In face of internal and external challenges and difficulties, Readboy finally made it after two failure attempts.
Readboy (2385:HK), one of the largest manufacturers specializing in electronic learning products in China, was successfully listed on the Hong Kong Stock Exchange today, with shares plunging nearly 29% from its listing price on its maiden trading.
Established in 1999, Readboy aims to develop and manufacture smart learning devices, including digital teaching and learning resources, for primary and secondary school students, parents, and teachers.
Though the learning device provider is listed, Readboy is still confronted with a slew of challenges.
First, declining gross profits. In 2021, its gross profit fell to CNY169 million from CNY 202 million in 2020 due to growing costs, per its new prospectus. Meanwhile, net profit declined 10.7% year-on-year to only CNY 82.1 million, showing weakness in earnings.
Second, excessive relying on distributors. From 2019 to 2021, it has contracted with 132 offline distributors, who together controlled 4,523 points of sale across 344 cities. This led to a compression of profitability potential.
Third, high marketing expenses with low R&D expenses. During the reporting period, Readboy’s sales and distribution expenses kept rising, amounting to CNY 74.16 million and CNY 73.06 million, respectively. By contrast, the expenses on research and development were CNY 30.21 million and CNY 43.87 million only. This inadequate invest in R&D and small number of R&D staff posed a detrimental effect on its own development.
Fourth, a fierce market. The domestic edtech market was long led by Chinese electronic conglomerate BBK (SZ:002251) with a market share of 28.9% in 2021, while the figure for Readboy was merely 6.1%. Moreover, some tech giants have also targeted the industry of intelligent educational hardware.
For example, NetEase Youdao (DAO:NYSE) and Huawei worked together to launch an intelligent dictionary; iFlytek (SZ:002230) launched an AI learning machine; Baidu (BIDU:NASDAQ) developed the intelligent learning machine P2. Traditional player YouXuePai (Chinese: 优学派), and edtechs such as Yuanfudao (Chinese: 猿辅导), Zhangmen Education (ZME: NYSE) and New Oriental (EDU: NYSE) have also had its layout in this field.
The successful IPO of Readboy can, to a certain extent, enhance its brand impacts and help it expand new business. However, the listing is not the key to retrieve the demanding situation. It seems to be more urgent for Readboy to find solutions to the current difficulties in operation.
The firm’s competitors include BBK (SZ:002251), NetEase Youdao (DAO:NYSE), iFlytek (SZ:002230) and Baidu (BIDU:NASDAQ).
As of press time, Readboy closed at HKD 6.8 apiece, with a total market value of HKD 2.394 billion.