Oulun Electric IPO: High Inventory Goods Ratio, Continuous Decline in Export Unit Price, Is There a "Price Reduction to Boost Sales" Situation?

Ask AI · How can a low gross margin be matched to claims of technical advantages?

《Electric Eel Finance》Electric Eel Channel/Author

On March 17, Zhejiang Oulun Electric Co., Ltd. (hereinafter referred to as Oulun Electric) cleared the Beijing Stock Exchange (BSE) IPO approval process. According to the prospectus, Oulun Electric is a comprehensive company integrating R&D, design, manufacturing, sales, and service around environmental conditioning equipment. Its main products include four major series: dehumidifiers, portable air conditioners, car refrigerators, and air-source heat pumps. Currently, the company’s products have been widely used in industries or fields such as power, electronics, pharmaceuticals, paper, food, agricultural and sideline products, venues, warehouses, laboratories, and so on.

After reading the materials provided by the company, Electric Eel Finance noted that during the reporting period, the company’s export sales volume showed “growth against the trend.” The company attributes this to “vertical, professional-brand enterprises achieving growth against the trend by leveraging specialized technology and superior product performance.” However, it is worth noting that the company’s gross margin is far lower than that of comparable listed peers. During the reporting period, the company’s export product unit prices generally showed a downward trend—does this indicate a “cut prices to boost sales” strategy? In addition, the underwriting/trade-related exchange scrutiny raised concerns about the large amount of “base funding” for its募投 projects, and inventory goods account for more than 60%—future absorption of the newly raised production capacity is also a cause for concern.

How is a gross margin far lower than peers’ “specialized technology and superior product performance” reflected?

The prospectus shows that Oulun Electric plans to raise 754 million yuan, of which 459 million yuan will be used for an annual production project of 600,000 dehumidifiers and 15,000 air-source heat pumps, 95.04 million yuan will be used for an annual production project of 30,000 air-source heat pumps, 99.25 million yuan for the R&D center construction project, and 100 million yuan for补充流动资金 projects.

From 2022 to 2024 and from January to June 2025 (hereinafter referred to as the reporting period), Oulun Electric achieved operating revenue of 972 million yuan, 1.232 billion yuan, 1.623 billion yuan, and 1.242 billion yuan, respectively. In the same periods, net profit attributable to owners of the parent was 93 million yuan, 140 million yuan, 208 million yuan, and 150 million yuan, respectively. In the same periods, net cash flow generated from operating activities was 242 million yuan, 234 million yuan, 237 million yuan, and 194 million yuan, respectively.

The prospectus shows that during the reporting period, the revenue contribution from dehumidifiers was 61.42%, 54.37%, 55.15%, and 22.81%, respectively; from portable air conditioners it was 34.64%, 38.23%, 35.08%, and 55.13%, respectively; from car refrigerators it was 1.98%, 2.70%, 2.76%, and 3.38%, respectively; and from air-source heat pumps it was 0.5%, 2.61%, 3.58%, and 5.78%, respectively.

During the reporting period, Oulun Electric’s sales revenue from Europe was 24.05%, 30.92%, 35.91%, and 31.26%, respectively. Sales revenue from Asia was 11.79%, 13.39%, 14.01%, and 21.02%, respectively. Sales revenue from North America was 17.22%, 10.69%, 9.59%, and 6.84%, respectively. Sales revenue from Oceania was 1.63%, 0.79%, 1.37%, and 0.79%, respectively. Sales revenue from South America was 0.27%, 0.70%, 1.30%, and 0.13%, respectively.

It can be seen from this that Oulun Electric’s operating revenue mainly comes from dehumidifiers and the European market. According to disclosures in the second round of responses to inquiries, (1) from 2023 to January–June 2025, Oulun Electric’s main business revenue increased year over year by 26.99%, 31.76%, and 38.68%, respectively, mainly because the sales volume of portable air conditioners and dehumidifiers continued to grow. At the same time, the company launched two major emerging products—car refrigerators and air-source heat pumps—and achieved significant growth. (2) from 2023 to January–June 2025, the year-over-year increases in revenue from portable air conditioners were 40.15%, 20.90%, and 51.24%, respectively. The export shipment volume of the portable air conditioner industry declined in 2022 and 2023. The year-over-year increases in dehumidifier sales revenue were 12.40%, 33.65%, and 4.27%, respectively. The growth was mainly driven by exports. The European market increased relatively quickly; however, from 2022 to 2023, the export shipment volume of China household dehumidifiers to Europe continued to decline. In January–June 2025, the domestic dehumidifier sales volume was 5.308 million units, down 11.4% year over year. From April to August 2025, the monthly sales volume of household dehumidifiers outside China declined year over year. In 2023, Oulun Electric’s sales amount of dehumidifiers to the European market was 196.3709 million yuan, up 143.83%. Among this, the sales amount of Oulun Electric’s dehumidifiers to the top ten customers in Europe was 80.3097 million yuan, up 59.8879 million yuan from the same period last year, an increase of 293.25%, contributing 51.70% of the incremental revenue in the Europe region.

It can be seen that when export shipment volume from China decreased in the same period, Oulun Electric’s exports still grew against the trend. Regarding the mismatch between the company’s dehumidifier sales performance in the European market and the export shipment volume of China household dehumidifiers to Europe, in the second round of inquiry, the exchange required Oulun Electric to explain the reasons and rationality for why companies in that region could achieve substantial growth against the trend.

In its response to the second round of inquiries, Oulun Electric disclosed that according to the industry report “2023 China Household Dehumidifier Annual Research Report” by IPrO (Industrial Online), in 2023 the export shipment volume of China household dehumidifiers to Europe was 1.62 million units, down 8.40% year over year. Among different countries, there were significant differences: Western and Nordic European countries such as the UK, the Netherlands, and Sweden achieved growth, while Russia saw a much larger decline. In 2023, the export shipment volume of China household dehumidifiers to the UK increased by 25% year over year, ranking as the second among European countries for dehumidifier exports from China, indicating that demand in the UK market for China household dehumidifiers increased rapidly.

Oulun Electric stated that the above report shows that market participants perform differently. The leading comprehensive manufacturers saw declines when exporting to Europe, but vertical professional-brand enterprises such as Deyi Co., Ltd. and Oulun Electric achieved growth against the trend by leveraging specialized technology and superior product performance.

However, according to what Oulun Electric disclosed in its prospectus, during the reporting period the company’s gross margins were 22.24%, 24.17%, 27.13%, and 24.86%, respectively, while Deyi Co., Ltd., a comparable peer, had gross margins of 38.03%, 40.41%, 38.76%, and 37.48%, respectively.

It can be seen from this that Oulun Electric’s gross margin is far lower than Deyi Co., Ltd.’s. Oulun Electric stated above that “vertical professional-brand enterprises such as Deyi Co., Ltd. and Oulun Electric achieved growth against the trend by leveraging specialized technology and superior product performance.” When Oulun Electric’s gross margin is far lower than that of peers such as Deyi Co., Ltd., how does it demonstrate the company’s “specialized technology and superior product performance”?

Export unit prices keep falling—does this involve a “price cut to boost sales” strategy?

The prospectus shows that during the reporting period, Oulun Electric’s R&D expenses were 35.028 million yuan, 38.8800 million yuan, 50.6571 million yuan, and 33.6770 million yuan, respectively. As a proportion of operating revenue in the same periods, they were 3.60%, 3.16%, 3.12%, and 2.71%, respectively. Moreover, Oulun Electric’s R&D expense ratio is clearly lower than the R&D expense ratios of the vast majority of comparable peers.

During the reporting period, Oulun Electric’s gross margins for dehumidifiers were 26.98%, 30.04%, 31.02%%, and 31.70%, respectively. In the same period, the gross margins for portable air conditioners were 12.75%, 15.62%, 21.19%, and 20.75%, respectively. The gross margins for car refrigerators were 17.85%, 13.09%, 10.57%, and 21.49%, respectively. The gross margins for air-source heat pumps were 13.47%, 28.96%, 21.60%, and 24.94%, respectively.

During the reporting period, Oulun Electric’s sales volume of dehumidifiers was 1.116 million units, 1.5054 million units, 2.1423 million units, and 1.5591 million units, respectively. The sales volume of car refrigerators was 30.2 thousand units, 45.4 thousand units, 67.3 thousand units, and 42.0 thousand units, respectively. The sales volume of air-source heat pumps was 0.03 thousand units, 0.35 thousand units, 0.66 thousand units, and 0.89 thousand units, respectively.

In its response to the second round of inquiries, Oulun Electric stated that from 2022 to 2024, Deyi Co., Ltd. and the company’s growth trends were basically consistent; in January–June 2025, the “returning south fog/rain” weather characteristics in China were relatively weaker, leading to a decline in demand for dehumidifiers. Due to Deyi Co., Ltd.’s higher share of dehumidifier domestic sales, combined with more intense competition in the domestic market, its sales declined compared with the same period last year; the company’s dehumidifier domestic sales

declined 25.73%, which is consistent with the overall sales trend of Deyi Co., Ltd. and aligns with industry characteristics and weather conditions. However, given that the company has a higher export scale share and performed well overseas, the dehumidifier sales revenue in January–June 2025 still maintained a 4.27% increase.

In its response, Oulun Electric also stated: “The company’s sales are mainly targeted at overseas markets, where overseas consumer purchasing power is stronger. In recent years, the increase in my country’s overseas expansion business has been relatively large; whereas comparable companies such as Gree Electric Appliances, Hisense Home Appliances, and Midea Group have focused mainly on domestic sales. Their domestic sales share is more than 50%, and Gree’s domestic sales proportion is over 80%. In recent years, due to factors such as intensified domestic competition and insufficient consumer demand, their growth rate has been lower than that of overseas markets.”

It can be seen from this that Oulun Electric’s export sales volume of dehumidifiers was 433.3 thousand units, 749.4 thousand units, 1.0948 million units, and 561.1 thousand units, respectively. In the same period, the export unit selling prices were 597.80 yuan per unit, 528.84 yuan per unit, 522.82 yuan per unit, and 522.54 yuan per unit, respectively. The domestic sales volume of dehumidifiers was 286.3 thousand units, 216.1 thousand units, 378.6 thousand units, and 140.2 thousand units, respectively, and the domestic unit prices were 1171.09 yuan per unit, 1260.55 yuan per unit, 848.70 yuan per unit, and 902.95 yuan per unit, respectively.

Oulun Electric’s export sales volume of portable air conditioners was 340.3 thousand units, 500.5 thousand units, 610.4 thousand units, and 736.1 thousand units, respectively. The export unit prices were 867.50 yuan per unit, 876.04 yuan per unit, 865.46 yuan per unit, and 832.30 yuan per unit, respectively. The domestic sales volume of portable air conditioners was 55.0 thousand units, 39.4 thousand units, 58.4 thousand units, and 121.7 thousand units, respectively. The domestic unit prices were 733.75 yuan per unit, 807.59 yuan per unit, 690.11 yuan per unit, and 591.29 yuan per unit, respectively.

In its inquiry response, Oulun Electric stated that during the reporting period, the sales of its dehumidifier and portable air conditioner products were mainly in export markets. Export revenue amounts increased steadily. The reasons were that, against the backdrop of continuous growth in overseas market demand, the company deepened its focus on overseas markets. Through continuous product iterations, strict control of product quality, improving delivery efficiency and service level, and strengthening cost management capabilities to protect customers’ profit margins, among other measures, it has continuously consolidated existing customers, enhanced customers’ purchasing stickiness, and at the same time continuously expanded new customers—thereby achieving continuous and stable growth in export sales volumes of its two product categories in overseas markets.

However, it is worth noting that when Oulun Electric’s overseas sales volume continued to grow, the company’s export market selling price per unit fell nearly along the entire way. During the reporting period, the export unit selling price of Oulun Electric’s dehumidifiers was 597.80 yuan per unit, 528.84 yuan per unit, 522.82 yuan per unit, and 522.54 yuan per unit, respectively; the export unit selling price of portable air conditioners was 867.50 yuan per unit, 876.04 yuan per unit, 865.46 yuan per unit, and 832.30 yuan per unit, respectively.

Does Oulun Electric’s “growth against the trend” in overseas sales involve a strategy of using prices to boost sales? As the marginal benefits brought by price cuts diminish, can the company’s sales amount in overseas markets continue to grow?

Large “base funding” for the募投 projects draws the exchange’s inquiry; inventory goods account for more than 60%

The prospectus shows that for this IPO, Oulun Electric plans to raise 754 million yuan. Of this, 459 million yuan will be used for the annual production project of 600,000 dehumidifiers and 15,000 air-source heat pump projects, and 95 million yuan will be used for the annual production project of 30,000 air-source heat pumps.

The implementation entity of the “annual production of 600,000 dehumidifiers and 15,000 air-source heat pumps” funded by 459 million yuan raised by Oulun Electric is Oulun Electric itself. The total investment amount is 4,594.2000 million yuan, and the construction period is 24 months. The project plans to expand the company’s dehumidifier production capacity by building new factory buildings, optimizing production layouts, purchasing advanced production equipment, and recruiting personnel. After the project is fully operational, it will add production capacity of 600,000 dehumidifiers and 15,000 dehumidifier dryer capacity air-source heat pump units. In particular, given that dehumidifiers and portable air conditioners share a common final-assembly production line, the related line resources are allocated and capacity accounted for uniformly; therefore, the added capacity of 600,000 dehumidifiers is the combined capacity of the two product types.

Among the 459 million yuan of raised funds mentioned above, 17.98 million yuan will be used for contingency/preliminary expenses, and 40 million yuan for base working capital (铺底流动资金). Together they total 57.98 million yuan.

The implementation entity of the “annual production of 30,000 air-source heat pump projects” funded by 95 million yuan raised by Oulun Electric is Oulun Electric itself. The total investment amount is 950.4000 million yuan, and the construction period is 12 months. The company plans to expand the capacity for its air-source heat pump products by optimizing the production layout, purchasing advanced production equipment, and recruiting personnel. After the project is fully operational, it will add production capacity of 30,000 units of air-source heat pump heating and hot-water units.

Among the 95 million yuan of raised funds mentioned above, 3.99 million yuan will be used for contingency/preliminary expenses, and 11.35 million yuan for base working capital (铺底流动资金). Together they total 15.34 million yuan.

It can be seen from this that Oulun Electric plans to use a large amount of the raised funds for base working capital and contingency/preliminary expenses. The company also needs to use an additional 100 million yuan raised funds to补充流动资金. Regarding using such a large amount of raised funds for base working capital, the exchange raised questions in the second round of inquiry.

During the reporting period, Oulun Electric’s capacity utilization rates were 61.62%, 85.48%, 94.09%, and 96.53%, respectively. It can be seen that Oulun Electric’s capacity utilization rate is not low. However, it is worth noting that as of June 30, 2025, the book value balance of the company’s inventory goods was 187 million yuan, representing about 66% of the total current assets, which is the largest component by share among current assets.