US Stock IPO Outlook | With only $130,000 in cash left, Weimi Holdings urgently needs to go public to "replenish blood"

In recent years, against the backdrop of phased adjustments in the IPO rhythm of the A-share market, the listing standards for the main board and the ChiNext have been raised, while the evaluation standards for the technology attributes of the Sci-Tech Innovation Board are also being further improved. As a result, the number of listed companies in the A-share market has significantly decreased. Affected by this, many companies are turning their attention overseas, seeking broader development space, and capital outflow is gradually becoming a trend.

In the current accelerated process of global economic integration, the demand for overseas financing among enterprises continues to rise, with Hong Kong and U.S. stocks becoming the preferred markets for capital outflow. According to statistics, a total of 68 domestic companies successfully landed on the U.S. stock market in 2024. In terms of listing methods, 62 companies achieved listing through Initial Public Offerings (IPOs), 5 companies adopted the Special Purpose Acquisition Company (SPAC) method, and another company went public through OTC transfer.

However, while some celebrate, others face challenges. As the first company to receive a filing notice from the China Securities Regulatory Commission (CSRC) since the new filing regulations, Weimei Holdings (MJID.US) has not had a smooth IPO journey. Since submitting the F-1 document for the first time in April 2023, the company has updated its prospectus multiple times but has yet to obtain a ticket to Nasdaq.

From the company's latest prospectus, Weimei Holdings' fundamentals do not look optimistic, with losses expanding year after year and a consistently high customer concentration. Meanwhile, in February of this year, the official website of the CSRC released supplementary material requirements for overseas issuance and listing filings, issuing supplementary material requests for 6 companies, including Weimei Holdings. The CSRC required the company to explain the situation and reasons for not completing overseas issuance and listing within 12 months of the previous filing notice, as well as the fulfillment of commitments made during the previous filing.

Amid numerous risks and doubts, can Weimei Holdings still impress Nasdaq?

95% of Revenue Comes from a Single Business

According to Zhitong Finance APP, Weimei Holdings provides supply chain management services for the Chinese apparel industry, offering clients a one-stop solution that includes yarn products, textiles, and finished garments. The company provides a full range of services in the apparel supply chain, covering market trend analysis, product design and development, raw material procurement, and more.

According to the prospectus, for the fiscal years ending September 30, 2023, and 2024 (referred to as the "reporting period"), the company's revenue was RMB 82.5637 million and RMB 87.6224 million, respectively, representing a year-on-year growth of 6.2%.

Breaking it down, the company's business is mainly divided into yarn sales and finished garment sales.

Among them, yarn sales are the company's primary source of revenue, accounting for over 90% of its revenue, with the revenue from yarn sales reaching as high as 95% in the fiscal year 2024. It is worth mentioning that benefiting from increased customer demand, the company's yarn sales achieved an 8.1% year-on-year growth to RMB 83.269 million in the fiscal year 2024. However, the company's finished garment sales business saw a decline during the period, dropping from RMB 5.524 million in the fiscal year 2023 to RMB 4.3534 million in the fiscal year 2024.

![image.png](https://img.zhitongcaijing.com/image/20250302/1740887776765367.png? While revenue is growing, the company's profitability continues to strengthen. During the period, the company's gross profit margins were 5.1% and 6.2%, respectively. This is mainly attributed to the increase in the gross profit margin of the company's yarn sales, which rose by 1.5 percentage points year-on-year to 5.6%.

Against this backdrop, the company's losses have continued to expand. During the reporting period, the company's net losses were RMB 993,900 and RMB 1,284,200, with cumulative losses over two years reaching RMB 2,278,100. Notably, the company's general and administrative expenses increased significantly by 52.9% year-on-year to RMB 4,992,500, which the company stated is the main reason for the substantial increase in losses.

Difficulties in Resolving Upstream and Downstream Dependencies

Zhitong Finance APP also noted that Weimei Holdings faces a concentration risk with major clients. According to the prospectus, the company's clients include brand owners, textile manufacturers, clothing procurement agents, and online fashion clothing retailers. During the reporting period, the revenue from the company's top five clients accounted for 81% and 86% of total revenue, respectively.

Weimei Holdings candidly acknowledged in the risk factors that it does not enter into long-term agreements with any of the top five clients, who primarily purchase on an order basis. Therefore, these clients have no obligation to continue placing orders with the company, and their demand for the company's clothing products may fluctuate significantly due to various reasons such as their business strategies, operational needs, and product mix. As a result, the company cannot guarantee that it will maintain existing business relationships with major clients in the future, nor can it ensure the expansion of its customer base, which may adversely affect the company's performance.

In addition to reliance on major downstream clients, Weimei Holdings also faces high concentration risks with its upstream suppliers. During the reporting period, the company's top five suppliers accounted for approximately 71.9% and 66.8% of its cost of goods sold. Meanwhile, the company also does not enter into long-term agreements with suppliers.

Furthermore, examining the company's financial situation, tight cash flow and heavy debt are also among the main reasons for Weimei Holdings' eagerness to go public for financing. As of September 30, 2024, most of the company's current assets were composed of accounts receivable, with net accounts receivable reaching an astonishing RMB 40,441,300 in the 2024 fiscal year. Relative to its working capital needs, the company's cash level is low, with cash and bank balances decreasing sharply from RMB 591,800 at the end of the 2023 fiscal year to RMB 130,900.

The company stated that unless it can timely collect some accounts receivable, it may not have sufficient working capital to fund its operations without additional financing. Moreover, as the company expands its raw material inventory and strengthens its SCM services to cover a larger customer base, it is expected that the company's operating and capital expenditures will further increase in the coming years. Therefore, if the company cannot secure sufficient funding, it may need to significantly cut back on its operational plans, which could have a major adverse impact on its ability to continue operations

Intense Industry Competition

From the industry performance perspective, CICC pointed out that the textile manufacturing industry is expected to achieve rapid revenue growth in 2024 under a low base. As overseas brands resume normal ordering rhythms, textile manufacturing companies are experiencing a recovery in order growth, with the overall sector's revenue maintaining a double-digit growth rate from the fourth quarter of 2023 to the third quarter of 2024. Meanwhile, driven by the high revenue growth rate, the capacity utilization rate of textile manufacturing companies is expected to recover in 2024.

However, the magazine "China Textile" noted that in 2024, the domestic apparel market will continue to grow, but due to insufficient consumer willingness and intensified market competition, the endogenous momentum of terminal consumption is weak, leading to a slowdown in domestic sales growth. According to data from the National Bureau of Statistics, from January to December 2024, the retail sales of apparel products above designated size in China totaled 1,071.62 billion yuan, a year-on-year increase of 0.1%, with the growth rate slowing down by 15.3 percentage points compared to the same period in 2023; the online retail sales of clothing products increased by 1.5% year-on-year, with the growth rate slowing down by 9.3 percentage points compared to the same period in 2023.

CICC expects the textile manufacturing industry to continue its stable growth trend in 2025, with profit margins returning to normal levels against the backdrop of gradual expansion in personnel and capacity.

From the perspective of industry competition, China's apparel SCM industry has a large number of participants, making the industry highly fragmented and competitive. Companies compete with other apparel SCM companies based on service quality and pricing. Some of the company's competitors may offer a wider variety of services, greater pricing flexibility, stronger brand recognition, longer operational history, and more established customer bases. Therefore, these competitors have greater competitive strength, while the advantages of Weimei Holdings are not particularly obvious in comparison.

Overall, under multiple risks, Weimei Holdings' urgent desire to go public for "blood replenishment" is understandable, but with such fundamentals, winning over Nasdaq's "heart"? This may not be easy