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Edit | Peng Xiaoqiu

Another 3C brand in Shenzhen grabs the beach market.

Recently, Lvlian Technology submitted a prospectus to Shenzhen Stock Exchange, intending to raise 65.438+50.4 million yuan in IPO on GEM. On the eve of the delivery of the form, Lvlian Technology introduced external capital twice, of which Gaoyou Capital invested twice in succession, with a capital contribution of 550 million yuan.

Lvlian Technology, which started from Tmall and JD.COM, not only occupies a place in the domestic 3C accessories market, but also is widely known in overseas markets because it seized the limelight of Amazon on 20 14.

According to the prospectus, from 20 19 to 20021year, the operating income of Lvlian Technology was 2.045 billion yuan, 2.738 billion yuan and 3.446 billion yuan respectively, and the corresponding gross profit margins were 35.7 1%, 38. 10% and 37.266 respectively. Domestic and overseas markets account for almost half of the revenue. The net profit after deducting non-profit is 220 million yuan, 287 million yuan and 276 million yuan respectively.

Figure: Revenue changes of Lvlian Technology from 20 19 to 202 1.

From the financial report, we can find that in 20021year, Lvlian Technology has fallen into the dilemma of not increasing revenue. Although revenue kept growing, the growth rate reached 25.88%. However, after deducting non-profit, the profit growth rate did not maintain the growth rate of more than 30% in the previous year, but directly turned from positive to negative, down by 3.82%. The reason for the decline is that R&D investment and equity incentive fees have increased significantly, and the total of the two fees has increased by 85.5287 million yuan compared with last year.

In addition, Lvlian is also affected by the upstream procurement cost, and the prices of chips, wires and finished products purchased by Lvlian generally rise.

From the specific product side, Lvlian Technology's fist product is transmission 3C accessories, accounting for more than one-third of its revenue, which is also the deepest brand image. Transmission products include docking stations, hubs, network cards and network cables. , which is mainly used for communication connection and data transmission requirements between different intelligent devices.

Figure: The main products of Lvlian

The other two main products are audio and video and charging, including TWS headphones, fast charging head and mobile power supply, all of which belong to the 3C subcategory with the most intense competition in recent two years. Many startups and listed companies compete here.

In the 10 year of e-commerce in the Red Sea at home and abroad, can Lvlian Technology, which started with data lines, successfully hit the GEM?

First, the "two legs" of domestic e-commerce and cross-border e-commerce

To sum up the factors of the commercial success of Lvlian Technology, it can be divided into two parts: one is to catch up with the e-commerce dividend, and the other is to pour resources into the brand. Zhang Qingsen, the founder, once said, "Our success lies in not being greedy, finding the right sub-industries, spending enough energy to be vertical and catching up with the rapid development of e-commerce."

Channel layout is an important difference between the competitive strategies of 3C digital accessories brands. For example, when Anke went public two years ago, more than 80% of its revenue came from Amazon's European and American markets. Pinsheng Electronics paid more attention to domestic offline distributors and franchisees, and a larger part of its market share was controlled by head mobile phone brands such as Xiaomi, Huawei and OV.

The main revenue of Lvlian Technology basically comes from e-commerce sales, covering mainstream platforms such as JD.COM, Tmall, Amazon and AliExpress. The original intention of Zhang Qingsen's entry into the e-commerce platform is to be a brand and get a high premium, and the entry time coincides with the starting point of the e-commerce platform to restart the brand strategy, thus eating the traffic bonus given by the platform.

Figure: Online and offline income structure of Lvlian Technology 20 19-202 1.

In 2009, Zhang Qingsen, who had just graduated from college for two years, saw that the electronics manufacturing market in Shenzhen was in full swing and plunged into the entrepreneurial army. Thanks to its accumulated foreign trade experience in Hong Kong-funded companies, OEM production of data lines for foreign customers became the main profit source of Lvlian Technology, and expensive original data lines also supported a number of startups including Lvlian at that time.

However, just one year after starting a business, Zhang Qingsen was disgusted with the malicious price competition of his peers, and immediately gave up the OEM business and formed a small team of three people to turn to Tmall Mall.

At that time, the 3C accessories category of Tmall Mall was crowded with stall owners of Shenzhen SEG Electronics, because most of the latter's income still came from offline counters, which made their Tmall stores basically unable to talk about service experience and so-called brands.

After serving as customer service in the team, Zhang Qingsen saw the unsatisfied consumer demand and the lack of domestic brands in this huge market. Therefore, Lvlian chooses to develop its own molds to make its own products (Shanzhai brands use "public models" to reduce costs), and regards customer service as an important department to enhance customer experience.

Take the data cable of HDTV as an example. At that time, most of the goods were 1.8 meters, which is a 6-foot export data line. Lvlian made lengths of 0.5m, 1 m,1.5m, 2m, 3m and 5m. This practice is like a clean stream, which has become famous in the domestic market. In Zhang Qingsen's words, it means "opening Shaxian snacks with the strength of five-star hotels".

In 20 14, the brigade that smelled business opportunities joined the array that went out to sea through Amazon. At that time, Amazon China, which was losing ground before the domestic e-commerce war, turned its attention to the export business of sellers in China and placed cross-border e-commerce in an important strategic position.

However, moving to the sea is a helpless move of the Green League. This year, the first-line Internet companies saw the CES exhibition of Internet of Things equipment for the first time, and they laid out intelligent hardware in succession, which was called "building an ecosystem". The most representative products are mobile power, smart bracelets and electronic scales.

Internet companies' "hand-to-hand combat" in the field of intelligent hardware has also spread to the 3C accessories market. In order to fight involution, Zhang Qingsen tried to replicate the success of domestic e-commerce in Amazon. After half a year's stay, the sales of Lvlian Amazon exceeded $20,000 a day.

The following year, Lvlian began to integrate the supply chain and introduced upstream suppliers such as mold factory, chip factory and assembly factory into its own industrial zone, which greatly reduced the product cost. Three of the top five suppliers of Lvlian Technology-Shenzhen Xiangfan Technology (accounting for 13.93%), Fei Xuan Electronic Technology (accounting for 6. 19%) and Xie Yuan Science and Technology Industry (accounting for 4. 10%) are located in Longcheng Industrial Zone, Longhua District, Shenzhen.

Figure: Geographical distance between Lvlian Technology and major suppliers

After 10 years of e-commerce battlefield competition, Lvlian Technology has formed a certain brand power in domestic and foreign markets. According to the prospectus, during the reporting period, the online income of Lvlian Technology was 65.438+68.2 billion yuan, 2.249 billion yuan and 2.286 billion yuan respectively, accounting for 82.42%, 82.35% and 78. 14% of the total income respectively.

Because most domestic 3C digital accessories brands have not been listed, it is impossible to accurately see the competitiveness of Lvlian. A reference data is that the online revenue of Green Link in the domestic market in 20 19 was 863 million yuan, while the overall online sales of 3C digital accessories in China at that time was 40.689 billion yuan, so it is roughly estimated that the online market share of Green Link in 20 19 is about 2. 1%.

Photo: Online sales of 3C digital accessories in China.

Second, lack of core technology and dependence on outsourced products.

In contrast, Anke Innovation has launched different brands in multiple 3C categories. Lvlian's brand matrix is relatively simple, and it is still "3C brand selling data cable and network cable" in the downstream consumer market.

Moreover, even if the transmission product is a cash cow for business, the production mode of the core product, Green Link, is to purchase outsourced finished products, and its own production capacity is very weak. According to the prospectus, from 20 19 to 202 1, the production amount outsourced by Lvlian Technology has been as high as 75%.

Figure: 20 19 -202 1 year capacity, output and sales volume of Lvlian science and technology products.

In the last three years, Lvlian Technology has been trying to build its own factory to increase production capacity. However, due to the fast iteration cycle of 3C products, it is difficult to guarantee the quality and price of the factory, and the proportion of its own production capacity has declined instead of rising, but it has supported powerful upstream suppliers.

Specifically, taking Xiangfan Science and Technology, the largest supplier in the upstream of Lvlian, as an example, starting from the earliest transmission products, Xiangfan Science and Technology followed the rapid development of Lvlian and successively produced audio and video products, charging products and storage products for it. Xiangfan Science and Technology Factory has a monthly shipment of 300,000 pieces and an output value of nearly 50 million yuan. Lvlian purchases more than 260 million yuan from it every year.

At an earlier stage of development, Lvlian also sought for head brand suppliers through "Xiaomi-like model", produced cost-effective products and expanded new categories. For example, Shenzhen Xianying Technology, one of the five major suppliers of Lvlian Technology, has customers such as Belkin and DJI Innovation. The core transmission products of Belgin and Lvlian are almost the same. The former was acquired by Foxconn for 866 million yuan in 20 18.

Therefore, the mode of relying too much on supplier production will be a restrictive factor for the future development of Lvlian. If we further analyze its investment in R&D, we can see this sign more clearly.

From 20 19 to 202 1 year, the R&D investment of Lvlian was 64 million yuan, 95 million yuan and 654.38+56 million yuan respectively, accounting for 3. 17%, 3.47% and 4.54% of the operating income respectively. Although this figure is lower than the industry average, compared with the traditional R&D expense rate of 3C cross-border sales 1% ~ 2% in Shenzhen, the investment of HKTA is still considerable.

Figure: Comparison between the expense ratio of Lvlian Technology from 20 19 to 202 1 R&D and peers.

However, the problem of the Travel Federation is that the proportion of R&D personnel is relatively small, and only 565 of the 2,503 employees are R&D personnel. Anke, with a small number of employees, had 822 R&D personnel in 2065, accounting for more than 53%.

Why is this a key point? Due to the numerous branches of 3C category and different core technologies involved, the market scale is relatively small, and the overall market scale in 20 19 is 40.6 billion yuan. At the same time, 3C parts enterprises must invest heavily in R&D, including personnel and funds, if they want to cross multiple categories and obtain high brand premium. However, from the perspective of personnel composition, the R&D and marketing investment of Lvlian are roughly equal.

The most direct reflection of R&D investment is that it is difficult for brands to break through the "cost-effective curse". According to the prospectus, the sales unit price of similar products of Anke Innovation is basically 2-3 times that of Lvlian Technology. Of course, it is undeniable that the brand image created by Anke Charging Bao is more scientific and technological.

At the same time, when Lvlian horizontally expands new categories, it still chooses to follow the main brand of "UGREEN Lvlian", and 3C products in the low-end price range are just the battleground for big manufacturers and startups. Especially in the case of rising upstream costs, the controllable profit margin of its brand in the downstream has also been greatly reduced. 202 1 is a significant year.

As shown in the following figure, in 20021year, the procurement cost of purchased finished products and main raw materials of Lvlian Technology basically faced a price increase of more than 15%, and the cost of individual projects increased by more than 50%. However, in the downstream market, the average increase in the sales price of Lvlian products is only 2. 19%. It can be said that this is an important reason for its sharp decline in profits.

Figure: The change of product procurement cost from 20 19 to 202 1 of Lvlian Technology.

Third, Gao Lin voted twice in a row, and the founding team cashed in 300 million.

The listing signal of Lvlian Technology was first revealed in June last year. Gao Yan Capital invested 300 million yuan in Lvlian, and subsequently attracted institutional investors such as Shenzhen Shi Heng, Yuanda Strategy and Nut Nuclear Power, which were the only two external investments introduced by Lvlian.

In May, 2002 1, founder Zhang Qingsen and co-founder Chen Junling transferred the original 3.7% shares and 1.85% shares to Gaoyan Capital at the price of 200 million yuan and1100 million yuan respectively, and this round of valuation reached 5.4 billion yuan.

Combined with the changes in financing activities shown in the cash flow statement, this round of 300 million yuan belongs to the private cash of the two founders and has not been used for the company's operation. The prospectus also shows that in the past three years, Lvlian Technology has implemented six cash dividends with a total amount of 340 million yuan.

Figure: Cash flow analysis generated by Lvlian financing activities.

In June, 20021,Lvlian Technology introduced a new round of financing. Gao Yan invested another 250 million yuan, Shenzhen Shi Heng, Yuanda Strategy and Nut Capital invested 20 million yuan,150,000 yuan and150,000 yuan respectively, and the pre-investment valuation of this round rose to 5.7 billion yuan. If you count the funds to be raised, this listing will attract 2 1 100 million yuan of external funds.

Interestingly, however, Gao Xian arranged for Gu Xiangxiang to be a director when he first became a shareholder, but on April 2, on the eve of the listing of the Travel Association, Gu Xiangxiang issued a resignation letter, saying that he resigned as a director of the company due to personal physical reasons. Chen Yan, the director of the by-election, is one of the founding team executives of Lvlian Technology itself.

Of the 654.38+05 billion yuan to be raised, Lvlian plans to invest 55.65438+00 million yuan in product research and development and industrialization construction projects to optimize and integrate R&D laboratories for storage products, audio-visual products and charging products. In addition, 390 million yuan was used to build the headquarters operation center, and 450 million yuan was used to supplement the working capital.

After IPO, Zhang Qingsen holds 45.27% of the shares, Chen Junling holds 65,438+07.36%, and the employee-owned platform, Legal Alliance Consulting, holds 65,438+02.82%, Gao Yingxiheng holds 8.44%, and the employee-owned platform, Legal Alliance and Shun, holds 4.22%. Gao Yan Capital is the largest external shareholder.

Figure: Changes in shareholding structure before and after issuance

In terms of directors, the senior executives of Lvlian Technology also have a complex family background. Zhang Bijuan, the senior after-sales service supervisor of the Travel Federation, is Zhang Qingsen's sister, Li Jingzhen, the warehouse manager, is Zhang Bijuan's spouse, and Zeng Qiuyang, the foreign trade operation supervisor, is Lei Shubin's spouse. It can be seen that these people control several important sectors of the green alliance, such as supply chain, after-sales and overseas business.

In the case that the e-commerce environment at home and abroad has repeatedly encountered "black swan", as a first-line Internet 3C brand, after eating the development dividends of many mainstream e-commerce platforms, Lvlian Technology obviously needs to prove itself again in product strength and category expansion.

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