Private Brand Involved In Several Intellectual Property Lawsuits

On May 21, 2021, the application draft of grebe's prospectus was officially accepted by Shenzhen Stock Exchange, with a total of 3.456 billion yuan to be raised, which is 3.5 times of its net assets of 970 million yuan at the end of 2020. In the critical period of listing review, the private brand of glibo has been involved in intellectual property disputes. It has launched a series of lawsuits with the State Intellectual Property Office, baoshide group and other units. So far, there is no definite result.

According to the statistics of 21st century economic report, in 2021 alone, glibo had more than 20 legal lawsuits with baoshide technology, State Intellectual Property Office, Beijing Shiji Weibang and Zhejiang Enjia intelligent.

On June 21, 2021, a number of intellectual property disputes between glibo, the State Intellectual Property Office and Baosteel Technology will be heard again, mainly involving the private brand greenworks, etc.

In 2020, the sales revenue of glibo's own brand products accounted for 54.05%, but the key brands were involved in property rights disputes. Whether it would have a significant impact on the company's listing, there are still many problems to be solved when glibo landed on the A-share market.

Highly dependent on North American market

According to the public information, gelibo is mainly engaged in the research and development, design, production and sales of new energy garden machinery. According to the use, the products can be divided into mower, lawnmower, cleaning machine, hair dryer, pruning machine, chain saw, etc.

During the reporting period from 2018 to 2020, the operating revenue of glibo is 3.112 billion yuan, 3.725 billion yuan and 4.291 billion yuan respectively, and the net profit is - 144 million yuan, 154 million yuan and 568 million yuan respectively. According to the profit standard of no less than 50 million yuan in recent two years, glibo meets the requirements of gem stock issuance and listing.

It is worth noting that it is not difficult to find out the huge market hidden danger behind the revenue of glibo by analyzing its business data.

During the reporting period, almost all of the main business income of grebe came from the overseas markets of Europe and America, accounting for 99.14%, 98.55% and 99.06% respectively. Among them, the company's dependence on the North American market continued to rise, from 73.73% in 2018 to 83.13% in 2020, while the proportion of European market revenue decreased continuously during the reporting period, only 14.45% in 2020.

Grebe's rapid growth in revenue is increasingly dependent on the North American single market.

Moreover, the company's customer composition is also concentrated. During the reporting period, the company's sales revenue to the top five customers accounted for 73.31%, 74.04% and 77.51% respectively, of which the sales revenue of Lowe's, the first largest customer, and Amazon, the second largest customer, accounted for 57.65%, 63.23% and 63.26% respectively.

In response to this, greebo said in response to the 21st century economic report that the company's products gathered in mature markets such as North America and Europe. The overall development prospect of the landscape tools industry in the above regions is good, and there is no risk of market shrinkage.

In the prospectus, greibe pointed out that if the company's product competitiveness declines or encounters market competition, which affects the cooperation between the company and its main customers, it will have a greater impact on the company's revenue, profits and other business performance. At the same time, if the overseas business environment changes, the main export countries and regions change the import trade policies and product certification system of garden machinery, the company's overseas operation will face risks.

Analysts pointed out that at present, U.S. trade protectionism has created a lot of friction in Sino US trade. If Sino US trade friction is further intensified in the future, export-oriented companies will face greater pressure of tariff barriers.

Gruber believes that if the United States cancels the tax exemption on some products of the company or further increases the tariff on some products of the company, it will affect the company's performance growth.

Private brand deeply involved in intellectual property disputes

Returning to the operational level, most of the enterprises that rely too much on the single market and single customer lack the market leading power, which often brings business pressure in many aspects, such as high debt, high receivable, high inventory and so on. Glibo also has a similar business dilemma.

At the end of each reporting period, the asset liability ratios under the consolidated calibre were 105.88%, 99.93% and 73.68%, respectively. In 2018 and 2019, the company even operated in full debt. Until now, the company still faces greater liquidity pressure.

In 2018 and 2019, glibo made profits for two consecutive years. However, by the end of 2020, the company's accumulated outstanding losses under the consolidated statements still reached 182 million yuan, and the undistributed profits in the parent company's statements reached 385 million yuan. In this fund-raising plan, 1.5 billion yuan of the company's 3.456 billion yuan will be used to supplement working capital.

At present, at the end of each period, the inventory and accounts receivable of glibe are both high, which once again erodes the liquidity of the company.

At the end of each reporting period, the book value of the company's inventory was 903 million yuan, 889 million yuan and 1 359 billion yuan, accounting for 47.47%, 41.44% and 44.27% of the company's current assets respectively; The total book value of accounts receivable and receivables financing were 668 million yuan, 835 million yuan and 827 million yuan respectively.

Glibe said that the product sales did not meet the market forecast, which may lead to unsalable goods in stock and overstock of raw materials, such as the decline of inventory allocation or performance competitiveness, or the long-term delay in sales of inventory, or the loss of inventory impairment. In addition, if the market environment and customer's business conditions change adversely, The company may increase the amount of bad debt withdrawn.

On the other hand, the dependence on the single market and customer concentration also makes the company's brand building link still weak. Glibo's sales mode mainly includes private brand, Shangchao brand and ODM business. Among them, Shangchao brand business is OEM production for self owned brand of Shangchao, and ODM business is OEM production for well-known brands in garden machinery industry.

In 2020, the company's Shangchao brand and ODM business accounted for 45.95% of the company's revenue, that is, nearly half of the company's revenue still relies on OEM and OEM contribution. Its private brands such as greenworks and powerworks, which it has been cultivating since 2009, are facing a number of trademark intellectual property disputes.

According to glibo's disclosure, since April 2016, Baosteel Technology has filed a lawsuit for invalidation of the application for trademark use such as "greenworks" held by glibo. Since then, baoshide group has filed a lawsuit for invalidation of the trademark "greenworks tools pro and map" held by glibo.

In October 2020, the State Intellectual Property Office rejected the application for partial use of "greenworks" trademark held by glibe; In November of that year, the State Intellectual Property Office rejected part of the application for the use of the company's "duramaxx" trademark; In December, the State Intellectual Property Office rejected the company's "powerworks" trademark application for registration.

It is understood that at present, there are as many as 14 trademark cases involved in glibo, and the related trademark registration related to the above-mentioned private brands is still at the stage of dispute. If the registration can not be carried out smoothly, the private brands contributing 54.05% of the revenue of Grubb may be in the dilemma of being unable to use in mainland China, and the company's brand construction may be hindered.

Questions about the rapid growth of performance

On the other hand, during the reporting period, greibe's performance rapidly achieved hundreds of millions of yuan from net loss, and the operation methods behind it were also widely concerned by the market.

During the three-year report period, the average growth rate of revenue of glibo is about 30%, but the net profit is changed from 144 million yuan in 2018 to 568 million yuan in 2020.

The company's comprehensive gross profit margin has increased for three consecutive years, which are 30.35%, 34.49% and 35.10% respectively from 2018 to 2020, while the average gross profit margin of comparable companies in the same industry is 29.11%, 30.94% and 29.40%, respectively. The profit level of glibe is significantly higher than the average level of the same industry, and has risen significantly during the reporting period. Is there any real operating performance behind it?

Glibo believes that the growth of the company's gross profit margin is mainly affected by favorable changes in the exchange rate, the overall decline in raw material costs, large-scale and lean production and other factors.

However, the 21st century economic report reporter inquired its prospectus and found that, inconsistent with the annual growth of the main business revenue, the company's period expense rate was 31.38%, 25.59% and 22.25% respectively during the reporting period. The revenue increased significantly year by year, and the period expense rate continued to decline significantly. In particular, the company's sales expenses decreased significantly from 412 million yuan in 2018 to 324 million yuan in 2020, Only this item, the company's profit increased as much as 100 million yuan.

According to common sense, the substantial growth of revenue will keep pace with the increase of sales expenses. However, glibo has achieved the operation miracle of sharp reduction of sales expenses and soaring revenue.

In this regard, glibo said that during the reporting period, while maintaining a high performance growth rate, the company implemented a comprehensive global budget management system to continuously improve the input-output efficiency of expenses, and the cost rate during the period decreased year by year. In 2020, according to the relevant requirements of the new revenue standard, the company will include the transportation expenses originally included in the sales expenses into the operating cost accounting, which will further reduce the period expense rate.

The 21st century economic reporter noticed that during the reporting period, the sales prices of domestic and foreign products of glibo also showed a big contrast. The company's product prices experienced a substantial price reduction at home, but the sales prices abroad increased significantly.

During the reporting period, the average price of the company's new energy garden machinery products decreased significantly from 694.96 yuan to 354.56 yuan in China, while the average price of overseas sales was adjusted from 712.04 yuan to 753.17 yuan; The average price of AC garden machinery products in China will be adjusted from 226.76 yuan in 2018 to 279.24 yuan in 2020, and the average overseas price will soar from 381.74 yuan in 2018 to 522.96 yuan in 2020.

According to glibo, there is a certain difference in the average sales price of domestic and foreign products, mainly due to the different specific models and sales channels of domestic and foreign products. The company's domestic business scale is small, the specific model of sales products is relatively limited, mainly for domestic small and medium-sized customers, so the price is different from that of overseas, which is reasonable.

In response to the inconsistency of the average price changes of domestic and foreign sales products, greibe replied to the 21st century economic report that the company continued to carry out iterative upgrading of its main products and constantly launched new products with more market competitiveness. The price rise of some products is related to the increase of sales of new products and the depreciation of RMB exchange rate.

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