, the company's reliance on these channels is evident.

The revenue generated from Amazon alone comprised about 1.61 billion, 3 billion, and 3.26 billion, constituting shares of 84.4%, 86.2%, and 93.4%. During these years, order volumes through Amazon were 449,000, 867,000, and 968,000, with daily average orders increasing from 67 to 158.

Zhang Xinyuan again elaborated on the pronounced risks associated with Juzi Tech's reliance on Amazon, noting that the spike from 84.4% in 2022 to an astonishing 93.4% in 2024 signifies an alarming dependence on a single platformThe inherent perils include shifts in Amazon's operational policies, cost structures, or algorithm changes that could adversely impact Juzi Tech’s sales and profitabilityMoreover, the competitive landscape within Amazon's marketplace presents challenges from other sellers which could ignite price wars, and any disruptions in Amazon's services pose immediate threats to Juzi Tech's revenue streamAdditionally, this dependency could dilute the company's control over its brand and limit direct consumer engagement.

To mitigate these risks, Zhang recommends that Juzi Tech explore multi-channel sales strategies, stating the potential in establishing their own e-commerce platform and diversifying to platforms like eBay and Walmart, as well as developing physical sales channels

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