Reporter | Zhang Qiaoyu
In recent years, the popularity of Wang Yibo , Meng Meiqi , Fan Chengcheng , Wu Xuanyi and other artists has made the Beijing Lehua Yuanyu Culture Communication Co., Ltd. (abbreviation: Lehua) behind them Culture ) and its founder Du Hua entered the public eye.
Taking advantage of these "east winds", Du Hua quickly established Lehua Entertainment Group (referred to as: Lehua Entertainment) on June 10, 2021, and took this opportunity to submit an prospectus to the Hong Kong Stock Exchange in one fell swoop, fulfilling his intention An 8-year dream of going public. Behind the surge in revenue brought about by
’s talent show craze is the company’s heavy reliance on artist management business in recent years. The company's top five suppliers are gradually being "contracted" by companies controlled by artists. In the future, as artist contracts expire and supervision strengthens the "combination punch" of comprehensive entertainment management, the future of Lehua Entertainment will face many uncertainties. The road to listing of
is extremely bumpy. Du Hua, the founder of
, has been pursuing capital market ambitions for a long time. In 2014, Lehua Culture (a subsidiary of Lehua Entertainment) at the time received approximately 255 million Series B financing from CMC Capital.
In April of the same year, with the help of Shanghai Junmeng Network Technology Co., Ltd. (hereinafter referred to as: Shanghai Junmeng ), which was seeking to be listed at the time, Leroy Culture and Shanghai Junmeng once reached an agreement with Huitong Energy Chairman Zheng Shuchang to acquire Opinion. However, during the due diligence process, Zheng Shuchang decided to terminate the acquisition because the intermediary agency discovered that there was a large gap between the final appraised value of Lehua Culture and the purchase price negotiated by both parties.
On September 22, 2015, Lehua Culture (833564) sought to list transactions on the New Third Board. Not long after
landed on the New Third Board, Lehua Culture suspended transfers due to the major restructuring work of A shares and 's listing. In December 2015, Gongda Electronics announced that the company planned to acquire 100% of the equity of Lehua Culture through shares and cash, with a transaction price of 2.32 billion yuan.
In October 2016, after the valuation adjustment by both parties, Gongda Electronics will acquire the entire equity of Lehua Culture for 1.89 billion yuan. Lehua Culture also promised that the net profit from 2016 to 2018 will reach 150 million yuan, 190 million yuan, and 190 million yuan, respectively. 250 million yuan.
Lehua Culture’s net profit in 2016 was only 64 million yuan. Because it failed to meet the standards, it terminated the decision to backdoor Gongda Electronics. Afterwards, Du Hua expressed his intention to pursue an independent IPO in an interview. As of 2019, Lehua Entertainment’s net profit is only 119 million yuan, which is very different from the performance originally promised.
In February 2018, Lehua Culture and China Merchants Securities signed a guidance agreement on the initial public offering and listing of RMB ordinary shares (A shares), seeking to list on the main board of the Shanghai Stock Exchange; on March 22 of the same year, Lehua Culture re-opened Delisted from the third board. As for the reasons for this delisting, Leroy has stated that it is mainly "to meet the company's business development needs and long-term strategic development plan, and to take into account the current low liquidity of the stock and high financing costs."
After 2018 From 2021 to June 2021, Lehua Culture has been receiving guidance from China Merchants Securities on the company’s main board listing. Until June 4, 2021, the China Securities Regulatory Commission also announced the progress report of the sixteenth phase of Lehua Culture’s counseling work and the termination of counseling information. . At this point, Lehua Culture’s plan to seek listing on the main board failed again. The reason why
terminated the agreement is: the actual situation has changed significantly.
Since then, it has benefited from the craze of talent shows and variety shows. In July 2021, Lehua Culture received strategic investment from Alibaba Pictures , ByteDance and other companies.
On June 10, 2021, Du Hua quickly established Lehua Entertainment. In January this year, Tianyancha showed that many shareholders of Lehua Culture had withdrawn, including Du Hua, Tibet Huaguoguo, where Han Geng is located, and Quantum, a subsidiary of ByteDance. All shareholders including Yuedong Technology, Dongyang Alibaba, and Chinese Culture have withdrawn one after another. It is reported that Du Hua held 48.2% of the shares before withdrawing, and Tianjin Lehua Investment Co., Ltd. took over. As of now, the National Enterprise Credit Center shows that Tianjin Lehua Investment Co., Ltd. holds 99% of the shares. The
prospectus shows that Tianjin Lehua Investment Co., Ltd. is an indirect wholly-owned subsidiary of Lehua Entertainment in China. Therefore, Lehua Culture became one of the subsidiaries of Lehua Entertainment.
The exit equity was transferred to Lehua Entertainment Group (Hong Kong YH ENTERTAINMENT), an exempted limited company registered in Cayman Islands . On March 8, 2022, the Yi disclosed that Lehua Entertainment officially transferred to Hong Kong In the listing application materials submitted, CITIC Construction International and China Merchants Securities International are the joint sponsors.
As of the signing date of the prospectus, Du Hua held a total of 52.80% of the shares of Lehua Entertainment and was the company's largest shareholder. Alibaba Pictures and Chinese Culture were the second largest shareholders, holding 14.25% of the shares respectively. ByteDance held 14.25% of the shares. Han Geng indirectly holds 2.47% of the company's shares.
The top five suppliers are "contracted" by artists
Since the establishment of Lehua Entertainment, the main business has focused on three stages, from music album production to film and television dramas to artist management. Zhongtai Securities' "Fan Economy Industry Report" pointed out that before 2018, Lehua Entertainment once occupied a large share of film and television revenue.
Along with the talent show boom in 2018, talent shows such as " Idol Producer ", " Creation 101", "Produce Camp", " Youth with You " became very popular, and Lehua Entertainment's artists Wang Yibo, Meng Meiqi, Wu Xuanyi, Huang Minghao, Fan Chengcheng, etc. have become popular one after another, and what follows is the tilt of Lehua Entertainment business towards artist management. The proportion of artist management in the company's total revenue increased from 84.0% in 2019 to 91.0% in 2021. Currently, the company has a total of 58 contracted artists and has established a talent pool including 80 trainees.
On the other hand, Du Hua, the "godmother" of the entertainment industry and the owner of Lehua Entertainment, has frequently appeared in variety shows such as " Everyday Up " and "Sister Overcoming Troubles", which has also pushed Lehua Entertainment into the public eye.
From 2019 to 2021 (reporting period), Lehua Entertainment’s revenue was RMB 631 million, RMB 922 million, and RMB 1.29 billion respectively, with a compound annual growth rate of 43.0%; net profits were approximately RMB 119 million, RMB 292 million, and 335 million yuan, with a compound annual growth rate of 67.6%. Behind the soaring performance of
, what follows is Lehua Entertainment's reliance on a few popular signed artists, relying on a few artists to participate in variety shows, appear in TV series, and release albums to obtain income.
became popular due to Wang Yibo's appearance in "Chen Qing Ling". As of December 31, 2021, the two digital singles "Wu Sen" and " Minecraft Code " produced by Lehua Entertainment for Wang Yibo have been sold. The numbers are as high as 17.6 million and 15.2 million respectively. Based on NetEase Cloud Music’s corresponding price of 2 yuan and 3 yuan per song, the two singles brought the company more than 80 million yuan in revenue.
On the variety show, Wang Yibo participated in "This!" "That's Street Dance" Season 3 and 4, Cheng Xiao participated in " Extreme Youth ", Wu Xuanyi participated in " Love Drama Hero ", Huang Minghao participated in " Star Detective " and so on. In the series signed by
, Wang Yibo, Cheng Xiao, and Wu Xuanyi also participated in " Wind in Luoyang ", " Good Words Freehand " and " World Mote " respectively.
During the reporting period, Lehua Entertainment’s suppliers can be divided into contracted artists and entities controlled by them, media platforms, suppliers that provide styling, security and photography services, and service providers that provide music works and lyrics related to the production and operation of music IP. Shang et al.
The most direct reflection of Lehua Entertainment's reliance on well-known artists to generate revenue is that, From 2019 to 2021, among Lehua Entertainment's top five suppliers, the proportion of purchases from companies controlled by contracted artists to the total cost increased from 22.5% in 2019 to 53.6% in 2020, and further increased to 61.6% in 2021.
In 2019, social media platforms and cultural media companies were among the top five suppliers of Lehua Entertainment. In 2020 and 2021, the top five suppliers of Lehua Entertainment are all companies controlled by contracted artists.
Lehua Entertainment's artist management costs have also increased from 240 million yuan in 2019 to 318 million yuan in 2020, and further increased to 529 million yuan in 2021, accounting for 68.4%, 74.3% and 76.9% of the total operating costs. %. The contracting relationship between
and artists is particularly important. However, according to the content disclosed in the prospectus, the contract expiration times of the above-mentioned artists will be concentrated between 2023 and 2024. Whether subsequent contracts can be renewed after they expire is questionable.
On the other hand, the milk dumping scandal and the Qinglang Fanquan Operation in 2021 undoubtedly mean that the supervision of the entertainment industry is becoming stricter. The "Notice on Carrying out Comprehensive Management in the Entertainment Sector" issued by the Central Propaganda Department clearly states that it is strictly prohibited to select minors to participate in talent show programs, combat various forms of traffic fraud, and broadcast idol development. Programs of this type are not allowed to set up links and channels such as off-site voting, rankings, and support. It is strictly prohibited to guide and encourage fans to use material means such as shopping and membership replenishment to spend money to vote in disguise.
On January 6, 2022, at the National Radio and Television Work Conference, Yang Shuo, Secretary of the Party Group and Director of the Beijing Municipal Radio and Television Bureau , pointed out on Internet governance that the Beijing Bureau should do a good job in comprehensive cultural and entertainment management in terms of Internet governance, Comprehensive suspension of idol development online TV dramas and "delayed reform" themed online movies and TV dramas, seriously carried out special inspections in the field of online movies and TV dramas, short videos, and live broadcasts. The suspension of the
idol development online variety show is undoubtedly a heavy blow to Lehua Entertainment. The sustainability of future income is still worthy of attention.
Two dividends accounted for 80% of the three-year net profit
Before the listing, Lehua Entertainment shareholders cashed out large sums of dividends.
It is reported that in October 2020, Lehua Entertainment's subsidiary Lehua Culture distributed a dividend of RMB 200 million to its then shareholders; in March 2022, Lehua Entertainment once again distributed a total dividend of US$63 million (approximately RMB 400 million) , the above two dividend payments have been settled. This is equivalent to the fact that Lehua Entertainment has distributed a total of 600 million yuan in dividends in the past two years. mentioned above , Lehua Entertainment controls 99% of the equity of Lehua Culture through its wholly-owned domestic subsidiary Tianjin Lehua Investment Co., Ltd.
It is worth noting that the net profits of Lehua Entertainment during the reporting period were approximately RMB 119 million, 292 million, and 335 million yuan, totaling 746 million yuan. paid dividends twice and divided up 30% of the total net profit for the three years. 80.43%.
The company stated that the distribution of such dividends will not have a significant impact on Lehua Entertainment's working capital adequacy, and the company will be able to maintain sufficient funds to meet working capital needs and debt obligations. Also, past dividend declarations may not reflect our future dividend declarations.
During the reporting period, Lehua Entertainment’s asset-liability ratios were 52.66%, 101.15%, and 80.97% respectively. The current debt ratio is very high. In this round of listing of
, part of the funds raised by Lehua Entertainment will be mainly used for artist investment and operations, including building artist training centers, expanding trainee plans, artist promotion, etc.; part of it will be used to expand the music IP library; in addition, part will be used for Acquisitions and investments, etc.
The exit equity was transferred to Lehua Entertainment Group (Hong Kong YH ENTERTAINMENT), an exempted limited company registered in Cayman Islands . On March 8, 2022, the Yi disclosed that Lehua Entertainment officially transferred to Hong Kong In the listing application materials submitted, CITIC Construction International and China Merchants Securities International are the joint sponsors.
As of the signing date of the prospectus, Du Hua held a total of 52.80% of the shares of Lehua Entertainment and was the company's largest shareholder. Alibaba Pictures and Chinese Culture were the second largest shareholders, holding 14.25% of the shares respectively. ByteDance held 14.25% of the shares. Han Geng indirectly holds 2.47% of the company's shares.
The top five suppliers are "contracted" by artists
Since the establishment of Lehua Entertainment, the main business has focused on three stages, from music album production to film and television dramas to artist management. Zhongtai Securities' "Fan Economy Industry Report" pointed out that before 2018, Lehua Entertainment once occupied a large share of film and television revenue.
Along with the talent show boom in 2018, talent shows such as " Idol Producer ", " Creation 101", "Produce Camp", " Youth with You " became very popular, and Lehua Entertainment's artists Wang Yibo, Meng Meiqi, Wu Xuanyi, Huang Minghao, Fan Chengcheng, etc. have become popular one after another, and what follows is the tilt of Lehua Entertainment business towards artist management. The proportion of artist management in the company's total revenue increased from 84.0% in 2019 to 91.0% in 2021. Currently, the company has a total of 58 contracted artists and has established a talent pool including 80 trainees.
On the other hand, Du Hua, the "godmother" of the entertainment industry and the owner of Lehua Entertainment, has frequently appeared in variety shows such as " Everyday Up " and "Sister Overcoming Troubles", which has also pushed Lehua Entertainment into the public eye.
From 2019 to 2021 (reporting period), Lehua Entertainment’s revenue was RMB 631 million, RMB 922 million, and RMB 1.29 billion respectively, with a compound annual growth rate of 43.0%; net profits were approximately RMB 119 million, RMB 292 million, and 335 million yuan, with a compound annual growth rate of 67.6%. Behind the soaring performance of
, what follows is Lehua Entertainment's reliance on a few popular signed artists, relying on a few artists to participate in variety shows, appear in TV series, and release albums to obtain income.
became popular due to Wang Yibo's appearance in "Chen Qing Ling". As of December 31, 2021, the two digital singles "Wu Sen" and " Minecraft Code " produced by Lehua Entertainment for Wang Yibo have been sold. The numbers are as high as 17.6 million and 15.2 million respectively. Based on NetEase Cloud Music’s corresponding price of 2 yuan and 3 yuan per song, the two singles brought the company more than 80 million yuan in revenue.
On the variety show, Wang Yibo participated in "This!" "That's Street Dance" Season 3 and 4, Cheng Xiao participated in " Extreme Youth ", Wu Xuanyi participated in " Love Drama Hero ", Huang Minghao participated in " Star Detective " and so on. In the series signed by
, Wang Yibo, Cheng Xiao, and Wu Xuanyi also participated in " Wind in Luoyang ", " Good Words Freehand " and " World Mote " respectively.
During the reporting period, Lehua Entertainment’s suppliers can be divided into contracted artists and entities controlled by them, media platforms, suppliers that provide styling, security and photography services, and service providers that provide music works and lyrics related to the production and operation of music IP. Shang et al.
The most direct reflection of Lehua Entertainment's reliance on well-known artists to generate revenue is that, From 2019 to 2021, among Lehua Entertainment's top five suppliers, the proportion of purchases from companies controlled by contracted artists to the total cost increased from 22.5% in 2019 to 53.6% in 2020, and further increased to 61.6% in 2021.
In 2019, social media platforms and cultural media companies were among the top five suppliers of Lehua Entertainment. In 2020 and 2021, the top five suppliers of Lehua Entertainment are all companies controlled by contracted artists.
Lehua Entertainment's artist management costs have also increased from 240 million yuan in 2019 to 318 million yuan in 2020, and further increased to 529 million yuan in 2021, accounting for 68.4%, 74.3% and 76.9% of the total operating costs. %. The contracting relationship between
and artists is particularly important. However, according to the content disclosed in the prospectus, the contract expiration times of the above-mentioned artists will be concentrated between 2023 and 2024. Whether subsequent contracts can be renewed after they expire is questionable.
On the other hand, the milk dumping scandal and the Qinglang Fanquan Operation in 2021 undoubtedly mean that the supervision of the entertainment industry is becoming stricter. The "Notice on Carrying out Comprehensive Management in the Entertainment Sector" issued by the Central Propaganda Department clearly states that it is strictly prohibited to select minors to participate in talent show programs, combat various forms of traffic fraud, and broadcast idol development. Programs of this type are not allowed to set up links and channels such as off-site voting, rankings, and support. It is strictly prohibited to guide and encourage fans to use material means such as shopping and membership replenishment to spend money to vote in disguise.
On January 6, 2022, at the National Radio and Television Work Conference, Yang Shuo, Secretary of the Party Group and Director of the Beijing Municipal Radio and Television Bureau , pointed out on Internet governance that the Beijing Bureau should do a good job in comprehensive cultural and entertainment management in terms of Internet governance, Comprehensive suspension of idol development online TV dramas and "delayed reform" themed online movies and TV dramas, seriously carried out special inspections in the field of online movies and TV dramas, short videos, and live broadcasts. The suspension of the
idol development online variety show is undoubtedly a heavy blow to Lehua Entertainment. The sustainability of future income is still worthy of attention.
Two dividends accounted for 80% of the three-year net profit
Before the listing, Lehua Entertainment shareholders cashed out large sums of dividends.
It is reported that in October 2020, Lehua Entertainment's subsidiary Lehua Culture distributed a dividend of RMB 200 million to its then shareholders; in March 2022, Lehua Entertainment once again distributed a total dividend of US$63 million (approximately RMB 400 million) , the above two dividend payments have been settled. This is equivalent to the fact that Lehua Entertainment has distributed a total of 600 million yuan in dividends in the past two years. mentioned above , Lehua Entertainment controls 99% of the equity of Lehua Culture through its wholly-owned domestic subsidiary Tianjin Lehua Investment Co., Ltd.
It is worth noting that the net profits of Lehua Entertainment during the reporting period were approximately RMB 119 million, 292 million, and 335 million yuan, totaling 746 million yuan. paid dividends twice and divided up 30% of the total net profit for the three years. 80.43%.
The company stated that the distribution of such dividends will not have a significant impact on Lehua Entertainment's working capital adequacy, and the company will be able to maintain sufficient funds to meet working capital needs and debt obligations. Also, past dividend declarations may not reflect our future dividend declarations.
During the reporting period, Lehua Entertainment’s asset-liability ratios were 52.66%, 101.15%, and 80.97% respectively. The current debt ratio is very high. In this round of listing of
, part of the funds raised by Lehua Entertainment will be mainly used for artist investment and operations, including building artist training centers, expanding trainee plans, artist promotion, etc.; part of it will be used to expand the music IP library; in addition, part will be used for Acquisitions and investments, etc.
