With the name of the largest IPO of Hong Kong stocks this year, Chabaidao has become the second new tea beverage company to successfully land on the Hong Kong Stock Exchange. But it still hasn't been able to avoid the cold wind blowing from the capital market.
On April 23, Tea Baidao (02555. HK) was officially listed on the Hong Kong Stock Exchange, becoming the "second share of milk tea" in Hong Kong stocks. However, on the first day of listing, the share price of Chabaidao was broken, and the issue price of HK$17.5 fell by more than 30%. As of the close of Hong Kong stocks on April 23, the share price of Chabaidao closed at HK$12.8, down 26.86% from the issue price, and the company's total market value was HK$18.9 billion.
The "fall from grace" of tea Baidao in the capital market has its own listing price slightly higher, which also reflects the fading popularity of new tea drinks in the market. Some capital market sources revealed to Wall Street that there are also other new tea brands that were originally scheduled to be listed this quarter, but after comprehensive consideration, the current listing node has also been postponed.
Of course, compared with other new tea brands that have not been on the market for a long time, Cha Baidao is also much luckier. It's also going to find a way to stay at the tables after the new tea craze fades.
disappointment
Nearly three years after the listing of Nai Xue's tea, the "first share of milk tea" in Hong Kong, Tea Baidao seems to have failed to break the fate of tea companies on the first day of listing.
On June 30, 2021, Nayuki's tea (2150. HK) was listed on the Main Board of the Hong Kong Stock Exchange at a price of HK$19.8 per share. However, the aura of "the first share of new tea drinks" did not make Nai Xue's tea sought after in the capital market. On the contrary, on the first day of listing, Nai Xue's tea fell below the issue price, closing at HK$17.12 on the same day, down 13.54% from the issue price.
If you look at the performance of Cha Baidao and Nayuki's tea at the time of listing, Cha Baidao and Nayuki's tea should have been two completely different stories.
From 2021 to 2023, the performance of Tea Baidao will grow rapidly. In the past three years, the revenue of Tea Baidao was 3.64 billion yuan, 4.23 billion yuan and 5.70 billion yuan respectively, with a compound annual growth rate of 25.1%, the gross profit of the company was 1.30 billion yuan, 1.46 billion yuan and 1.96 billion yuan respectively, with a compound annual growth rate of 22.9%, and the adjusted net profit was 900 million yuan, 970 million yuan and 1.26 billion yuan respectively, with a compound annual growth rate of 18.2%.
According to the data, in 2023, a total of 1.016 billion cups of milk tea will be sold in Chabaidao stores, and the total retail sales will reach about 16.9 billion yuan. As of April 5, 2024, the number of Chabaidao stores has reached 8,016, covering 31 provinces and cities across the country, achieving full coverage of all provinces and tier-level cities.
This is not the case with Nai Xue's tea, which was still in a state of loss when it went public. In 2021 and 2022, the net profit attributable to the parent of Nai Xue's tea was a loss, and it was not until 2023 that it turned a profit.
Why didn't the performance of Chabaidao help it avoid the fate of breaking on the first day?
"Capital is not so interested in the milk tea category in the first place. For the first day of the Hong Kong stock of Tea Baidao, a practitioner in the tea industry said.
In recent years, it has almost become an industry perception that capital does not like new tea drinks. Zhu Danpeng, an analyst of China's food industry, believes that in the environment of low overall activity of Hong Kong stocks, capital is more willing to choose short-term sectors such as technology and energy, and is not so keen on the food sector that needs to implement long-termism, which has also led to the cold of Tea Baidao in Hong Kong stocks.
Compared with Nayuki's tea, Tea Baidao has shown a certain coldness in the subscription stage. According to the allotment results announced by Chabaidao, the company offered about 148 million shares globally, raising a net of about HK$2.463 billion, and the offer price per share was HK$17.5. The public offering was only 0.5 times subscribed and the international offering was subscribed 1.11 times.
In comparison, Nai Xue's tea issued a total of about 257 million shares at an issue price of HK$19.8 per share, raising a total of HK$4,842.4 million in net proceeds. According to the subscription results announced, a total of 642,000 subscription applications were received under the Hong Kong Public Offering, which was oversubscribed by more than 432 times, and the subscription of the international offering part also reached 18.18 times.
However, Nai Xue's tea, which had a good start, failed to stabilize its advantage, and now, its share price has fallen to HK$2.28 per share, with a market value of only HK$3.9 billion.
Fence
The experience of tea Baidao's listing in Hong Kong is not good news for tea companies that are still waiting to be listed, or are interested in listing.
Just after the New Year of 2024, a number of new tea drinks lined up, took the number to Hong Kong to deliver the form, and joined the competition for the "second share of milk tea" in Hong Kong stocks. Now, after Cha Baidao took the lead in breaking through, Mixue Bingcheng, Gu Ming and Aunt Shanghai are still waiting. The news in the market about the joy of tea and the overlord tea girl seeking to go public has never stopped.
Comparing the prospectuses of several tea companies, it can be found that the stories told by new tea companies are generally similar - joining, sinking and going to sea, but they have not been able to escape from the cage and tell a more "sexy" story to the market.
In recent years, the new tea beverage industry has gradually involuted, and the pattern of high-end, affordable and popular new tea drinks has been continuously broken, and various tea beverage companies are constantly approaching in price, product and strategy. Nowadays, most tea products are concentrated in the price range of 10-20 yuan. Among the several tea companies queuing up to be listed, except for Mixue Bingcheng, which still occupies the price band below 10 yuan with the ultimate cost performance, most of the other products are in the price band of 10-20 yuan. The downward trend of the price band also means that the gross profit space is narrowing.
This has also led to the fact that joining and sinking have become the main mode of operation and development direction of tea enterprises.
Judging from the information disclosed in the prospectus, whether it is Tea Baidao, Mixue Bingcheng or Shanghai Auntie, its revenue from franchise stores exceeds 90% of the total revenue, and the sinking market occupies its main market.
According to the data, at the end of 2023, the number of Chabaidao stores in first-tier, new first-tier, second-tier, third-tier, fourth-tier and below cities accounted for 10.6%, 26.9%, 20.9%, 19.4% and 22.2% respectively. As of September 30, 2023, about 49.0% of all Shanghai Auntie's stores are located in third-tier cities and below.
Despite this, the sinking market is still the focus of competition among various tea beverage companies. In order to further sink into smaller counties, in 2023, Shanghai Auntie will launch a "light enjoyment" store model designed for consumers in third-tier cities and below, focusing on cost performance. The price of the light version is 2-12 yuan, which is comparable to the price of Mixue Bingcheng, and the store type is smaller and the store location is more flexible.
Hey Tea and Nai Xue's tea, which have been mainly directly operated, have also been opened to join, shifting from first- and second-tier cities to the sinking market.
This is mainly due to the fact that franchised stores can create higher gross profit margins than directly operated stores. According to the prospectus of Tea Baidao, from 2021 to 2023, the gross profit margin of Chabaidao's franchised stores will be between 34% and 36%, while the gross profit margin of directly operated stores will only be about half, about 11%-18%.
When joining and sinking have become the common goals of new tea brands, the competition for high-quality franchisees with their own resources and large-scale stores is becoming increasingly fierce. Overseas markets have also become the next target for tea brands.
According to the prospectus of Chabaidao, part of the funds raised from the listing will be used to support the supply chain capacity of overseas markets, and plans to build production and distribution facilities. In 2024, the company plans to start establishing a supply chain system covering Southeast Asian markets such as Thailand, Vietnam and Malaysia. In 2025, the company plans to start setting up a distribution center to support the company's expansion in the Southeast Asian market.
However, before this, the stores of tea brands such as Heytea, Mixue Bingcheng, and Bawang Tea have already settled overseas.
When the new tea brands collectively fall into homogenization, what can the tea companies waiting to go public use to persuade the capital market and strive for financing?
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