XJ Electrics files for Hong Kong IPO

The maker of electric kettles, garden hoses and other kitchenware will use proceeds from its planned listing to pay for new production bases in Thailand and Indonesia

Key Takeaways:

  • X.J. Electrics has filed to list in Hong Kong, reporting its revenue rose 10% in the first half of this year on strong sales for its core electric kettles
  • The company is moving more of its production overseas, following a broader movement for greater geographic diversification among Chinese manufacturers

  

By Edith Terry

Kitchenware may not be that sexy, but don’t tell that to investors. Carote Ltd. (2549.HK) wowed the markets with its pots and pans earlier this month, lifting its shares to a steamy 58% jump on their first trading day in Hong Kong on Oct. 2. Now, the similarly kitchen-themed X.J. Electrics (Hu Bei) Co. Ltd. is hoping to replicate that success with its own IPO.

X.J. Electrics, more commonly known in China as Xiang Jiang, has similar financial metrics to Carote. It earned revenue of 1.19 billion yuan last year, not far behind 1.58 billion yuan for Carote. And X.J. Electrics’ net margin of 10.2% for the year wasn’t much below Carote’s 14.9%.

Both companies navigate a complex global consumer market in an industry that is growing, but not that quickly. X.J. Electrics’ niche for small kitchen appliances like tea kettles and hotplates grew from $63.2 billion in 2019 to $71.6 billion in 2023, and is expected to grow to $87.5 billion by 2028, according to market data in the listing document filed on Sept. 29. That’s certainly not small potatoes.

As is customary, the company’s listing document doesn’t provide any fundraising targets. But its hiring of the mid-sized Chinese brokerage Sinolink Securities as sole underwriter indicates the listing will probably be small to mid-sized, probably raising $50 million or less.

X.J. Electrics’ listing path has gone through quite a few twists and turns. According to Chinese media, the company began planning an IPO on China’s domestic A-share market as early as 2013, and its application was accepted by the Shenzhen Stock Exchange in March last year. But it withdrew that application in April this year and shifted its focus to Hong Kong, saying the city’s status as an international financial hub more closely aligned with its own global business.

Like Carote, X.J. Electrics is an original equipment manufacturer (OEM) and original design manufacturer (ODM) of kitchen and lifestyle items, with a flexible manufacturing system that can produce 2,400 different products at its seven factories. Electric kettles are one of its biggest products, with over 1 million exported last year – around a fifth of China’s total exports of that product. Such kettles fall under the company’s broader category of electro-thermal appliances, which accounted for 499 million yuan in sales last year, or 42% of the company’s total, and 296.2 million yuan, or 48.2% of the total, in the first half of 2024.

The company was China’s 10th largest small appliance manufacturer last year based on export value, with 0.6% of a sector whose total value was 130.7 billion yuan. By contrast, market leader Galanz, a major microwave oven maker that also owns Whirlpool China (600983.SZ), logged 13.5 billion yuan in exports for the year, or 10.3% of the small appliance market.

X.J. Electric’s other big earner is garden hoses, which accounted for 221.8 million yuan of its revenue in 2023, or 18.7% of its total, and 135 million yuan, or 22% of the total, in the first six months of 2024.

A-list of customers

The company has a relative A-list of customers, including major names like Walmart, Philips, Hamilton Beach and British brand Sensio Home. It said 10 of its products were in the top 10 for their categories on Amazon.com as of August 2024, including its steamer, rice cooker, electric griddle and electric skillet.

Despite all the similarities with Carote, one important place where X.J. Electrics differs is in its attempts to develop its own brands that are typically far more profitable than OEM and ODM work. Its own-brand business has been declining over the past few years, falling from 93.9 million yuan in 2021 to 49.7 million yuan in 2023, as its Weighmax, Accuteck and Aigoli brands, sold solely on e-commerce platforms, made little headway. Carote has been far more successful in developing its own Carote brand, which is a key factor behind its faster revenue growth than X.J. Electrics’.

A primary motivation for X.J. Electrics’ latest listing attempt is raising money to move more of its manufacturing to cheaper offshore locations, following a general trend among Chinese manufacturers. The company set up an offshore unit in Indonesia last year, and another in Thailand earlier this year. It still makes all its products in China, shipping them to 70 countries and regions.

But that will soon change with the planned launch of a 7,745-square-meter factory in Indonesia in the first quarter of next year, followed by an even larger Thai facility by the end of 2025. With more than 43,000 square meters of space, the Thai facility is equal to about 12% of the company’s current manufacturing footprint.

The overseas movement seems driven by a combination of factors, including not only lower costs but also minimizing geopolitical risk amid growing Chinese trade tensions with the West. According to the listing document, five of China’s top 10 small kitchen appliance manufacturers have moved some production to Southeast Asia, which X.J. Electrics calls “an inevitable trend.”

The new Thai facility will include 10 automated assembly lines with a capacity of 7 million units. It will ultimately cost 139.2 million yuan, some of which would be paid for using the listing proceeds. X.J. Electrics also plans to use proceeds to build a new R&D center in its current manufacturing base in Qichun in Central China’s Hubei province. Among other things, new products on its roadmap include intelligent dumpling frying pans and high-powered mixers, as it tries to jumpstart its own-brand business.

The company said it may also explore acquisitions of some of the 100-plus U.S. brands of small kitchen appliances, following another pattern for Chinese manufacturers to buy Western brands and use their own expertise to try to lower their costs.

In terms of its financial trends, X.J. Electrics’ metrics have been mostly on a slow but steady growth track. Its overall revenue grew 8% to 1.19 billion yuan last year, and the rate ticked up slightly to 10% in the first half of this year to 614 million yuan. Its gross profit margin grew from 17.5% in 2021 to 22.4% in the first half of 2024. Its bottom line also posted steady growth, rising from 71.8 million yuan in 2021 to 121.4 million in 2023, though the figure fell 12% to 60.5 million in the first half of 2024 from 69.1 million yuan a year earlier.

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