Mingyue Optical Lens Taps into Billion-Dollar Blue Ocean with Scale and Brand Advantages

For many people, eyeglasses are an indispensable necessity in daily life. Recently, Mingyue Optical Lens Co., Ltd. (abbreviated as “Mingyue Optical Lens”), engaged in the production and sales of optical lenses, has publicly released an updated prospectus as it seeks to list on the ChiNext board. A reporter from 《Economic Reference Daily》 reviewed the prospectus and found that in recent years, Mingyue Optical Lens has gradually established a sales network in China, with its core business performance experiencing rapid growth.

Rapid Growth in Market Size

Capacity utilization is approaching saturation

The prospectus reveals that Mingyue Optical Lens is a leading comprehensive optical lens manufacturer in China, with its establishment dating back to 2002. After nearly 20 years of development, Mingyue Optical Lens has established a complete industry chain and a one-stop service system, boasting comprehensive capabilities in R&D, design, production, and sales.

Currently, Mingyue Optical Lens's product portfolio primarily encompasses prescription lenses with various refractive powers for myopia, hyperopia, and astigmatism, as well as non-prescription plano lenses. The refractive power of its lenses ranges from +10.00D to -10.00D, in increments of 0.25D. Additionally, customized lenses featuring specific refractive powers or complex refractive combinations can be tailored to meet special customer requirements. During the reporting period (referring to 2018, 2019, and 2020, the same applies hereinafter), Mingyue Optical Lens achieved steady performance growth, with net profits attributable to shareholders of the parent company reaching RMB 32.8466 million, RMB 69.8460 million, and RMB 70.0049 million, respectively, representing a compound annual growth rate (CAGR) of 45.98%.

It is worth noting that the current market environment in which Mingyue Optical Lens operates represents a vast blue ocean of demand. The latest data from the World Health Organization shows that the number of myopia patients in China has reached 600 million, with the country's youth myopia rate ranking first globally. Meanwhile, as economic standards improve, consumer demand for eyewear is shifting toward diversification and personalization. In addition to myopia-correcting glasses, sunglasses and other eyewear are increasingly favored by consumers. Furthermore, population aging has intensified the demand for presbyopic glasses. These factors continuously generate new growth points for the eyewear market, which is poised to become a blue-ocean market valued at hundreds of billions of RMB.

《Economic Reference News》 reporters noted that during the reporting period, the capacity utilization rates for Mingyue Optical Lens's lenses stood at 99.43%, 83.02%, and 77.01%, respectively, while those for lens raw materials were 99.04%, 97.54%, and 66.65%, respectively. Barring a significant decline in capacity utilization in 2020 due to the pandemic, the rates in all other years remained near saturation. During the reporting period, the company's production-to-sales ratios for lenses reached 100.56%, 103.88%, and 113.39%, respectively, while those for lens raw materials stood at 98.14%, 91.05%, and 102.14%, respectively, exceeding 100% in most years.

Accordingly, Mingyue Optical Lens plans to raise RMB 568 million through this IPO. After deducting relevant issuance expenses, the net proceeds will be primarily allocated to capacity expansion projects for high-end resin lenses, as well as capacity expansion and technological upgrade projects for conventional resin lenses. Upon completion of all these projects, Mingyue Optical Lens will increase its annual production capacity by 16.5 million pieces for high-end resin lenses and 8.5 million pieces for conventional resin lenses. Mingyue Optical Lens believes that the aforementioned investment projects funded by the proceeds will not only enhance the production capacity and manufacturing processes of its resin lenses, but also continuously strengthen the company's R&D capabilities, marketing and service capabilities, and core competitiveness, thereby contributing to its sustainable development.

Sales System Continuously Improving

Brand awareness continues to rise

While maintaining its technological advantages and product quality, Mingyue Optical Lens has established a multi-tiered, extensively covered, and highly efficient marketing network system across China, and cultivated an experienced marketing team. As disclosed in the prospectus, Mingyue Optical Lens has deeply penetrated the offline terminal store market through a multi-channel model integrating direct sales and distribution, directly and indirectly covering and serving over 10,000 retail store clients across provinces and municipalities in China. As of the end of 2020, Mingyue Optical Lens had a total of 82 distributors and 3,187 direct sales customers.

Mingyue Optical Lens noted that online sales have grown rapidly in recent years, and under its new retail model, the sales scale of its online brand flagship stores directly targeting individual consumers has also expanded significantly. However, reporters from the *Economic Reference News* found that during the reporting period, its online self-operated revenue stood at only 4.2626 million yuan, 20.7818 million yuan, and 45.7371 million yuan, accounting for 0.85%, 3.77%, and 8.50% of its main business revenue respectively, representing a relatively low proportion. Nevertheless, industry analysts pointed out that eyeglasses differ from other consumer goods; ancillary services attached to the sales process, such as optometry, prescription dispensing, and after-sales support, all rely on physical store backing. Consequently, although Mingyue Optical Lens's online sales share is relatively low, it does not substantially hinder the company's sustainable development.

The reporter noted that, in terms of brand development, to enhance brand awareness, Mingyue Optical Lens has not only engaged Chen Daoming, Chairman of the China Film Association and a National First-Class Actor, as its brand spokesperson, but also entered into advertising partnerships with numerous variety shows such as *If You Are the One* and *The Brain*. Online, Mingyue Optical Lens directly places advertisements on e-commerce platforms or purchases brand promotion services; offline, it promotes its brand and products through advertising placements at airports, high-speed railway stations, core urban commercial districts, and landmark buildings across China.

A reporter for 《Economic Information Daily》 found that engaging well-known actors as brand endorsers has made “Mingyue Optical Lens” widely recognized among consumers. While browsing the Dianping website, the reporter noted in the comment sections of several optical retailers, including “Meihui Optical” at the Longhui Building in Panjiayuan, Beijing, that numerous consumers stated they chose to purchase Mingyue Optical Lenses from these stores due to their trust in the endorsers. Notably, during the reporting period, the advertising expenses paid by Mingyue Optical Lens amounted to 24.5438 million yuan, 41.7184 million yuan, and 46.3490 million yuan, respectively.

Mingyue Optical Lens believes that, after several years of development, the company now stands shoulder to shoulder with industry leaders such as Essilor and Zeiss in the first tier of domestic eyewear manufacturing brands in China, in terms of brand awareness, production and sales scale, and marketing channels.

Accounts Receivable Increased

Full Provision and Proactive Response

Upon reviewing the prospectus, a reporter from 《Economic Reference News》 found that alongside the growth in Mingyue Optical Lens's revenue and financial performance, the net book value of its accounts receivable has also continued to expand. The associated risk of bad debts on accounts receivable warrants investors' attention.

Mingyue Optical Lens disclosed in its prospectus that during the reporting period, its operating revenue was RMB 509 million, RMB 553 million, and RMB 540 million, respectively. During the same period, its accounts receivable stood at RMB 104 million, RMB 120 million, and RMB 128 million, respectively, reflecting a growth of 23.81% from 2018 to 2020, which was significantly higher than the growth rate of its operating revenue over the same period. In terms of the aging structure, Mingyue Optical Lens held a substantial amount of accounts receivable aged over two years, which totaled RMB 4.3837 million, RMB 7.8851 million, and RMB 10.9535 million during the reporting period, respectively.

In response, Mingyue Optical Lens acknowledged that the Company has a large number of customers making sporadic purchases, and the accounts receivable from such customers entail relatively high management costs. Furthermore, the extension of the Company's receivables aging profile is primarily attributable to the prolonged non-payment by certain customers for lens products. However, Mingyue Optical Lens also pointed out that it has fully provided for bad debts on an individual basis for receivables from customers under circumstances such as terminated cooperation or involvement in litigation. Additionally, in its prospectus, Mingyue Optical Lens also warned of the "risk of bad debts arising from accounts receivable": should such risks materialize, it may have a certain impact on the Company's asset quality and normal business operations.

A further review of the prospectus by reporters from 《Economic Information Daily》 revealed that Mingyue Optical Lens primarily operates through three sales models: direct sales, distribution, and consignment sales, with direct sales accounting for over 65% of total revenue. The company's direct sales clientele includes retail optical stores, optical chain enterprises, trading companies, hospital clients, and e-commerce businesses. Among these, retail optical stores are the most numerous, representing approximately 75% of direct sales customers. These stores are predominantly operated by individual businesses or small-scale enterprises. Industry insiders note that, compared with large corporations, individual businesses are often constrained by factors such as financial strength and management capabilities, which in turn increases the difficulty for Mingyue Optical Lens in collecting payments. Consequently, the company's accounts receivable turnover ratio has gradually declined, recording 4.51 times/year, 4.33 times/year, and 3.77 times/year during the reporting period, respectively.