Note of Nongfu mountain spring IPO, once again came substantial progress.
After hearing by the Hong Kong Stock Exchange yesterday, according to the latest foreign reports, Nongfu Shanquan began to assess the investor demand for IPO from today. The unit plans to raise $1 billion, with CICC and Morgan Stanley as co sponsors, which will be used for brand building, equipment purchase and production facilities construction.
According to several other public reports, Nongfu Shanquan will be listed on the main board of the Hong Kong Stock Exchange on September 4. Based on the scale of fund-raising, the average price to earnings ratio of 25-30 times in Hong Kong stocks and the leading position of Nongfu spring, the IPO market value of Nongfu spring may reach HK $150 billion to HK $180 billion.
In order to understand the latest situation of Nongfu mountain spring’s listing, xiaoshidai went through the newly released 500 page post hearing information collection of the “nature Porter” today, and found that it disclosed a lot of new information, including the performance of the first half of the year, the impact of the epidemic situation and prediction, the dividend of 7.8 billion yuan and the details of overseas acquisition. Now, let’s take a look at them one by one.
Highlight 1: performance in the first half of 2020
According to the information collection after the hearing, the income of Nongfu mountain spring was 11.545 billion yuan (RMB, the same below) for the six months ended June 30, 2020, a year-on-year decrease of 6.2%, which has narrowed the drop rate of 12.6% in the first five months of this year.
In addition, in the first five months of this year, Nongfu Shanquan recorded a profit of 1.931 billion yuan, with a net profit margin of 22.3%. In the same period last year, the above figures were 2.360 billion yuan and 23.8% respectively.
Like many food and beverage companies, after the outbreak, Nongfu Shanquan is also “watching” cash flow.
According to the data set, the net current liabilities of Nongfu mountain spring decreased from 1.712 billion yuan as of May 31, 2020 to 964 million yuan as of June 30, 2020, mainly due to the increase of cash and bank balance by 1.602 billion yuan, which was mainly cash generated from operating activities during the peak sales season.
In the first five months of this year, the sales and distribution expenses, advertising and promotion expenses of Nongfu spring also decreased year on year.
Highlight 2: changing the battle under the epidemic situation
In the first half of the year, packaged drinking water is the biggest highlight of Nongfu spring.
According to the data set, for the five months ending May 31, 2020, the income of packaged drinking water, tea drinks, functional drinks and fruit juice drinks of Nongfu mountain spring decreased by 4.3%, 21.2%, 40.9% and 13.6% respectively year-on-year.
Nongfu Shanquan said that due to the rigid consumption of packaged drinking water products, the epidemic situation has less impact on it. As for beverage products, due to the closure of consumption places such as schools, scenic spots and sports venues during the outbreak of the epidemic, the demand for functional beverage products and tea beverage products was greatly affected.
It is worth noting that under packaged drinking water, large and medium-sized products have achieved high growth against the trend driven by domestic consumption. In the five months to May 31, 2020, revenue from large and medium sized packaged drinking water products suitable for household consumption increased by more than 20% year-on-year, the company said.
“During the outbreak, consumer mobility was limited, and e-commerce channel delivery capacity was limited. Consumers tend to shop in supermarkets and hypermarkets with a wider choice of daily necessities. Therefore, during the outbreak, we increased the supply of packaged drinking water products through modern channels. ” Farmer mountain spring said.
For example, it has set up unmanned water supply points in some residential areas so that consumers can buy their products through mobile phone payment. It is reported that this measure partially offset the impact of the decline in sales of Nongfu spring in retail outlets.
Nongfu Shanquan also revealed that the income growth rate in June 2020 was higher than that in June 2019, mainly driven by the sales growth of packaged drinking water products.
In the five months ending May 31, 2020, the proportion of packaged drinking water in Nongfu spring’s income has expanded to 61.9%
Snack generation found that after a period of cultivation, the scale of Nongfu spring new products has also been significantly improved.
The company said that for the five months ended May 31, 2020, the revenue and gross profit of the “other products” sector, which includes a number of new products, increased significantly compared with the same period last year, mainly due to soda and coffee drinks launched in the second half of 2019.
It is worth noting that Nongfu spring’s other products have also added a new category of “flavored drinks”, including tot bubble drinks launched by the company in May this year.
Highlight 3: cautious forecast for the second half of the year
Out of the hearing, we believe that the business of Shanquan is returning to normal level after hearing. Previously, the company had expected that the outbreak would not have a significant adverse impact on the full year performance and long-term business development in 2020.
However, Nongfu Shanquan still listed the epidemic as a new risk factor, saying that “if the epidemic continues, our business, operating results and financial situation will continue to be adversely affected.”.
Nongfu Shanquan said that if the outbreak continues or the outbreak repeats, its product sales and overseas equipment supply may be affected. In addition, although its non concentrated and reduced pure juice reserves are sufficient in 2020, the epidemic may affect the supply of overseas juice raw materials in 2021.
In view of the above potential impact, Nongfu mountain spring also gives a solution. For example, in the supply of fruit juice raw materials, Nongfu Shanquan said that “it will start domestic supply and production plans to replace fruit juice raw materials when necessary, so as to ensure the normal production of fruit juice beverage products”.
Although the business recovery momentum is good, Nongfu Shanquan is still cautious in looking forward to the second half of the year. Assuming that it still operates at a similar level for the first five months of 2020, revenue will fall 12.6% in the second half of this year from a year earlier, the company said.
In addition to the epidemic situation, the business of Nongfu mountain spring has also been affected by natural disasters recently. According to the above data set, the rainstorm in July this year caused floods in several provinces in China, which had a negative impact on the sales of products in their retail outlets and thus had a negative impact on the operating performance in July 2020.
Highlight 4: the “addition and subtraction method” of Nongfu mountain spring
After the outbreak of the epidemic, Nongfu Shanquan did not stop its business from various aspects.
The first is sales channels. According to the post hearing data set, in the five months ending May 31, 2020, Nongfu Shanquan added 196 new dealers and terminated 22 dealers.
At the end of the report period, the company had 4454 distributors, covering more than 2.43 million terminal retail outlets in China, of which about 1.88 million terminal retail outlets were located in the third tier and lower tier cities.
At the same time, Nongfu mountain spring, which hopes to reach consumers through multiple channels, is also expanding new retail channels, such as vending machines.
According to reports, as of May 31, 2020, the company has launched nearly 62900 intelligent terminal retail devices represented by vending machines in nearly 300 cities across the country. Compared with the old and new versions of the pre disclosure documents, the number of xiaoshidai has increased by about 2900 units compared with the number at the end of 2019.
Secondly, around the performance of the first half of the year’s outstanding drinking water, Nongfu mountain spring has also carried out capacity expansion.
According to the above data set, as of May 31, 2020, the packaged drinking water and beverage production lines of Nongfu mountain spring have increased to 144, 7 more than the end of 2019. Comparing the new and old versions of the pre disclosure document, the company noted that as of that date, the company’s automated drinking water production lines also happened to have added seven.
Highlight 5: dividend, dividend!
Prior to this, Nongfu Shanquan had caused a lot of discussion about “surprise dividend” before listing. Today, after looking through the information collection after the hearing, the snack food agent noticed that recently, Nongfu Shanquan also made the latest progress in the issue of dividend distribution.
According to the latest documents, Nongfu Shanquan announced the full amount of the historical retained profits of RMB 7.8 billion to the existing shareholders on August 14, 2020, and planned to pay the dividends in full in cash.
The company stressed that as of July 31, 2020, it had unrestricted deposits of 7.162 billion yuan and was expected to continue to record net cash inflow from operating activities in August. Therefore, it believes that it can maintain sufficient funds to meet the working capital requirements and repay the agreed debts, and has no plan to increase bank loans due to dividends.
Highlight 6: new progress of overseas acquisition
After the hearing, Nongfu mountain spring, which was planning to acquire overseas many years ago, also announced for the first time the transaction amount and the latest progress of otakiri springs limited, a New Zealand bottled water company.
The company said that it had signed two agreements in November 2016 and two supplementary agreements in October 2017 to acquire its business, land and related assets from otakiri springs limited and the then owner of the land (all independent third parties) for a total consideration of S $10.5 million.
As of the last practicable date (i.e. August 15, 2020), Nongfu Shanquan has paid a deposit of NZ $200000 in accordance with the terms of the acquisition agreement, and has established two wholly-owned subsidiaries in New Zealand to gradually build up overseas operation capacity after the completion of the transaction.
Xiaoshidai noted that the acquisition is still waiting for the outcome of a lawsuit.
It is reported that in 2018, Nongfu mountain spring’s application for expanding the bottled water production plant has been approved by the local authorities. However, local residents subsequently appealed to the New Zealand environmental court against the decision, and then to the high court after it was rejected.
Nongfu yamaquan said that as of the last practicable date, the high court had not made a decision. Although the acquisition has not yet been completed, pending local legal proceedings in New Zealand, “it is not expected that there will be any other potential obstacles to completion,” the company added.
Highlight 7: Plastic reduction
The snacks generation also noted that with the “plastic reduction” becoming a hot topic in the global beverage industry, especially the bottled water industry, Nongfu Shanquan also mentioned the relevant actions and plans in the IPO document for the first time.
After the hearing, the company said in the data collection after the hearing that with the improvement of environmental awareness, it is “the general trend” to reduce the use of plastics and other non recyclable packaging materials in different industries around the world, including the soft drink market. Previously, Nongfu Shanquan has taken measures to reduce the use of PET bottles in plastic reduction and explore ways to cooperate with a third party to recycle and reuse packaging.
“In the future, we will continue to improve the plastic packaging material policy. We may need to promote the recycling and disposal of plastic waste to reduce the amount of plastic used per unit product. We may also need to promote the recycling and reuse of plastic packaging materials through consumer interaction. ” Farmer mountain spring said.