UTime Ltd

UTime Ltd (NASDAQ: UTME) is engaged in the design, development, production, sales and brand operation of mobile phones, accessories and related consumer electronics. It also provides Electronics Manufacturing Services (EMS), including Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM) services, for well-known brands. The company operates in China and its products are sold globally, including India, Brazil, the United States, and other emerging markets in South Asia and Africa as well as Europe.

Recent Highlights

• Boosted liquidity through IPO process: Recently, the company has received USD 15 million from the public through an initial public offering of 3.75 million ordinary shares at a price of USD 4.00 per share. The funds are being utilized to develop and market new goods, as well as engage local distribution networks and open a representative office in the United States.

Financial overview (Figures in thousands)

Source: Company

• Revenue for the year ended March 31, 2020, posted by the company stood at USD 27.2 million, a decrease of USD 8.1 million, or 18.9%, from USD 35.4 million for the year ended March 31, 2019. The decrease was attributable to the continued trend of reduction of OEM/ODM orders from the major customers, decreasing sales of in-house brand products, and the impact of COVID-19 on the business activities in the PRC and India.
• Gross profit for the reported period was USD 2.7 million, representing a decrease of USD 1.0 million, or 22.6%, from the gross profit of USD 3.7 million in the previous corresponding period.
• On the back of higher operating expenses, the company’s net loss increased 81.6% to USD 3.1 million compared to a loss of USD 1.8 million in the previous corresponding period.

Risks associated with investment

The company incurred significant losses and may continue to experience losses in the future. Furthermore, in the foreseeable future, it would continue to derive, a significant portion of net revenues from a small number of major customers and key projects.  For the year ended March 31, 2020, its top three customers accounted for approximately 57.3%, 9.6% and 6.0% of its net revenues. Dependence on few customers is a big risk to the company.

Stock recommendation

The company’s performance deteriorated in the last financial year and continuation of such a trend would put funding of the operations under pressure. Recently, the company made its IPO by issuing 3.75 million share units for gross proceeds of USD 15 million. The stock of UTME tumbled ~79.5% and ~73.6% in the last one month and three months, respectively. Since the stock recently listed on the exchange and with limited information available, we would like to see how the results pan out. Hence, we prefer to remain on the side-line. Therefore, we recommend an "Avoid" rating on the stock at the closing price of USD 10.27 on July 6, 2021.

Technical Price Chart (as on July 06, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.