China Net Technology March 10, Lehua Entertainment Group YH Entertainment Group (hereinafter referred to as "Lehua Entertainment") recently submitted a prospectus in Hong Kong, intending to be listed on the Main Board of Hong Kong. CITIC Construction Investment International and China Merchants Securities International are the joint sponsors.
It is understood that the funds raised by Lehua Entertainment in this IPO will be invested in the operation of artists, and it is planned to strengthen teachers by striving for better training facilities for trainees and contracted artists to enhance artist training and management capabilities. It also intends to expand the scope of artist promotion, to expand the music IP library, to invest in and acquire businesses or assets that are consistent with the development strategy or that can create synergies with the business, to expand the pan-entertainment business, to expand overseas expansion, to use as working capital and general corporate purposes to support business operations and growth.
In fact, this is not the first time that Lehua Entertainment has gone to the capital market, in September 2015, Lehua Entertainment's subsidiary Lehua Co., Ltd. was listed on the New Third Board, and then chose to voluntarily delist in February 2018. In addition, Lehua Limited also considered seeking an A-share listing in 2018, but its plan failed.
According to public information, Lehua Entertainment was founded in 2009 and is currently a cultural entertainment platform, with business covering artist management, music IP production and operation, and pan-entertainment business. According to Frost & Sullivan, a well-known consulting firm in the industry, Lehua Entertainment is the largest artist management company in China and one of the most recognized entertainment brands in China in terms of artist management revenue in 2020. Up to now, the well-known artists of Lehua Entertainment include Wang Yibo, Wu Xuanyi, Meng Meiqi, Zhu Zhengting and Han Geng.
Therefore, in terms of overall revenue and performance, artist management has become the main source of income for Lehua Entertainment. According to the prospectus, from 2019 to 2021, Lehua Entertainment's revenue was 631 million yuan, 922 million yuan and 1.29 billion yuan, gross profit was 279 million yuan, 493 million yuan and 602 million yuan, gross profit margin was 44.3%, 53.5% and 46.6% respectively, and net profit for the year was about 119.3 million yuan, 291.9 million yuan and 335.3 million yuan, respectively.
In terms of specific revenue ratio, the prospectus shows that from 2019 to 2021, artist management accounted for 84.0%, 87.7% and 91.0% of total revenue, respectively. Music IP production and operation accounted for 11.8%, 10.0%, and 6.1%, respectively, and pan-entertainment business accounted for 4.2%, 2.3%, and 2.9%, respectively. Artist management has become the main source of revenue for Lehua Entertainment, and accounts for more than 90% of the total revenue.
Even if there are well-known artists pressing the front, China Net Technology has noticed that there are views in the industry that relying heavily on artist management in terms of income will make Lehua Entertainment have certain risks, and if it cannot maintain cooperation with artists and the number of excellent trainees is not much, its revenue will be directly affected.
From the current environment, the draft variety show has been stopped, which directly leads to the direct rupture of the trainees' rapid monetization channel, and Lehua Entertainment will also face some potential crises in the future. In addition, in terms of pan-entertainment business, lehua entertainment intends to enter the "meta-universe" field, and has previously cooperated with ByteDance to launch the virtual idol girl group A-SOUL, but at present, the business is only in the testing stage and has not yet formed a stable revenue.