Interpreting New Stocks on U.S. Stocks Market | Low Profitability Highlights the "Middleman" Nature, TYZ Group (TYZ.US) Multidimensional Planning Aims to Enhance Intrinsic Value

Only 23 employees can accelerate the impact of a commodities trader with annual revenue drying up to $784 million on the capital market. It was observed that Shanghai-based Tongying Group, after submitting its public prospectus (Form F-1) to the SEC on February 21, 2025, updated its prospectus for the first time on April 23, 2025, continuing to advance its IPO process. According to the prospectus, Tongying Group is applying to list on Nasdaq under the code "TYZ," but the size of the issuance and the offering price have not yet been disclosed. Market rumors suggest that it will raise up to $10 million in this IPO. After updating the prospectus, Tongying Group's performance in 2024 also "emerged". Data shows that Tongying Group's revenue in 2024 was $595 million, a 24.2% decrease from $784 million in 2023, with a net profit of $810,000, a 14.57% year-on-year increase, but with a net profit margin of only 0.14%. What is the true value of Tongying Group, with declining revenue and low profitability? By combining the company's prospectus, this can be explored. The Secret Behind the Decline in Revenue As a commodities trader, the essence of Tongying Group's business model is actually to profit from the price difference as a "middleman". According to the prospectus, Tongying Group mainly engages in commodities trading and supply chain consulting services, but almost all of its revenue comes from commodities trading. The company purchases chemical products, non-ferrous metal products, and agricultural products from upstream suppliers and sells these products to downstream customers. It is worth noting that Tongying Group does not provide transportation and warehousing services in this process, instead entrusting third-party warehouses to store products purchased from suppliers. Typically, products are transported by the suppliers to the company's designated third-party warehouse, and customers pick up the products themselves. In this model, Tongying Group, as a middleman, achieves light asset operation, allowing it to quickly enter the commodities trading market and expand its annual revenue scale to $784 million in just three years. However, as a newcomer in the industry, Tongying Group lacks sufficient experience, and its product portfolio is relatively concentrated. Currently, Tongying Group mainly trades in chemical raw materials (such as PTA, ethylene glycol) and products like rebar and corn to meet the needs of downstream industries. In 2023, revenue from PTA and ethylene glycol accounted for 57.2% and 36.8% respectively, with these two chemical raw materials accounting for 94% of the company's revenue. As is well known, chemical raw materials are a typical cyclical industry, and having a highly concentrated product portfolio can pose potential business risks, as price fluctuations can significantly impact a middleman's income. In 2024, Tongying Group faced this challenge. According to the prospectus, revenue from ethylene glycol in 2024 fell by 90.9%, with its proportion of total revenue dropping from 38.6% to 4.6%, a drastic decrease of 34 percentage points. This was mainly due to rising prices of ethylene glycol in 2024 restricting profit margins, prompting Tongying Group to strategically exit this sector. While strategically exiting the ethylene glycol market, Tongying Group also actively reduced its business scale in the rebar market due to its prediction of continued weakness in the real estate industry hindering rebar demand. Revenue from rebar fell by 54% in 2024, with its proportion of total revenue decreasing from 1.8% to 1.1%. At the same time as this strategic contraction, Tongying Group accelerated the expansion of other products. On one hand, the company continued to explore the PTA product, with revenue growth of 11.7% in 2024; on the other hand, Tongying Group began to focus on the corn sector to diversify its risks, with revenue from corn growing by 973.2% in 2024 and its proportion of total revenue increasing from 0.7% to 10%. Although revenue from PTA and corn increased, revenue in 2024 still decreased by 24.2% due to the drag from ethylene glycol and rebar. However, despite the decline in revenue, net profit increased. This was mainly due to an increase in gross profit margin and a decrease in total operating expenses. In 2024, Tongying Group's total operating expenses were $897,000, a 20.41% year-on-year reduction. Several potential challenges need to be addressed, and liquidity remains tight Generally, the development path for emerging players in the commodities trading sector is to first focus on the circulation of niche categories, then gradually expand towards platformization and product diversification after achieving a large scale through synergies. Tongying Group is currently still in the phase of focusing on niche categories, hence facing the issue of a highly concentrated product portfolio. Although the company made efforts in 2024 to enter the corn market beyond chemical raw materials, as of now, the problem of overly concentrated product categories still remains unresolved. In 2024, revenue from PTA for Tongying Group skyrocketed to 84.3%, further increasing the concentration, leading to a further increase in potential risks. Therefore, driving the development of diversified products to enhance the stability of the company's performance has become a difficult issue that Tongying Group needs to address. The company explicitly stated in the prospectus that it plans to continue expanding into other commodity categories to ensure diversification of its product supply. However, the challenges that Tongying Group needs to face do not stop there. Firstly, a deep insight into the trends of price changes in the commodities trading market is necessary, and adjustments need to be made promptly. Only by making correct predictions and timely adjustments to product operating strategies can the company seek to maximize profitability in a market with constantly fluctuating prices. This often requires building a professional team to conduct in-depth market analysis. Tongying Group stated in the prospectus that the company plans to expand and independently set up a spot/futures chemical trading team to enter the field of chemical futures trading, which will better protect against price risks entering the spot market and ensure profitability. Secondly, the commodities trading market is highly competitive, and Tongying Group, as a middleman, not only has low profitability but also needs to enhance its market competitiveness. In 2023 and 2024, Tongying Group's gross profit margins were 0.27% and 0.07% respectively, showing room for improvement in market competitiveness.Gross profit margin is low at 0.33%, and the net profit margin for 2024 is only 0.14%.Although the light asset model, which is not responsible for storage and transportation, allows Tongying Group to quickly enter the market and rapidly grow in scale, the relatively low business value content has made it difficult for the company to increase its profitability. In the increasingly competitive market, as competitors continue to improve the quality of their services, Tongying Group faces growing competition pressure. To address this challenge, Tongying Group has stated that they will launch the company's independently developed CRMC platform construction by the end of 2025, enabling centralized online management of products. They also plan to establish their own automated intelligent warehouse by 2027, achieving interoperability between the chemical supply chain and the Internet of Things, thereby enhancing the company's market competitiveness in multiple dimensions and optimizing its profitability. However, the implementation of the above plan undoubtedly requires a significant amount of financial support, and Tongying Group's current financial situation is extremely tight. According to the prospectus, as of December 31, 2024, Tongying Group's current assets were $1.356 million, current liabilities were $1.846 million, and the current ratio was only 0.73, indicating limited liquidity, which is also the main reason for Tongying Group's listing in the United States.