Worldia Steps on the Accelerator to Seek CNY 407 Mn in STAR Board IPO
The company gained traction in overseas market in the past three years. But it has posted a higher-than-industry selling expenses ratio (selling expenses/revenue), driven by higher wages it paid for sales.
Worldia Diamond Tools, an industry leader in the field of metal machining, is seeking to raise as much as CNY 407 million (USD 59.18 million) in its Shanghai STAR Broad initial public offering.
Backed by early-stage investment firm China Growth Capital and Northern Light Venture Capital, the company is offering 20 million shares at a price of CNY 26.68 (USD 3.88) per share, it said in a filing to the Shanghai Stock Exchange.
Worldia specializes in the design and manufacturing of Polycrystalline Diamond (PCD) and Polycrystalline Cubic Boron Nitride (PCBN) cutting tools. These tools generated CNY 224 million (USD 32.58 million) in 2018, representing 85.48% of total revenues, according to its prospectus. The cutting tools maker also produces super hard materials, which accounted for 9.13% of revenue in 2018. It relies heavily on its direct sales channels, separated into two parts: traditional direct sales and OEM/ODM sales. Several high profile names to name here for its OEM/ODM sales are Master Carbie Tools Company and Kennametal Asia.
The company gained traction in overseas market in the reported years – overseas sales contributed to 26.97% of total revenue in 2018, up from 2016’s 23.78%. Its cutting wheels competitors are from South Korea and Taiwan while cutting blades competitors are from some Asian countries, North America and the Europe Union.
The firm also has posted a higher-than-industry selling expenses ratio (selling expenses/revenue), driven by higher wages it paid for sales. In 2018, the firm posted 7.25% of its revenue in selling expenses compared to an average 4.84% level in the industry. In contrast, it spent 6.35% of revenue on R&D last year.
The manufacturing player did see much net profit growth in the past three years. It recorded CNY 66.3 million net profit last year, up 14% from CNY 58.14 million (USD 8.45 million) in 2017.
China’s cutting tools market value grew to CNY 38.8 billion (USD 5.64 billion) in 2017, which was hovering around CNY 33 billion since 2012, according to the company’s prospectus. Manufacturing in China is pivoting towards a more intelligent era, especially after the 13th Five-Year Plan for Economic and Social Development pointed it out.