Zhou Hongyi's Huafang Group plans to go public in Hong Kong with a net profit of 232 million yuan in the first eight months of the alternating profit and loss

Wu Shuping, editor of The Benteng News of The Yangtze River Business Daily, reported comprehensively

Another social pan-entertainment company is about to go to Hong Kong for an IPO.

On October 25, Huafang GroupInc. (hereinafter referred to as "Huafang Group"), an operator of social entertainment live broadcasting platforms such as Huajiao Live broadcasting and Liufangfang in Beijing, submitted a prospectus to the Hong Kong Stock Exchange for an IPO on the Main Board of Hong Kong.

According to the prospectus, Huafang Group is a well-known Internet company in China, providing audio and video live entertainment and social networking services for users around the world. Focusing on the field of online social entertainment, Huafang Group has a diversified business portfolio from live broadcasting to a series of multi-faceted audio and video social networking products and services, and has three major platforms, namely the mobile flagship product Hua pepper, the PC flagship product Six Rooms (including mobile six-room live broadcast, pomegranate live broadcast and Huafang live broadcast) and the international products of HOLLA Group operating overseas.

As of August 31, 2021, the cumulative number of registered users of Peppercorns reached 207 million. As of August 31, 2021, Hua pepper had about 101 million registered anchors, and for the eight months ended August 31, 2021, There were more than 200,000 average monthly active anchors.

According to the prospectus, the chairman of the board of directors of Huafang Group is Zhou Hongyi, who is also the largest shareholder of the company, holding 38.21% of the shares through the three companies. Songcheng Performing Arts holds 37.06% of the shares through its wholly-owned subsidiary Global BacchusLimited, making it the second largest shareholder of Huafang Group. In addition, Mango Cultural Creation also appeared in the list of shareholders, with a shareholding ratio of 1.54%.

According to the prospectus, from 2018 to 2020, the total operating income of Huafang Group was 993 million yuan, 2.831 billion yuan and 3.684 billion yuan respectively, and the revenue in the first eight months of 2021 was 2.96 billion yuan.

However, its performance in terms of net profit has not been stable, with net profits of -187 million yuan, 191 million yuan and -1.525 billion yuan from 2018 to 2020, respectively, and a net profit of 232 million yuan in the first eight months of this year. In the same period, the company's gross profit margin was 15.1%, 24.9%, 27.5% and 27.7%, respectively, showing an upward trend year by year.

From the perspective of revenue composition, the revenue generated by voice live broadcasting services accounted for 0.5%, 6.8%, 14.2% and 22.1% of the revenue generated by voice live broadcasting services from 2018 to the first eight months, respectively. The revenue generated by Kuaishou's voice live broadcast services in the same industry accounted for 97.70%, 80.37%, 56.50% and 51.2% from 2018 to the first six months of 2021, respectively.

As for costs, the vast majority of Huafang Group's sales costs are the revenues from virtual tipping that it shares with anchors or anchor brokerage companies on live streaming services. From 2018 to 2020 and the first eight months of this year, the proportion of anchor costs to revenue in each period was 74.6%, 67.8%, 66.4% and 66.1%, respectively, showing a decreasing trend year by year.

From the perspective of the industry, the stock prices of several social pan-entertainment companies currently listed are not ideal. In addition to Kuaishou, Huanju, Momo and other companies can achieve a market value of 10 billion +, the market value of many social pan-entertainment companies is hovering around 1 billion yuan.

Editor-in-charge: ZB

This article originated from the Yangtze River Business Daily