With the development of RFID industry, the rapid growth of the RFID label market, bringing practitioner SML Group Corporation (“SML”) to more than HK $1 billion per year, also allows the company to expand into the capital markets. According to Hong Kong stock exchange disclosure on January 9, SML submitted a listing application to the main board, with BNPPARIBAS as its sole sponsor.

rfid industry

RFID technology, also known as radio frequency identification technology, identifies and read and write specific target data through radio signals, and can complete the identification and reading and writing of label information without close contact. RFID technology, as a part of the Internet of Things, plays a very important role in our daily life.

For example, RFID tags, embedded with RFID inserts and coded using unique single-grade digital identification data, provide them with additional product tracking, verification, and inventory management capabilities for retailers.

Newbega company undertakes the production of all kinds of RFID electronic labels, engaged in the radio frequency industry for more than 20 years, affordable, well-known. You can contact our team if need our assistance.

According to the F & S report, the global RFID label market for clothing and footwear increased from approximately $600 million to approximately $1 billion between 2017 and 2021, with a compound annual growth rate of 12.2% during the period. And this has also promoted the SML company’s determination to go public to some extent.

Who is SML?How does It Matter with RFID?

SML is mainly responsible for the development, manufacturing and sales of identification label products. It is the world’s largest and most famous shoe and clothing retailer and brand owner, and also owns the world’s leading “RFID” products. At present, the company operates three major business segments, respectively, the basic label business involves the development, manufacturing and sales of no RFID standard; the development, manufacturing and sales of RFID labeling and distribution RFID system.

In 2021, the basic labeling business is the largest business of SML, with a revenue of 2.06 billion yuan (Hong Kong dollars, the same below), accounting for 59.9%; the second largest business RFID labeling business was 1.321 billion yuan, accounting for 38.5%; the revenue of RFID system business was 55.68 million yuan, accounting for 1.6%.

Although SML is the leading enterprise in the global clothing and shoe label market, the company has lacked strong performance and growth stability in recent years. In terms of performance, in 2019,2020 and 2021, SML revenue was about 2.926 billion, 2.611 billion and 3.437 billion respectively. During the same period, the profit margin in the year was about 94.151 million yuan, 24.742 million yuan and 203 million yuan, respectively. That is well below earnings expectations.

What Caused the Unstable Performance of SML Company?

rfid clothing tags

SML disclosed in the prospectus that the sharp decline in net profit in 2020 was mainly due to the decline in gross profit margin and exchange loss; and the significant increase in net interest rate in 2021 was due to the decrease of losses caused by exchange and the improvement in company operating efficiency, and the proportion of sales and marketing expenses, general and administrative expenses decreased.

Summary and Outlook

In 2020, SML confirmed the net loss of foreign currency exchange of 42.8 million yuan, and the net loss of 9.4 million yuan. The reason why the company faces such a large exchange risk is mainly due to the company’s extensive business and strong uncertainty of exchange. On the other hand, the price of raw materials fluctuates greatly, and the total cost of raw materials of the company is rising every year. The proportion of raw material costs from 2019 to 2022 accounted for 45.8%, 47.2%, 51.6% and 50.7% of the total cost of sales.

In particular, SML noted that supply conditions have gradually improved since the second half of 2022, and prices are expected to gradually return to normalization. If RFID inserts and chip prices continue to rise and the company fails to transfer the cost, the company’s business and operating performance will be significantly adversely affected.

From the perspective of industry growth, if SML can effectively solve the problem of exchange rate fluctuations and raw material increases, the company’s business is expected to achieve steady growth.

According to the F & S report, the increasing consumer demand for clothing and footwear products in the global clothing and footwear labels market is increasing, resulting in a corresponding increase in labels.

The global clothing and footwear labeling market experienced steady growth between 2017 and 2021, rising from approximately $11.7 billion to approximately $11.8 billion, with a compound annual growth rate of 0.4%. The global apparel and footwear labels market is expected to reach approximately US $14.2 billion by 2026, with a compound annual growth rate of 3.7% from 2021 to 2026.

In 2021, SML’s RFID software Clarity ranked first with 5,300 deployed stores, with a market share of about 19.6%. This is another step for SML to help retailers and brands, which will focus on the impact of the commercialization of the software on the company’s future performance.

Newbega company follows the international trend, RFID label products are exported to overseas, and low cost, affordable. If you have this need, welcome to inquire.

(News is from sohu)

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