(Yicai Global) Oct. 12 -- Skyworth Electric has withdrawn its application for an initial public offering in Shenzhen. It is the latest Chinese home appliance maker to get cold feet in recent months and this could have to do with difficulties increasing their market share due to stiff competition from listed rivals, an investment banker told Yicai Global.

Skyworth, which is a spin-off of parent firm Skyworth Group, was planning to go public on the Shenzhen Stock Exchange’s Nasdaq-style ChiNext board. Its withdrawal follows that of subsidiaries of home appliance giants Midea Group and Haier Group, namely lighting specialist Midea Intelligent Lighting & Controls Technology and home decoration firm Qingdao Eoroom Intelligent Technology.

Innovation is highly prized by the ChiNext, the Shanghai Stock Exchange’s Nadaq-style Star Market and the Beijing Stock Exchange, the investment banker said. In order for ‘potential champions’ to go public, companies need to invest heavily in research and development for years and obtain a big slice of the market.

It would appear that the market has concerns about the future performance of these firms due to great pressure from competitors, their relatively small share of the market and the fallout from a cooling real estate market, he added.

Around 80 percent of Skyworth’s revenue comes from refrigerators and washing machines. Last year, it logged revenue of CNY1.6 billion (USD229.9 million) from refrigerator sales and CNY1.7 billion from washing machines last year, yet this is estimated to be just 1 percent of the market.

By comparison, its biggest rival, Haier Electronics Group, posted revenue of CNY71.5 billion (USD10 billion) and CNY54.7 billion from refrigerator and washing machine sales respectively, commanding a more than 30 percent share in each market.

“Competition in the refrigerator and washing machine markets is getting fiercer as growth slows and this is likely to erode Skyworth’s profits,” the Shenzhen-based firm said in the IPO prospectus.

Eoroom said it terminated its listing due to changes in the Qingdao, eastern Shandong province-based company’s strategic development and the market environment. Three of its top five clients are real estate firms and one of them, Evergrande Group, is on the brink of bankruptcy.

Set up in April 2013, Skyworth makes its own brand of home appliances and also provides original design manufacturer services. Internet giant Xiaomi Communications is its biggest client, accounting for 13.4 percent of sales.

Editor: Kim Taylor