The essence of Chenguang Kolip's business is actually centralized procurement and targeted sales for large customers, mainly providing cost-effective procurement services for large-scale enterprises such as governments, public institutions and central state-owned enterprises.
Since the selling point of the service lies in its high cost-effectiveness, list of lebanon whatsapp phone numbers the concentrated and large-scale purchasing volume has caused the purchasing price to be pressed down again and again, the final result is a continuously declining gross profit margin.
Source: Chenguang Group 2023 Financial Report
In 2023, M&G Kolip achieved a revenue of over 13.3 billion yuan, but only created a net profit of 400 million yuan, with a net profit margin as low as 3%, which is significantly lower than the profit margin of traditional stationery sales.
In addition, since Chenguang Kolip serves large B-end customers, the extra-long account period compared to the C-end coupled with the soaring revenue has caused the pressure on accounts receivable faced by Chenguang Co., Ltd. to continue to rise.
According to financial report data, in seven years, Chenguang Group's accounts receivable data soared from 165 million yuan in 2016 to 3.587 billion yuan in 2023, an increase of nearly 22 times.
The accounts receivable turnover days and debt-to-asset ratio also surged, with the former soaring from less than 27 days in 2018 to over 50 days in 2023, and the latter increasing from 38.41% to 45.47%.
It has high revenue, low profits, and faces the risk of high account periods. To put it bluntly, this is a typical business that "wins face but loses substance."
Image source: Tonghuashun
However, this is not the biggest risk currently facing Chenguang Holdings.
M&G's main business is facing an unprecedented industry impact. Most of its writing tools and stationery products are highly dependent on the educated population, that is, students who are mostly under 24 years old. It is a foregone conclusion that the current birth rate is in a rapid decline, and these newborns are the potential customers of M&G in the future.
In addition, the "double reduction" policy and "middle school entrance examination diversion" policies implemented in recent years have made the student market targeted by Chenguang even worse.
