Cha Baidao breaks through the first day of listing, new tea drink IPO faces test – Luwang Financial Channel

On April 23, Chabaidao was listed on the Hong Kong Stock Exchange, becoming the second listed company in the new tea beverage industry. Although it became the largest IPO on the Hong Kong stock market since 2024 with a total raised of nearly HK$2.6 billion, Chabaidao still faced the fate of breaking the stock price on the first day of listing, with an intraday drop of more than 35%.

Behind Cha Baidao, there are a group of new tea drinkers waiting and watching the listing, such as Mixue Bingcheng, Gu Ming, Shanghai Auntie, Cha Yan Yuese… Will the sharp fluctuations in Cha Baida’s stock price on the first day of listing affect the market? confidence?

In this regard, interviewees believe that currently new tea beverage companies urgently need to take more initiative in the development of the industry through listing. Chabaidao’s performance on the first day of listing will allow issuers, investors and other market parties to consider corporate valuation more carefully and make better decisions in the investment and financing process.

Cha Baidao broke on the first day of listing

In 2008, the first Tea Baidao was born in Chengdu. After more than ten years of development, Chabaidao has grown into the third largest freshly made tea brand in China. As of April 5, 2024, Chabaidao has 8,016 stores in 31 provinces across the country.

Despite facing fierce competition, Chamoido’s operating performance is very strong. Prospectus data shows that from 2021 to 2023, Chabaidao’s revenue will be 3.64 billion yuan, 4.23 billion yuan and 5.70 billion yuan respectively, with a compound annual growth rate of 25.1%; adjusted net profits will be 900 million yuan and 970 million yuan respectively. and 1.26 billion yuan, with a compound annual growth rate of 18.2%.

It is worth mentioning that in 2023, Cha Baidao’s adjusted net profit margin will reach 22%, significantly exceeding the industry average (generally below 15%).

Excellent operating indicators make Chabaidao popular among institutional investors. In June 2023, Chabaidao received a strategic investment of 1 billion yuan, with a post-investment valuation of nearly 18 billion yuan.

On April 15, Chabaidao launched a public offering on the Hong Kong Stock Exchange, with an issue price of HK$17.5 per share. Calculated based on the issue price, Chabaidao raised net funds of HK$2.456 billion through this issuance, making it the largest IPO in Hong Kong this year.

However, unlike the popularity of the primary market, Cha Baidao is not popular in the secondary market of Hong Kong stocks. On April 23, Chabaidao broke its stock price on the first day of listing, opening 10.06% lower. It once fell more than 35% during the session, and finally closed at 12.8 yuan per share, a drop of 26.86%.

“There are very few companies in Hong Kong stocks that can raise more than HK$1 billion. This time Chabaidao can raise more than HK$2.5 billion, which is almost a small miracle for Hong Kong IPOs.” Du Xianjie, investment director of Tianai Capital, believes that overall, Chabaidao’s plunge on the first day of listing was partly because the company’s IPO pricing valuation was obviously on the high side, and partly because the management was not adequately prepared for investor screening, such as not introducing cornerstone investors. In addition, new tea drinks are no longer a scarce industry. Before Cha Momochi, the stock price of Nayuki’s tea had fallen by more than 80% after its listing.

Huang Lichong, President of Huisheng International Capital, believes that the current new tea beverage market is highly competitive, with severe homogeneity of products and services. In this case, the lack of innovative and differentiated competitive strategies makes it difficult for companies to stand out. Chabaidao’s listing valuation is relatively high, and investors may be worried about the lack of corresponding business support behind the high valuation.

New tea drink’s road to IPO faces challenges

Breaking at the opening, Cha Baidao undoubtedly sounded a wake-up call to new tea drinking peers.

Behind Cha Baidao, there are also a number of peers waiting in line for listing, such as Mixue Bingcheng, Gu Ming, Shanghai Auntie, which have submitted to the Hong Kong Stock Exchange this year, and Chayan Yuese, which is rumored to be planning to be listed in Hong Kong.

Among them, Mixue Bingcheng’s road to listing was quite bumpy. As early as September 2022, Mixue Bingcheng submitted a prospectus to A-shares. However, due to factors such as the periodic tightening of A-share IPOs, it chose to switch to Hong Kong stocks for listing. In January 2024, Mixue Bingcheng disclosed its Hong Kong stock prospectus, and was subsequently required by the China Securities Regulatory Commission to submit additional explanatory materials. The latest news is that Mixue Bingcheng will be listed on the Hong Kong stock market as soon as the second quarter.

Regarding the phenomenon of new tea beverage companies gathering together for IPOs, Chinese food industry analyst Zhu Danpeng believes that in an industry landscape in which involution has intensified and the “Matthew Effect” has become more apparent, new tea beverage companies must maintain their own sustainable development and rely on capital. Empowerment, thereby improving the supply chain, increasing store opening speed, etc. Only by not falling behind in all aspects can we ultimately win.

On April 15, Chabaidao launched its IPO. When asked “Why did you choose to list at this moment?”, Gu Jilin, co-founder of Cha Baidao, said that although the current market conditions are weak, the listing plan has been carefully considered, and the company is developing rapidly. He believes that listing in Hong Kong will be beneficial. long-term development of the company and maximization of shareholder interests. She described it as an “excellent time” to enter the Hong Kong stock market.

What impact will Cha Baidao’s stock price fluctuate significantly on the first day of its listing, which may affect new tea beverage companies lining up for listing? In Du Xianjie’s view, there is a high probability that new tea beverage companies will be forced to lower their valuations, reduce the amount of funds raised, and face the Hong Kong stock market more pragmatically.

Huang Lichong believes that judging from market confidence, investors may be more cautious about other companies in the new tea beverage industry. At the same time, Chabaidao’s stock price performance will also make investors more cautious in evaluating the business model of new tea beverage companies. When new tea beverage companies prepare to go public in the future, they may need to pay more attention to demonstrating the sustainability and profitability of their business models, rather than just the speed of expansion.

Editor in charge: Wu Taifeng