Special interview
Written by: Huang Jie
2020-08-26 15:32
The last update date: 2020-08-26 15:39Nongfu Spring (9633) hot sale, as of today (26th) noon, the margin subscription amount has exceeded 150 billion Hong Kong dollars, accounting for over 260 times of the public offering! Experts believe that Nongfu Spring has a "value rate", but the valuation is already on the high side. It is expected that the "water level" on the first day will only be more than 10%. In addition, the IPO response is hot. Margins accrue interest for up to 10 days. It is recommended to use your own funds to "participate in scare"
Fund-raising scale: only about HK$8.3 billion
Nongfu Spring plans to sell more than 388 million H shares, equivalent to 3.47% of the enlarged share capital. The offer price ranges from HK$19.5 to HK$21.5, and the maximum amount of funds raised is about HK$8.3 billion. Based on a lot of 200 shares of the stock, the admission fee is approximately HK$4,343.
International placement 93%, public offering 7%, cornerstone investors include Fidelity International, hedge funds Coatue, GIC and other large long-term funds. All cornerstone investors will invest a total of US$320 million (approximately HK$2.48 billion).
Nongfu Spring plans to sell more than 388 million H shares, raising a maximum of approximately HK$8.3 billion. ﹙Screenshot of Nongfu Spring website﹚
Absorbing power: gross profit margin is over 55%
Nongfu Spring’s revenue last year was 24.021 billion yuan, and sales to distributors accounted for 94.2%; gross profit was 13.311 billion yuan, and gross profit margin was as high as 55.4%. The main products include packaged drinking water, tea drinks, functional drinks, fruit juice drinks, etc.
Among them, the revenue from the main product packaging drinking water was 14.336 billion yuan, accounting for 59.7% of the total revenue, and it was the main force of the group to attract funds. The gross profit margin of this product is 60.2%, which is the highest among many products.
Nongfu Spring earned 4.957 billion yuan last year, with a net interest rate of 20.6%.
Market ranking: fourth in the country
According to the prospectus, the total size of the Chinese beverage market last year reached RMB 991.4 billion, but the market was relatively fragmented. The top 10 suppliers only accounted for 42.5% of the market. Nongfu Spring ranked fourth with RMB 62.4 billion in retail sales. The top three are listed in the order of US listed beverage companies (retail sales of 75.9 billion yuan), Hangzhou-established non-listed companies (retail sales of 69.5 billion yuan) and Taiwan-funded food and beverage companies (retail sales of 66.7 billion yuan).
In terms of packaged drinking water products, the Nongfu Spring market ranked first, accounting for 20.9% of the mainland market last year. As for tea beverages, functional beverages and fruit juice beverage products, the market shares were 7.9%, 7.3% and 3.8%, respectively, ranking third in the country.
Key chart of prospectus documents:
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Dividends: Pre-IPO dividends
Nongfu Spring stated clearly in the prospectus that it currently does not set any pre-determined dividend payout rate for post-listing. However, it is worth mentioning that in the three years before listing, the company paid dividends from 367 million yuan in 2017 and 2018 to 9.598 billion yuan in 2019. The cumulative amount is more than the amount of funds raised this time. .
In April this year, Nongfu Spring also distributed a dividend of RMB 900 million. At the same time, the company proposed on August 14 to declare all the 7.8 billion yuan of "historical retained profits" as dividends to existing shareholders before listing. In other words, the cumulative dividend payout before the company's listing will reach 19.03 billion yuan.
Nongfu Spring pointed out that the payment of these dividends will not have a significant impact on the adequacy of the group's operating funds after listing. As of the end of July this year, the group had unrestricted deposits of RMB 7.162 billion. It is expected that it will continue to record net cash inflows from operating activities in August. Therefore, it is believed that it can maintain sufficient funds to meet working capital needs and repay agreed debts. item. The group has no plan to increase bank loans due to dividends.
Wu Lixian, a strategist at Everbright Sun Hung Kai Securities, said that personally he is "not disgusted" with Nongfu Spring. "Although I don't have a good impression, profits are always the company's shareholders, and dividends before listing are the "right way."
Nongfu Spring’s main products are packaged for drinking, and the products are diversified. ﹙Screenshot of company prospectus﹚
Equity: Major shareholders hold more than 80% of the shares
The company's founder and major shareholder Zhong Suisui currently holds 87.447% of the shares. After listing (assuming the over-allotment option is not exercised), Zhong's shareholding ratio will be reduced to 84.41%, while H-share shareholders will account for 3.47%.
Valuation: PE is higher than the industry average
Assuming the completion of the offering but the over-allotment option has not been exercised, the market value of the listed shares of Nongfu Spring is between HK$218.171 billion and HK$24.547 billion based on the offer price of HK$19.5 to HK$21.5. Based on a profit of 4.957 billion yuan (HK$5.564 billion) in 2019, the track record price-earnings ratio (PE) is as high as 43 times.
Looking at the data, the average price-earnings ratio of the Hong Kong soft drink industry is 35.38 times. Among the Hong Kong-listed beverages stocks, Want Want China (0151) has a price-earnings ratio of 16.9 times, Master Kong (0322) has a price-earnings ratio of 23.4 times, Mengniu (2319) has a price-earnings ratio of 30.8 times, and Other milk (0345) P/E ratio is 53.7 times.
Fund-raising proceeds: brand building and purchase of equipment
The group estimates that the net fund raised is approximately HK$7.768 billion, of which approximately 25% will be used for brand building; approximately 25% will be used to purchase equipment such as refrigerators, warming cabinets and smart terminal retail equipment to increase sales; approximately 20% will be used The capital expenditure required for new capacity; about 10% will be used to strengthen the basic capacity building of business operations; about 10% will be used to repay bank loans; and about 10% will be used to supplement working capital and other general corporate purposes.
Wu Lixian, a strategist at Everbright Sun Hung Kai Securities, pointed out that Nongfu Spring’s valuation is too high, and it is expected that the first listed water level is about 10%. ﹙Profile Picture﹚
Expert analysis: its own valuation is over 10% higher than expected
Wu Lixian said that Nongfu Spring has a "value rate". He said that the company has two unique highlights, one is the number one packaging faucet; the other is the extremely high gross profit margin, reflecting the competitive advantage of the product.
He suggested that retail investors take new shares instead of chasing after the listing. "The valuation is always too high. The market value of Kangshibo is close to 90 billion, but Nongfu Spring says it is more than 200 billion! Moreover, it is difficult for the business to have ultra-high growth. I am right. The high valuation has always been reserved.” Wu Lixian added, given that the company only issues a small number of new shares, it is expected that there will be a "water level" on the first day of listing. And now the IPO market is in a good mood. If there is capital to chase in, it is expected to rise by more than 10% to 23 or 24 yuan, and its valuation is always high."
Seeing that the margin fair is hot, and the interest is calculated for up to 10 days, Wu Lixian suggested that retail investors use their own funds to "participate". "The response is so hot, and the margin may not be sent to many goods, and it is estimated that the increase may not be so explosive. Extend and bury at any time."
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