China Food

Farmer mountain spring is against the sky! HK $200 billion will be raised

The market value of Nongfu Shanquan, which is rushing for IPO in Hong Kong, may exceed the sum of the market value of Mengniu and Master Kang!

According to the Hong Kong Economic Daily today, the offering of Nongfu mountain spring (Stock Code: 09633), a leading packaged drinking water and beverage company, was officially launched today (25th) and closed on Friday. More than 388 million shares are planned to be sold by Nongfu spring, with the share price ranging from HK $19.5 to HK $21.5, with a maximum of HK $8.3 billion raised.

This means that the market value of Nongfu spring may reach more than HK $200 billion.

Market value over 200 billion

Based on the issue price of HK $19.5, the market value of the shares will be HK $218.171 billion if the offering is completed and the over allotment is not exercised. If it is calculated at HK $21.5, the market value of the shares will be HK $240.547 billion if the issue is completed without the exercise of the over allotment.

As of today’s opening, the market value of Mengniu (02319. HK) was HK $140.652 billion, that of Master Kang (00322. HK) was HK $76.261 billion, that of China Wangwang (00151. HK) was HK $67.414 billion, and that of Vitasoy (00345. HK) was HK $29.382 billion.

This is about 44 to 48 times the price earnings ratio (PE) in 2019, according to the report. Compared with some other beverage companies listed in Hong Kong, the P / E ratio of China Wangwang is 16.5 times, that of Kangshifu is 20.4 times, that of Mengniu is 30.3 times, and that of Vitasoy is 54.8 times.

It is worth noting that only 3.47% of the shares of Nongfu spring are on public sale. After the sale of Nongfu Shanquan, the number of domestic shares was 62118 million, accounting for 55.5% of the total issued shares of 11.188 billion shares; H shares converted from domestic shares accounted for 4.588 billion shares or 41%; the global H shares issued were 388 million shares, accounting for 3.47%.

According to the Hong Kong Economic Daily, Nong Fu Shan Quan owns 200 shares with an admission fee of about 4343 yuan. It is expected to be listed on September 8, with CICC and Morgan Stanley as the co sponsors of Nong Fu Shan Quan. According to statistics, at present, seven securities companies have reserved 150 billion yuan of hot capital for margin trading. Among them, futu, yaocai and Huili have respectively set aside a margin of 30 billion yuan, Dahua Jixian has set aside 20 billion yuan, Emperor yinghuang and Xincheng have set aside 15 billion yuan respectively.

cornerstone investor

He noted that the prospectus also disclosed a full list of cornerstone investors, including funds held by SASAC and CITIC.

According to Nongfu Shanquan’s prospectus, the total scale of China’s soft drink market reached 991.4 billion yuan last year, and is expected to reach 1.3 trillion yuan in 2024. Among them, the top 10 Suppliers account for 42.5% of the market. Nongfu Shanquan ranks fourth with 62.4 billion yuan in retail sales. The first is a US listed beverage company established in 82, with a retail sales of 75.9 billion yuan; the second is a non listed company established in Hangzhou; the third is Taiwan funded food and beverage company.

According to the data, the main products of Nongfu spring include packaged drinking water, tea drinks, functional drinks and fruit juice drinks. Among them, in China’s packaged drinking water market, Nongfu spring ranked first in terms of market share, with retail sales of 42.2 billion yuan, far exceeding the second place enterprise’s 25.5 billion yuan.  

Last year, the annual income of Nongfu mountain spring was 24.021 billion yuan, the gross profit was 13.311 billion yuan, and the gross profit rate was 55.4%. What attracts the attention of the market is that the gross profit rate of Nongfu spring since 2017 is higher than 50%.

Before that, Nongfu Shanquan had many large dividends, which attracted the attention of the outside world. “We expect to continue to record net cash inflows from operating activities in August 2020,” the prospectus said today. We believe that we will be able to maintain sufficient funds to meet our working capital needs and meet our contractual obligations. We have no plan to increase bank loans as a result of dividends. “

In addition, xiaoshidai noted that Nongfu Shanquan’s latest prospectus also disclosed the position of Zhong Shu Zi, the son of the company’s founder, Zhong. According to the prospectus, Zhong Shu Zi, 32, was appointed as a non-executive director in June 2017 to advise on business plans, major decisions and investment activities. He joined the group in January 2014 and has been the general manager of Yangshengtang brand center since January 2020.  

Purpose of fund raising

Last year, Nongfu Shanquan distributed 9.6 billion yuan (about HK $10.5 billion) to shareholders, which was more than the amount raised this time. At the same time, by the end of last year, Nongfu mountain spring had a distributable reserve of $9.17 billion (about HK $10 billion), which was higher than the amount raised this time.

So, has Nongfu Shanquan, who has repeatedly said “no difference in money”, really need to be listed for fund-raising?

According to the prospectus read by snack food agents, assuming that the offering price is HK $20.50 per H share (i.e. the median of the indicative offering price range set out in the prospectus), and assuming that the over allotment right has not been exercised, after deducting the underwriting Commission, fees and estimated expenses payable in respect of the global offering, Nong Fu Shan Quan is estimated to receive about HK $7.768 billion in net proceeds from the global offering.  

Nongfu Shanquan pointed out in the prospectus that the net proceeds are currently planned to be used for the following purposes:

First, about 25% (i.e. about HK $1.942 billion) will be used for brand building.

“We will increase the product development based on natural raw materials such as fruits, tea, natural plants, coffee, plant protein, etc., and will continue to promote the research and development of functional drinks with health demands. Consumers’ acceptance of new brands, especially new categories, needs to go through the process of training. For the brands and products that we have launched and will launch in the future, we will increase the strength of brand marketing and promotion. ” The company said.

Second, about 25% (i.e. about HK $1.942 billion) will be used to purchase refrigerators, warming cabinets and smart terminal retail equipment to enhance sales capacity.

“Consumers tend to drink cold drinks in summer and hot drinks in winter. Placing refrigerators and warmers in retail outlets will help increase our sales in summer and winter respectively Nongfu Shanquan said it would replace the existing refrigerators with new ones and increase the number of refrigerators in selected retail outlets. Meanwhile, it would start to place warming cabinets in retail outlets to enhance winter beverage sales.

The company also said that increasing the number of retail devices on smart terminals would help consumers have easier access to their products when there is a demand for instant drinking.  

Thirdly, Nong Fu Shan Quan said that about 20% (or about HK $1553 million) would be used to increase the capacity of existing production facilities and build new production facilities. Fourth, about 10% (i.e. about HK $777 million) will be used to strengthen the construction of business operation infrastructure, including the development of information systems, the development of R & D capabilities, and the construction of talent echelons.

Fifthly, about 10% (i.e. about HK $777 million) will be used to repay the RMB 2.113 billion loan without guarantee and pledge. Sixth, about 10% (i.e. about HK $777 million) will be used to replenish working capital and other general corporate purposes.  

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