60-year-old fellow chicken chairman Shu Congxuan is ringing the bell for IPO.
Anhui Laoxiang Chicken Catering Co., Ltd. (hereinafter referred to as "Laoxiang Chicken") made a pre-disclosure on May 19. It plans to be listed on the Shanghai Stock Exchange main board, Guoyuan Securities serves as the sponsor, and plans to raise 1.2 billion yuan for Laoxiangji East China Headquarters, construction of new catering stores, and data informatization upgrade construction projects.
This is another chain catering brand that has become the first Chinese fast food stock after rural foundation officially submitted its prospectus to the Hong Kong Stock Exchange on January 25 this year.
Laoxiangji once publicly announced that it took 12 years to cross 1 billion yuan in revenue; it took another 2 years to cross 2 billion yuan in revenue. From 2011 to 2019, Laoxiang Chicken’s profits increased 33 times, sales revenue increased 32 times, and the average annual growth rate was around 40%.
In the capital market, fellow chickens were also highly sought after. Several investment institutions were exposed this year as trying to invest in Laoxiangji with a valuation of 20 billion yuan. As early as May 2019, Canadia Capital invested nearly 200 million yuan in Laoxiang Chicken. In December last year, Maixing Investment and GF Xinde invested 89 million yuan and 50 million yuan in Laoxiang Chicken respectively.
However, the current catering industry is experiencing "ice and fire", industry financing has decreased, and catering companies seeking to go public have accelerated the process, such as Village Base, Yang Guofu Malatang, and Fu Lo Noodles , Qixintian, Domino's China, Green Tea Restaurant, Shangjing, etc. all want to list in Hong Kong. However, affected by the epidemic, its performance is not stable. Currently, no catering company has successfully listed on the Hong Kong Stock Exchange.
is rushing to be listed this time. Laoxiangji will be listed on the main board of the Shanghai Stock Exchange, which is more stringent than the Hong Kong stock IPO review. Can this Chinese catering company with a chain of 1,000 fast food restaurants support an IPO?
A company controlled by five people, the 60-year-old chairman is keen on "being an Internet celebrity"
Laoxiang Chicken was founded in 2003. It specializes in Chinese fast food services and covers the entire industry chain of hen breeding, food processing and chain operations. It took root in Anhui for fourteen years before its establishment. In 2017, it expanded beyond Anhui and has now entered Shanghai, Shenzhen, Zhejiang, Beijing and other places.
Image source: Laoxiang Chicken Prospectus
The epidemic has brought a severe impact to the catering industry, and Laoxiang Chicken has not been completely spared. The prospectus disclosed that from 2019 to 2021, Laoxiang Chicken achieved revenue of 2.859 billion yuan, 3.454 billion yuan, and 4.393 billion yuan, and net profits attributable to the parent company were 159 million yuan, 105 million yuan, and 135 million yuan.
In the past three years, the comprehensive gross profit margins of Laoxiang Chicken were 19.02%, 17.28% and 16.56% respectively, and the net profit margins were 5.57%, 3.05% and 3.06% respectively. Laoxiangji said that the company's gross profit margin has declined, mainly due to the increase in the cost of main raw materials, labor costs and the impact of the epidemic.
Image source: Laoxiang Chicken prospectus
An interesting detail is that compared to traditional Chinese chain restaurant brands, Laoxiang Chicken seems to be slightly better in terms of user recognition and brand marketing methods.
60-year-old Chairman Shu Congxuan is now an "Internet celebrity" with 127,000 followers on Weibo . Laoxiangji became famous on the Internet for the first time because of a video of tearing up a joint letter from employees. 2020 In the early days of the epidemic, Laoxiangji lost a conservative estimate of 500 million and suffered heavy losses. Employees jointly signed a voluntary initiative to waive their wages. Shu Congxuan, chairman of Laoxiangji, responded, "Even if we are selling houses or cars, we will do everything possible to ensure that employees have food and food. Class" sparked heated discussions.
"opened a press conference for 200 yuan" out of the circle, hired Yue Yunpeng as a brand spokesperson, and launched an "earthy" official poster. Because of his frequent "clucky" operations on Weibo, Shu Congxuan and his fellow villagers Chicken's down-to-earth, earthy, and simple interesting style has attracted the attention of many young people.
However, due to the actual control of the family, Laoxiangji has greater risks in corporate governance and is controversial. Five family members, Shu Congxuan, Zhang Qiong, Shu Xiaolong, Dong Xue, and Shu Wen, are the actual controllers, both directly and indirectly. The actual control ratio of the company's equity is 91.32%. Laoxiangji said that after this issuance, the proportion of shares held by the actual controller in the company is still relatively high.
In 2019, Laoxiangji’s losses due to occupational embezzlement in non-operating expenses alone reached 12.091 million yuan. In terms of non-operating expenses such as "compensations, fines, etc.", Laoxiang Chicken's expenses have increased year by year in the past three years, reaching 1.8649 million yuan, 3.8927 million yuan, and 6.4612 million yuan respectively.
Picture source: Laoxiang Chicken Prospectus
Once the "Feixi Old Hen", can get out of Anhui ?
At present, there is a market concentration risk in Laoxiangji that its operating income mainly comes from Anhui. The prospectus disclosed that the Laoxiang Chicken chain store was founded in Hefei City, Anhui Province. In June 2012, "Feixi Old Hen" was renamed Laoxiang Chicken. In 2017, it began to gradually expand to areas outside the Anhui market. Currently, the number of stores in markets such as Shanghai, Hubei, Jiangsu, Zhejiang, Shenzhen and Beijing is relatively small.
Since the current production and processing base of Laoxiang Chicken is still mainly in Hefei City, Anhui Province, which is limited by the sales radius of fresh and short-term food, the proportion of revenue from the Anhui market has always been at a high level in the past three years, respectively 82.01 %, 79.97%, 70.65%.
In terms of sales area, fellow chicken gross profit mainly comes from East China. Among them, the gross profit margin in South China and North China has been negative in the past two years. Laoxiang Chicken said that the gross profit for the current period was lower mainly due to the opening of new stores in South China and North China.
Image source: Laoxiang Chicken prospectus
Laoxiang Chicken’s products are not single. has formed hundreds of products covering chicken soup, specialty dishes, staple foods, beverages, new retail and agricultural and sideline products. The prospectus shows that the top sales of fellow chicken products in 2021 are rice, steamed eggs and chicken soup. Among them, 100 million copies of rice are sold a year, and 30 million copies of steamed eggs can be sold a year. Mainly based on Feixi Old Hen Soup products feature steamed eggs, farm-fried meat and other home-cooked dishes as the core.
Image source: Laoxiang Chicken Prospectus
Starting from 2020, Laoxiang Chicken has launched a "monthly new product" campaign, constantly launching new flavors and new varieties of products. However, most of the products are oily and spicy, with hints of Anhui characteristics. Laoxiangji also mentioned this in the prospectus. If the company cannot develop products that meet customer consumption needs in a timely manner in the future, it will have an adverse impact on the company's product sales and market development.
As of the end of last year, Laoxiang Chicken had 991 directly operated stores nationwide. Laoxiang Chicken stated that it plans to invest 600 million to build and put into use the Shanghai production and processing base, which is expected to further increase market coverage in East China and surrounding areas.
Image source: Laoxiang Chicken prospectus
In the next three years, Laoxiang Chicken plans to use raised funds to open 700 direct stores in key locations in Shanghai, Nanjing, Suzhou , Shenzhen, Beijing, Wuhan, Hangzhou, Hefei, Wuhu and other regions. Run a store.
In fact, Chinese fast food has become the most popular category in the catering industry after hot pot. As of the end of September 2021, Rural Chicken has 1,145 stores in China, which is about the same number as Laoxiang Chicken. After Laoxiang Chicken released a prospectus for its proposed listing last year, Village Base, which also has pioneering ambitions, also submitted a prospectus this year and expects to open about 250 to 290 new restaurants in 2022 and about 340 to 400 new restaurants in 2023.
Since this year, catering companies seeking to go public have been affected by the epidemic, lack of cash flow , and coupled with the promotion of capital behind them, they have tried to tell new stories of listing growth. Although the listing journey is full of controversies, some people in the industry said that if Laoxiang Chicken, which has a chain of 1,000 fast food restaurants, can successfully break through, it will be a positive signal for the catering industry.
(This article was first published on Titanium Media APP, author｜Liu Dafang, editor｜Tianpeng)
