With an annual income of 4.5 billion yuan and more than 600 stores, the IPO of the leading Hui cuisine is submitted again

Securities Market Weekly Market Number

2024-08-03 10:59Published on the official account of Beijing Red Journal Finance

Liu Jie

Since 2023, many catering companies have rushed to list on the Hong Kong stock market, including: Yang Guofu Malatang, the veteran Internet celebrity restaurant Green Tea, the chain fast food brand Village Base, and the Cantonese hot pot chain restaurant Laowang. However, judging from the current situation, the above-mentioned companies have not yet knocked on the door of the Hong Kong Stock Exchange and are still queuing.

With an annual income of 4.5 billion yuan and more than 600 stores, the IPO of the leading Hui cuisine is submitted again

Xiao Cai Yuan International Holdings Co., Ltd. (hereinafter referred to as "Xiao Cai Yuan"), a well-known Hui vegetable company, is also a member of the Hong Kong stock IPO queue. On January 16, after its first submission to the Hong Kong Stock Exchange, on July 16, it submitted its return again. In this IPO, it intends to raise funds to expand stores, consolidate its market position and enhance brand awareness. According to the plan, by the end of 2026, it will have more than 1,100 stores.

Rapid expansion There are more than 600 stores

In 2013, Xiaocaiyuan opened its first store in Anhui, and since then, with the business philosophy of "delicious and not expensive", it has opened a chain catering model, and now it has developed into a well-known chain Chinese restaurant in China. According to the prospectus, Xiaocaiyuan has 623 directly-operated stores, covering 135 cities or counties in 13 provinces in China, and its stores are mainly located in East China.

From the perspective of market overview, the Chinese food market is the largest catering industry in mainland China, accounting for 77.1% of the total market size of China's catering market in 2023. Among them, in terms of revenue, the mass convenience Chinese catering market with a unit price between 50 yuan and 100 yuan accounts for about 55.2% of the overall Chinese catering market, with a market size of 2,252.9 billion yuan in 2023 and is expected to reach 3,449.5 billion yuan by 2028. The current market pattern and development prospects of the industry provide a favorable external environment and historic opportunities for the sustained and rapid growth of small vegetable gardens.

Source: Prospectus

In recent years, the small vegetable garden has entered a stage of rapid expansion, and it has continued to lay stores in various regions to expand its capital territory. According to the prospectus, at the beginning of 2021, the number of its stores was 278, which increased to 379 in early 2022, with a net increase of 101 stores; In 2022, affected by the epidemic, the speed of store opening slowed down, with a net new store of 43 during the year; In 2023, it will accelerate again, with a net new store of 120 during the year, bringing the total number of stores at the end of the period to 542. In the first four months of 2024, it continued to expand rapidly, and as of April 30, 2024, the number of its stores has increased to 599.

Source: Prospectus

From 2021 to 2023, it will achieve operating income of 2.646 billion yuan, 3.215 billion yuan, and 4.552 billion yuan respectively, with a year-on-year growth rate of 21.50% and 41.61% in the latter two periods; The net profit was 227 million yuan, 238 million yuan and 532 million yuan respectively, and the year-on-year growth rate in the latter two periods was 4.60% and 123.96% respectively.

In addition, same-store sales at Xiaocaiyuan stores increased by 1.2% year-on-year in 2022 and 20.8% year-on-year in 2023. From 2021 to 2023, its store operating profit margins were 15.9%, 14.2% and 19.7%, respectively, performing well.

The pressure to rank first in the segment

According to Frost & Sullivan data, in terms of store revenue in 2023, Xiaocaiyuan store revenue will be 4.51 billion yuan, ranking first among all brands in the mainland mass convenience Chinese catering segment, accounting for 0.2% of the market share in the range of 50 yuan to 100 yuan. The second-ranked brand had a store revenue of 4.47 billion yuan in the same period, only 40 million yuan less than Xiaocaiyuan, and its market share was also 0.2%, with little difference between the two. This is one of the reasons why Xiaocai Garden wants to raise funds to further increase market penetration.

According to the prospectus, the second-ranked catering brand is "Taier", a Chinese Sichuan-style catering brand based on pickled cabbage and fish, with an average unit price of 70 yuan to 80 yuan, and its parent company Jiumaojiu is also listed on the Hong Kong Stock Exchange. By the end of 2023, Taier had operated more than 500 stores in China, covering major cities in China, as well as operations in Singapore, Canada, United States and other countries, making it one of Xiaocaiyuan's main competitors.

For this IPO fundraising, Xiaocaiyuan said that part of the funds will be used to continue to expand the store network to expand geographical coverage and improve market penetration. It plans to open approximately 160, 190 and 230 stores in 2024, 2025 and 2026, respectively, and expects to operate more than 1,100 stores by the end of 2026.

However, the rapid expansion has also put some pressure on the small vegetable garden. In order to motivate the store manager, he usually gives the store manager a certain amount of shares, and the store manager is mostly served by the head chef who has been promoted from the grassroots position of the store. In this regard, Xiaocaiyuan said in the prospectus: "Our continued expansion may put pressure on the reserve of qualified store managers and head chef candidates."

In addition, given that most of the store managers are promoted from the store's junior staff, Xiaocaiyuan also said that these employees may not have enough experience to assist the company in opening new stores, and even if they can open new stores as planned, these new stores may neither be profitable nor achieve the same performance as existing stores.

Supply chain management is also an important factor influencing its expansion. The quality and taste of the dishes depends largely on the quality of the ingredients, and Xiaocaiyuan said it may take longer for the company to establish a qualified supply chain system in a new market. As stores expand rapidly, it can become increasingly difficult to continue to source high-quality ingredients from reliable suppliers at competitive prices, as well as to manage food inventory and logistics across all stores.

It is necessary to strengthen the protection of employees' rights and interests

In recent years, the business of small vegetable garden has gradually expanded from offline to online. In 2021, its dine-in business accounted for 84.5%, but with the increase in demand for food delivery business, the proportion of its online business also increased significantly in 2022, from 15.5% in the previous year to 32.0%, and in the first four months of 2024, its food delivery business accounted for 35.5%.

Revenue Composition by Channel

Source: Prospectus

In terms of average daily consumption, the small vegetable garden has declined both online and offline. In the first four months of 2024, its average daily sales of a single store will be 24,400 yuan, compared with 28,900 yuan in the same period in 2023, a year-on-year decrease of 15.57%; In the first four months of 2024, the average consumption of takeaway orders was 73.3 yuan, compared with 80.4 yuan in the same period of 2023, a year-on-year decrease of 8.83%.

In addition, in the first four months of 2024, the average daily dine-in customers of the same store in Xiaocaiyuan was 269.6, a decrease of 11.84% from 305.8 in the same period of 2023; The average daily same-store sales in the first four months of 2024 were 25,300 yuan, down 12.46% from 28,900 yuan in the same period in 2023.

In this regard, Xiaocaiyuan said that it is mainly due to the base effect caused by the surge in consumer spending in China's catering market after the epidemic gradually disappears, as well as its adjustment to the price of dishes.

At the same time of rapid development of enterprises, the protection of employees' rights and interests cannot be ignored, and it is an important responsibility of enterprises to pay social security and provident fund for employees, and it is also related to the protection of employees' rights and interests. In the prospectus, Xiaocaiyuan said: "In the past, we did not pay social insurance and housing provident fund contributions for some employees in a timely manner in accordance with relevant Chinese laws and regulations. The agency may order the company to pay outstanding social insurance contributions within a specified period of time and may impose a late fee of 0.05% per day for the amount of late payment.

According to the company's own estimates, the maximum potential penalty amount due to insufficient social insurance payments for the period from 2021 to April 30, 2024 will be about 29.4 million yuan, 39.3 million yuan, 42.2 million yuan and 13.3 million yuan respectively. During the same period, the maximum potential penalty amount due to insufficient contribution to the housing provident fund will be about 9.5 million yuan, 11 million yuan, 14.3 million yuan and 5.3 million yuan respectively.

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