IP collaboration, cross-border gold and silver, can Tong Shifu break out a new curve in the Hong Kong stock market?

In the niche copper craft industry, can a new "Bubble Mart" be created? The market is focusing on a Hong Kong-listed company that is about to go public.

Recently, Tong Shifu submitted its prospectus for the Hong Kong stock market, holding a 35% market share as the leader in China's copper cultural and creative craft industry, yet its annual revenue is only 551 million yuan.

Although its revenue is less than one-twentieth of Bubble Mart, Tong Shifu is not lacking in traffic halo.

It has been described by Lei Jun as "the company most similar to Xiaomi outside the Xiaomi ecosystem," and has received investments from Shunwei Capital and Xiaomi Group twice.

Not only is it a rare craft brand in the Xiaomi ecological chain.

In the current trend of trendy toys, it has been given the expectation of being "the Bubble Mart for middle-aged men."

Six months before its IPO, one of the shareholders transferred its equity at a price of 4.16 yuan per share, an 85% drop in valuation compared to two years ago.

Where are Tong Shifu's opportunities and problems?

Xiaomi Apprentice

Copper crafts have traditionally been a niche market with severe polarization.

Exquisite works costing tens of thousands coexist with cheap, poorly made street goods, lacking high-quality products with good cost-performance ratios.

The blank market of having categories but no brands allowed Tong Shifu's founder, Yu Guang, to see an opportunity.

In 2014, Tong Shifu launched its first batch of products on its Tmall flagship store, with a horse-shaped copper sculpture named "Ma Dao Cheng Gong" priced at only 999 yuan, highlighting its cost-performance compared to similar products on the market that often cost thousands.

Coupled with the penetration dividends of Taobao's e-commerce, by 2016, Tong Shifu's total revenue across all channels reached 106 million yuan, with the Tmall flagship store's transaction volume hitting 91 million.

The founder's identity as a seasoned "Mi Fan" has infused this company with Xiaomi's colors from user operations to product planning.

In 2017, Tong Shifu created the first "Copper Fan Festival" modeled after Xiaomi's "Popcorn Festival."

This event invited Xiaomi co-founder Li Wanqiang to participate.

Soon after, Tong Shifu had the opportunity to present to Lei Jun, resulting in a 110 million yuan Series A financing led by Shunwei Capital and Xiaomi Group.

The following year, in a 310 million yuan Series B financing led by Cathay Capital, Shunwei and Xiaomi appeared again.

Currently, Shunwei Capital and Xiaomi Group are the second and third largest shareholders of Tong Shifu, respectively.

To implement a cost-performance strategy, Tong Shifu adopts a cost pricing method for all its products, controlling the gross profit margin at 30%-35%.

Additionally, it aims to create phenomenon-level explosive products.

Tong Shifu currently has two best-selling series: Copper Gourd and Qi Tian Da Sheng.

In the Copper Gourd series, the "Good Luck Copper Gourd," priced at 39 yuan, serves as a standard traffic product. According to Yu Guang: "We sell 200,000 units each year, losing about 2 million yuan."

High-frequency big-ticket items drive the sales of products with higher price points, such as those priced in the hundreds and thousands.

In the past three years, the Copper Gourd series has sold over 570,000 units, generating over 100 million yuan in revenue.

The Qi Tian Da Sheng series further enhances its added value after integrating the "Journey to the West" IP, contributing a cumulative revenue of 89.5 million yuan over the past three years In the "small but beautiful" track of copper craft cultural and creative products, Tong Shifu has successfully become a leader and has accumulated a loyal consumer base.

Over the past three years, Tong Shifu's average online transaction value has exceeded 750 yuan, with a repurchase rate of over 56%, comparable to Pop Mart.

Price-Driven Traffic

With a stable online direct sales ratio of 70%, this is Tong Shifu's main channel, allowing it to rank first in sales of copper cultural and creative products on Tmall and JD.

Although traffic is crucial, to ensure sufficient profit margins under the cost-performance ratio positioning, Tong Shifu has minimized marketing expenses as much as possible, aiming to keep advertising costs within 5%.

In the era of live e-commerce, the company also avoids high-commission influencer sales, focusing instead on store broadcasts as the main sales model.

Yu Guang himself frequently participates in live broadcasts across various platforms such as Taobao, JD, and Douyin. On Douyin, Tong Shifu's store broadcasts have an average ROI of 1:25, with the highest ROI for special live broadcasts reaching 1:40.

Compared to Pop Mart and 52TOYS' sales expense ratio of around 30%, Tong Shifu's sales expense ratio is as low as 12.5%.

The company's gross profit margin of 35.4% is not outstanding in the trendy toys and IP derivative industry, but its net profit margin can still reach 13.8%.

In the future, as platform traffic costs continue to rise, marketing and sales costs are expected to trend upward.

The company has already begun adjusting its channel layout, leaning towards offline stores.

By the end of 2024, the company will have 9 directly operated stores and 68 distribution stores.

In the next three years, it plans to open 30 directly operated stores in first-tier, new first-tier, and second-tier cities such as Beijing, Shanghai, and Hangzhou.

The Red and Black of IP

Collaborating with popular IPs has become another narrative for traffic for Tong Shifu.

Tong Shifu's own IP draws extensively from Chinese mythology, folklore, and cultural symbols, connecting with its core consumer group through auspicious meanings.

At the same time, it actively seeks authorized collaborations with well-known film and animation IPs, aiming to break through audience boundaries.

Yu Guang once stated: "All of our IP authorization projects are limited in quantity, and it's hard to make money. But because my advertising budget is very tight, I try every means to bring free topic dissemination to Tong Shifu."

"Doing Transformers generates a lot of discussions, including among the model toy community. Doing Saint Seiya brings in a bunch of fans to discuss." Yu Guang said: "They may not necessarily buy, but they will discuss, and that is very important."

However, the story of IP-driven traffic has yet to be validated by performance.

In 2024, the SKUs of authorized IPs for Tong Shifu will exceed 400, about one-third of its own IPs, but the actual sales contribution is only one-fifteenth.

In the first half of this year, Tong Shifu collaborated with four IPs: "Ne Zha: The Devil's Child," "Batman," "Game of Thrones," and MOSHOWTOYS.

Among them, "Ne Zha: The Devil's Child" has become Tong Shifu's most anticipated new product due to its matching tone and rising IP popularity Less than half a month after its launch, the official flagship store of Tong Shifu on Douyin shows that 824 units of the "Fire Lotus Six-Armed Nezha" priced at 4,999 yuan have been sold, and nearly 3,000 units of the "Pocket Nezha" priced at 999 yuan are also on pre-sale.

According to incomplete statistics, the cumulative revenue from related products is close to 10 million yuan.

However, the licensing fee for Nezha 2 that was previously reported has reached 9 million yuan, and the actual earnings of Tong Shifu from this IP remain to be observed.

Recently, the founder of Tong Shifu was found to have mutual follows with an account that belittled the character "Ao Bing" from Nezha 2, and friction arose with fans due to not promptly stopping malicious comments about the character during a live broadcast.

This indicates that the preference differences between IP fans and the audience for copper crafts may not be easily reconciled by one or two collaborations.

Ceiling is Apparent

Copper cultural and creative crafts remain a niche market.

Compared to trendy toys and figurines that are very popular among young people, copper crafts, which emphasize craftsmanship aesthetics and traditional culture, have a relatively narrow audience.

The market size in 2024 is only 1.6 billion yuan, less than 3% of trendy toys, with an urban penetration rate as low as 2.34%.

The performance bottleneck of Tong Shifu has already appeared.

In the past three years, Tong Shifu's revenue compound annual growth rate was only 6.54%, lower than the industry growth rate of 7.3%.

In 2024, the number of the company's distributors decreased by 18, and the advance payment from distributors dropped from 11.29 million yuan to 4.9 million yuan, a year-on-year decline of more than half.

The company is attempting to break through with a diversification strategy.

It has launched the "Happy Little General," "Seal Craftsman Gold Shop," and "Reading Silver" brands corresponding to plastic trendy toys, gold, and silver respectively.

In the view of Tong Shifu, both copper and gold are malleable metals suitable for detailed sculpture, carving, and casting.

The common characteristics of these two metals can bring synergy in design, supply, and production processes.

In recent years, the gold cultural and creative market has been gaining popularity driven by old gold shops.

Tong Shifu's gold cultural and creative business has just started in 2024, with a gross profit margin of only 16%, less than half of that of copper products.

Compared to high-margin plastic trendy toys, resource-based crafts carry inherent risks of cost fluctuations.

The direct material costs represented by copper account for about 50% of Tong Shifu's operating costs.

Copper prices have been in an upward range in recent years, with the price per ton rising from 67,100 yuan in 2022 to 75,000 yuan.

The main contract price of Shanghai copper broke through 80,000 yuan/ton at the beginning of the year, setting a new high in nearly 20 years.

Non-standardized craft products often require a large amount of time invested in carving, prototyping, and surface treatment, with a high dependence on labor.

However, Tong Shifu's production capacity is still relatively saturated.

From 2022 to 2024, Tong Shifu's capacity utilization rates reached 99.7%, 99.3%, and 101.7% respectively, basically in a state of full production and supply not meeting demand.

The bottleneck is not in the capacity itself, but in the high difficulty of demand forecasting and precise capacity allocation.

Tong Shifu stated that in recent years, it has repeatedly encountered consumer responses exceeding expectations, leading to prolonged reservation cycles and reduced delivery timeliness As the product line continues to expand, the difficulty of coordinated management may continue to increase.

This IPO fundraising will allocate part of the investment to product development and design capabilities, as well as to enhance production capacity and fulfillment flexibility.

In 2026, Tong Shifu plans to build a research and development center of approximately 31,000 square meters in Hangzhou.

The new center is expected to improve internal collaboration levels, accelerate the sampling cycle, and enhance the material integration between various product lines.

In addition, further upgrades will be made to production equipment used in casting, machining, and other processes, and more than 200 skilled workers specializing in wax model making, welding, and polishing will be hired.

Time is running out for Tong Shifu to explore incremental growth.

In 2024, the market share gap between the company and the industry second, "Zhu Bingren·Copper," is only 3.2 percentage points.

To gain market recognition, Tong Shifu needs to tell a more convincing story.

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