Ordinary products with high net profit! East China’s outdoor industry leader earned a net profit of 200 million yuan last year

East China's outdoor industry leader made a net profit of 200 million yuan last year from ordinary products with high net profit

The outdoor product category is a huge market, and many cross-border e-commerce sellers have achieved good performance in this category. Some invisible champions in the domestic sub-product market are also doing quite well.

Zhejiang outdoor product export giant, Naturehike, specializes in outdoor sports products such as inflatable mattresses, outdoor bags, headrest cushions, etc. In 2022, Naturehike’s operating income reached 946 million yuan, and the net profit attributable to shareholders of listed companies reached 213 million yuan, with a net profit margin of more than 20%.

According to data from the China Industry Research Institute, the global outdoor product industry’s revenue scale in 2020 was nearly US$160 billion. In 2021, the global outdoor product industry’s revenue scale was US$181.235 billion. It is expected to reach US$236.34 billion by 2025, with a CAGR of approximately 6.86% from 2021 to 2025. The European Outdoor Group’s report shows that the European outdoor industry is booming and in a period of rapid growth. With the recovery of travel activities in European and American countries, outdoor travel-related products have also shown a good growth trend.

Inflatable mattresses are hot-selling products on e-commerce platforms such as Amazon and Walmart, with a wide range of applications.

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Naturehike is an old soldier in the industry, founded in 2000, and has now formed a vertical integrated industry chain from research and development to sales. In the field of outdoor inflatable mattress products, Naturehike has formed considerable advantages in key materials and production processes.

For example, in the TPU fabric commonly used in inflatable mattresses, Naturehike has key technologies such as TPU film production and fabric composite technology, polyurethane foam foaming technology, high-frequency welding technology, and hot-press welding technology, which can intervene from the source and ensure cost, quality, and delivery time. This has improved the company’s front-end operations competitiveness, as well as its ability to withstand risks and bargaining power.

In order to strengthen its R&D capabilities, Naturehike has set up a research and development department in its Shanghai factory to collect information on the development trends of outdoor products at home and abroad, and to obtain the latest technology for processing raw materials and automation equipment. In the three R&D directions of basic materials, products, and automation equipment, the company focuses on key projects such as TPU composite luggage and bag fabrics, low-density high-rebound sponges, inflatable water sports products, and automated production lines for home inflatable mattresses, with customer demand as the goal.

As part of its supply chain layout, Naturehike has established a subsidiary in Vietnam. According to Vietnam’s tax incentives, Naturehike Vietnam Outdoor Products Limited Liability Company enjoys a tax exemption of 100% for the first two years and 50% for the third to sixth years from the year of profitability or the fourth year of establishment, whichever is earlier. The subsidiary in Vietnam was established in May 2020 and has not yet been profitable in 2022, so there is no need to pay corporate income tax according to the policy.

Currently, Naturehike’s own brand is still in the development stage, and most of its revenue comes from ODM processing for customers including outdoor product brands and large supermarkets. Amazon’s outdoor brand Sea to Summit is an important customer of Naturehike. Through the intermediary purchaser LSO LP, Naturehike also supplies goods to North American platforms such as Costco and Walmart.

On the one hand, with growing demand and good customer acquisition capabilities, on the other hand, controlling the key links of R&D and product production, Naturehike has a higher net profit margin while increasing its revenue! In 2022, Naturehike achieved operating income of 945 million yuan, a year-on-year increase of 12.27%; a net profit attributable to shareholders of the listed company of 205 million yuan after deducting non-recurring gains and losses, a year-on-year increase of 2.99%. The net cash flow generated by operating activities was 228 million yuan, a year-on-year increase of 59.71%.

Looking at the quarterly performance, the company’s revenue and net profit in the first half of the year are significantly better than the second half. The revenue in the first half of the year is roughly twice that of the second half, and the net profit in the first half of the year is more than four times that of the second half.

Looking at the products, the annual revenue of the air beds is 688 million yuan, with a gross profit margin of 41.70%, while the annual revenue of the luggage is 127 million yuan, with a gross profit margin of 20.63%.

The star product of Da Ziran Outdoors, the inflatable mattress, sold 4.23 million units in 2021, an increase of 11.03% year-on-year.

In 2022, the sales of inflatable mattresses continued to grow, reaching nearly 4.35 million units, a year-on-year increase of 2.66%.

Although the products made by Da Ziran Outdoors seem quite ordinary, after years of deep cultivation in the category, they have thoroughly understood the key upstream and downstream links and controlled the entire chain. They have mastered the core products and research and development, and have also made supply chain arrangements in Vietnam for production, ultimately achieving high revenue and high profit. For cross-border e-commerce sellers, such a deep product strategy is very worthy of reference.

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