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So-called “white label” printer ink cartridges have lengthy been the topic of a love-hate relationship for shoppers.
On the one hand, they’re usually less expensive than cartridges formally licensed by big-name printer makers like HP (HPQ) and Canon (OTCPK:CAJPY, 7751.T), whose printer companies make a lot of their income from such cartridges. But such no-name merchandise are sometimes unreliable, that means you could have to purchase a couple of simply to get one which works.
Now, the world’s high maker of such cartridges is getting set to present buyers another excuse to like or hate this product class, relying on how the stock does if and when it makes it to market. This “printed in toner ink” itemizing is coming from Planet Image International Ltd. (PLIM, YIBO), whose financials are most notable for the corporate’s huge revenue potential fairly than its income development.
Planet Image first filed its plan to record on the Nasdaq on March 16, saying it deliberate to promote 6 million shares for $4 to $5 apiece, elevating internet proceeds of as much as $24 million. That would worth the corporate at about $300 million on the high quality.
Interestingly, the corporate filed an updated prospectus final week that had all of these figures deleted. The removing seems probably associated to the naming of Tiger Securities as the brand new underwriter, changing one other small brokerage known as Network 1 Financial Securities.
As the funding banking arm of UP Fintech’s (TIGR) Tiger Brokers, Tiger Securities is pretty well-known and linked in China, its authentic residence. Thus, Tiger’s naming as the brand new underwriter may point out Planet Image could be planning to improve its itemizing to boost extra funds and maybe may very well be looking for the next valuation as nicely.
The itemizing can be not less than the second within the U.S. for Tiger since Chinese IPOs in New York accelerated late final yr, ending a drought of greater than a yr as a consequence of a dispute between the U.S. and Chinese securities regulators that has now largely been resolved. Previously, Tiger was considered one of a number of big-name funding banks that underwrote the January IPO for QuantaSing (QSG), an grownup training firm that raised $41 million.
All that mentioned, we’ll take a deeper dive subsequent into Planet Image’s up to date prospectus and supply our view on how the itemizing would possibly fare, in addition to the corporate’s longer-term prospects.
Planet Image was based in 2011 in East China’s Jiangxi province. There’s no actual dialogue of its improvement when it comes to product high quality, which is a key issue for this type of “white label” product maker. But the prospectus implies that, in some unspecified time in the future, Planet Image went from being simply one other knockoff printer cartridge maker with the same old excessive failure charges to a maker of extra dependable merchandise that would promote nicely within the aggressive and quality-conscious U.S. and European markets.
High-risk play?
There’s no dialogue of buyer grievance charges or failure charges for the corporate’s merchandise within the prospectus, so it is laborious to gauge how huge a threat that issue may pose to the corporate’s longer-term prospects. At the identical time, firms like HP and Canon are virtually actually making an attempt to develop printers that would probably be troublesome for third events like Planet Image to make cartridges for, which, if profitable, may have a huge effect on the Chinese firm.
Planet Image’s prospectus cites third-party information saying it’s at present the world’s largest maker of such “white label” cartridges, with 11% of the market. It famous that it’s the high vendor of such cartridges within the U.S. and Europe, and its prospectus reveals that it generated 54% of its gross sales in North America final yr and one other 40% in Europe.
Its precise gross sales development is not very spectacular. The firm logged $142.1 million in gross sales final yr, which was up simply barely from the $141.5 million in 2021. But its revenue was far stronger, rising 47% to $7.2 million from $4.9 million over the identical interval. Even extra spectacular, the corporate’s working revenue, which does not embody objects like adjustments in honest worth of its spinoff devices, greater than tripled to $11.3 million final yr from $3.1 million in 2021.
Planet Image attributed a mixture of components to the robust revenue enchancment, principally one-time occasions, which helped to spice up its general gross margin to 38.7% from 34.5% in 2021. Those components included a robust U.S. greenback, which lowered prices for its essential manufacturing base in China, in addition to decrease freight prices as transport costs lastly got here down final yr after an enormous spike firstly of the pandemic. The firm additionally cited value hikes and rising recognition of its merchandise, two components that appear to trace at a rising fame for high quality that we talked about earlier.
Such a rising fame as a robust different for manufacturer-authorized cartridges may trace on the potential for stronger income development going ahead. At the identical time, we count on that revenue development may sluggish as a result of one-time nature of lots of the components behind final yr’s huge good points.
The $300 million valuation we talked about earlier, mixed with final yr’s revenue, would give Planet Image a price-to-earnings ratio (P/E) of about 37 if the shares had been priced on the center of the unique $4 to $5 vary. That seems fairly expensive in comparison with the 13 for Canon and the 12 for HP, although the determine would come down considerably if its revenue retains rising.
For a sign of how this itemizing would possibly do, we may have a look at Chinese logistics supplier Jayud Global Logistics (JYD), which raised a modest $5 million when it made its personal New York buying and selling debut final Friday. The stock closed up a stable 26% on its first buying and selling day however gave again most of that on Monday to shut at $4.07, only a tad above the $4 IPO value.
That appears to point out that U.S. buyers are nonetheless undecided about Chinese IPOs proper now. We count on that Planet Image may get a barely hotter reception than Jayud as a consequence of its international focus and main place in a comparatively massive market. But the chance components we talked about will even weigh on the stock, most likely limiting its potential for large good points if and when it makes it to market.
Disclosure: None
Editor’s Note: The abstract bullets for this text had been chosen by Seeking Alpha editors.