Zhejiang sex toy maker to debut on new board

A night scene from a Beijing street. Leisure and entertainment industries have thrived with economic liberalization. [Photo/China Daily]

The National Equities Exchange and Quotations, an over-the-counter style bourse also known as the New Third Board, is set to make history with the listing of the first sex industry-related stock.

According to information released by the board, Zhejiang Lover Health Science and Technology Co Ltd, a sex toy manufacturer, submitted an application on Friday to issue 79 million shares priced at 1 yuan ($0.15) apiece.

Disclosed information shows that sex toys are the company's mainstay business and accounted for 87.82 percent of its sales revenue during the first five months of this year. Closer scrutiny of the available information reveals that the company has enjoyed exceptionally high profit margins. Its gross profit rate, which was 43.94 percent in 2013, surged to 51.27 percent a year later. In the first five months of this year, the gross profit rate was about 46.41 percent.

Despite the high gross profit rate, the company has been making losses since 2013. Its losses reached a high of 73.21 million yuan in 2013. Though the company stemmed some of the losses in 2014, it was still in debt by 29.72 million. It had lost another 11.36 million yuan by this May.

According to the China Reproductive Health Industry Association, the market value of the country's reproductive health industry was about 48.7 billion yuan in 2007. Consumers' expenditure on this sector has been growing by 15 to 30 percent annually in recent years, and has already overtaken the average 13 percent in developed countries, it said without revealing the exact numbers.

"Competition is quite intense in the nation's reproductive health industry. Most of the products are sold online. The delivery of the products is highly reliant on logistics companies. Consumers who shop online are also more price-sensitive. As the industry is quite special and in its preliminary stage in China, Lover Health is facing problems like specific laws and regulations for publicity, industry supervision, market expansion, and customer education," the company said in its regulatory filing.

The NTB is extremely popular with companies from niche industries, and is host to China's first listed housekeeping service company, the first listed fermented beancurd manufacturer and the first theatre company.

The board has also become an extremely volatile market after the suspension of initial public offerings on the A-share market. Official data show that about 2,013 new companies were listed on the board during the first three quarters of the year. By the end of September, there were 3,585 listed companies on the board, with the total market value amounting to 1.5 trillion yuan.