Xiaocaiyuan International Holding Ltd. (00999.HK) is a prominent Chinese restaurant chain that has recently initiated its initial public offering (IPO) process on the Hong Kong Stock Exchange. Below is a comprehensive evaluation of the IPO based on the provided queries:
Purpose of IPO: The primary objective of the IPO is to fund the expansion of Xiaocaiyuan’s restaurant network, thereby broadening its geographical presence and enhancing market penetration. Specifically, the company plans to open approximately 160 new stores in 2025 and about 180 in 2026.
The IPO is priced at HK$8.50 per share.
Each lot consists of 800 shares, making the minimum investment approximately HK$6,868.57 per lot, including associated fees.
Given the company’s robust financial performance and strategic expansion plans, the IPO is anticipated to perform well on its first day of listing.
Harvest Capital is a notable institutional investor, having invested a total of CNY 500 million in March 2022 and March 2023, holding a 7.01% stake in Xiaocaiyuan prior to the IPO.
Huatai Financial Holdings (Hong Kong) Limited and UBS AG Hong Kong Branch are serving as joint sponsors for the IPO.
Business Model and Industry: Xiaocaiyuan operates a chain of self-owned restaurants specializing in mass-market Chinese cuisine, with an average customer spending between CNY 50 and CNY 100. As of November 28, 2024, the company operated 663 self-owned restaurants across 146 cities or counties in 14 provinces in China, primarily in Eastern China.
The company has demonstrated consistent growth, with revenues of CNY 2.646 billion in 2021 and CNY 3.213 billion in 2022. In the first three quarters of 2023, revenue increased by 41.6% year-on-year to CNY 3.429 billion, and net profit rose by 107.6% to CNY 430 million, resulting in a net profit margin of 12.5%.
According to Frost & Sullivan, based on store revenue in the first three quarters of 2023, Xiaocaiyuan ranks first among all brands in the Chinese mass-market traditional dining sector with average customer spending between CNY 50 and CNY 100.
The company was founded by Wang Shugao in 2013, who previously worked as a chef.
The mass-market Chinese dining sector is experiencing growth, with consumers seeking affordable dining options. Xiaocaiyuan’s focus on this segment positions it well for expansion.
Urbanization and rising disposable incomes in China are driving demand for dining-out experiences, benefiting chains like Xiaocaiyuan.
The company aims to open approximately 160 new stores in 2025 and about 180 in 2026, focusing on expanding its geographical coverage and increasing market penetration.
Harvest Capital holds a 7.01% stake in the company prior to the IPO, indicating strong promoter commitment.
Based on the company’s strong financial performance, strategic expansion plans, and leading market position, the IPO appears to be a promising investment opportunity. While exact first-day trading prices are speculative, the stock is expected to trade strongly above the IPO price, reflecting investor confidence.
Prospectus Download
The prospectus for Xiaocaiyuan’s IPO can be downloaded from here:
https://www1.hkexnews.hk/app/sehk/2024/106627/documents/sehk24071601035.pdf
#Xiaocaiyuan International Holding Ltd. (00999.HK) IPO
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