Sunny Sunday (Hunan) Group Co., Ltd. has officially submitted its listing application to the Hong Kong Stock Exchange, aiming for a main board listing with Goldman Sachs and CICC acting as joint sponsors.
Following the popularity of the film "Nezha: The Devil's Child Descends," a 9.9 yuan Nezha figure quickly became a hit in convenience stores and supermarkets. This highly cost-effective toy was produced by Sunny Sunday. Riding the "Nezha wave," the previously little-known toy company saw its revenue surge to 386 million yuan in the first nine months of 2025, with net profit turning from a loss to a profit exceeding 50 million yuan.
However, the prospectus reveals issues such as sharply rising sales expenses, high customer concentration, and reliance on IP licensing, which add uncertainty to its listing path.
1. Turning Losses into Profits Amid Surging Sales Expenses Financial data shows that for 2023, 2024, and the first nine months of 2025, Sunny Sunday's revenues were 107 million yuan, 245 million yuan, and 386 million yuan respectively, demonstrating rapid growth. Particularly in the first nine months of 2025, revenue increased 134% year-on-year. The compound annual growth rate from 2023 to 2024 was 129%, leading the industry.
Regarding profitability, the company shifted from losses to profits. It recorded a loss of 19.921 million yuan in 2023, narrowed the loss to 505,000 yuan in 2024, and achieved a net profit of 51.959 million yuan in the first nine months of 2025. This turnaround was supported by a significant improvement in gross margin, which rose from 16.9% to 23.3% and further to 35.3% over the reporting periods. The margin improvement was primarily due to a higher proportion of revenue from high-margin IP toy products and cost optimization from economies of scale.
Notably, sales and distribution expenses grew rapidly alongside business expansion. These expenses were 12.22 million yuan, 20.766 million yuan, and 36.824 million yuan during the reporting periods, accounting for 11.5%, 8.5%, and 9.5% of revenue respectively. Sales expenses for the first nine months of 2025 were nearly 1.8 times those for the full year 2024, indicating significantly increased marketing investment.
In contrast, R&D expenses as a percentage of revenue continued to decline. R&D spending was 5.88 million yuan, 8.396 million yuan, and 8.467 million yuan, representing 5.5%, 3.4%, and 2.2% of revenue respectively. The R&D expense ratio for the first nine months of 2025 was more than 3 percentage points lower than in 2023. This declining trend has raised concerns about the sustainability of the company's technological innovation.
2. Customer Concentration Exceeds 60% as Overseas Business Shrinks A challenge for Sunny Sunday is its high customer concentration. Sales to the top five customers amounted to 73.8 million yuan, 184 million yuan, and 235 million yuan during the reporting periods, accounting for 69.2%, 75.2%, and 60.7% of total revenue respectively. Although the proportion decreased in the first nine months of 2025, it remained above 60%. High customer concentration implies deep reliance on major clients; any changes in their demand or partnerships could significantly impact performance.
Dependence on the largest customer is particularly notable. Sales to the top client were 36.7 million yuan, 75.5 million yuan, and 76.9 million yuan, representing 34.4%, 30.9%, and 19.9% of total revenue respectively. Although the proportion is declining, nearly one-fifth of revenue coming from a single client represents a substantial risk exposure. For a company seeking listing, diversifying its customer base is crucial for enhancing risk resilience.
Geographically, the proportion of overseas revenue showed a clear downward trend. Revenue from international markets was 72.043 million yuan, 119 million yuan, and 78.421 million yuan, with its share dropping from 67.6% to 48.6% and then to 20.3%. This shift was mainly driven by explosive growth in domestic IP toy business, particularly hot-selling cultural IP products. According to Frost & Sullivan, Sunny Sunday was the largest seller of cultural IP toys by sales volume in the first nine months of 2025.
However, the rapid contraction of overseas business share has sparked concerns about the company's international capabilities. The prospectus indicates plans to expand into more global markets, but venturing into regions with limited or no experience entails risks such as political instability, import/export permits, rising intellectual property protection costs, and currency fluctuations.
The company sells IP toy products primarily through retailers, distributors, and e-commerce platforms. As of September 30, 2025, it had 427 distributors in China, covering over 32,000 retail points.
Revenue from distributors was 18.341 million yuan, 26.152 million yuan, and 65.396 million yuan during the reporting periods, accounting for 17.3%, 10.7%, and 16.9% of total revenue respectively. Sales through retailers generated 5.164 million yuan, 69.473 million yuan, and 160 million yuan, representing 4.8%, 28.4%, and 40.9%. E-commerce platform sales were 6.315 million yuan, 23.224 million yuan, and 79.278 million yuan, constituting 5.9%, 9.5%, and 20.5%.
3. Reliance on IP Licensing and Rapidly Growing Inventory Pose Concerns For an IP toy company, intellectual property licensing is critical. As of the latest practicable date, Sunny Sunday had collaborations with over 20 IPs, covering all age groups. It holds leading positions in both sports event IPs and cultural IPs. Its cultural IP portfolio includes popular works like "Nezha: The Devil's Child Descends," while international well-known IPs cover Sanrio, Harry Potter, SpongeBob SquarePants, Pokémon, and Honor of Kings.
Notably, in September 2025, the company secured a global license from FIFA to design, develop, manufacture, and distribute 2026 World Cup mascot-themed figures in over 60 countries and regions. This partnership not only highlights its world-class design and production capabilities but also serves as a strategic opportunity to access more global retail channels and enhance international influence.
The prospectus acknowledges that licensing agreements typically last one to two years, some do not renew automatically, and licensors can terminate cooperation for material breach or failure to perform. Sunny Sunday stated it might fail to renew some existing agreements, losing the right to sell related IP products thereafter. Furthermore, there is no guarantee of acquiring new, high-potential IPs in the future. Intensifying competition, shifting consumer preferences, and changes in IP partners' strategies could all affect the availability of desirable intellectual property.
Another concern is that many of Sunny Sunday's ongoing IP partnerships are non-exclusive, meaning partners can also work with competitors. This leads to multiple brands competing with products under the same IP license, increasing market pressure.
Regarding inventory management, inventory levels were 33.5 million yuan, 73.4 million yuan, and 126 million yuan as of December 31, 2023, December 31, 2024, and September 30, 2025, respectively, showing rapid growth and nearly tripling over two years. Inventory turnover days were 128.1 days, 103.9 days, and 107.4 days, indicating some improvement but remaining relatively high. The fast-growing inventory size amid business expansion places greater demands on working capital management and stock control.
As of the latest practicable date, Sunny Sunday operated five production facilities with a daily capacity exceeding one million units. In December 2025, it commenced production at a fully automated manufacturing facility in Zhongshan, Guangdong Province. According to Frost & Sullivan, this factory is one of the world's first "dark factories," enabling 7x24 fully automated toy production with minimal human intervention.
Comments