Reporter | Lu Yibei
Edit | Zan Huifang
On October 29, Chongqing Hongjiu Fruit Co., Ltd. (hereinafter referred to as "Hongjiu Fruit") submitted a prospectus on the Hong Kong Stock Exchange for an IPO on the Main Board of Hong Kong.
Hongjiu Fruit is a multi-brand fresh fruit group in Chongqing, founded in 2002, mainly engaged in the whole industry chain operation of high-end imported and domestic fruits. According to the prospectus, according to the information quoted by China Insight Consulting, hongjiu fruit has become China's largest wholesaler of its own brand fresh fruit and the largest durian distributor in China in terms of revenue in the first half of 2021.
In 1987, Deng Hongjiu, the founder of Hongjiu Fruit, was just a "stick" (i.e., porter) at The Chaotianmen Wharf in Chongqing, using flat shoulders to load and unload goods for others. After discovering that the retail price of red oranges in Chaotianmen was much higher than that of his hometown, Deng Hongjiu decided to take all his belongings of more than 2,000 yuan to buy and resell, and this move allowed him to earn the income of the previous month in two days. Since then, Deng Hongjiu has opened the territory of Hongjiu fruit wholesale business.
In the early days of the company's establishment, the domestic fruit market is relatively saturated, the number of fruits is larger, and only in planting, selection, and unit price have advantages to have room for appreciation, so Hongjiu fruit products choose to import fruits as the entry point to do brand fruits, and establish a complete supply chain of imported fruits to reduce the price of imported fruits, thereby forming a price advantage.
According to the prospectus, from 2018 to the first half of 2021, the operating income of Hongjiu Fruit products was 1.226 billion, 2.078 billion, 5.771 billion and 5.417 billion yuan, respectively; the net profit for the same period was 112 million, 163 million, 0.0275 billion and 0.0555 billion yuan, and the adjusted net profit was 127 million, 228 million, 662 million and 604 million yuan, respectively. Adjusted profits, on the other hand, are adjusted from pre-tax profits after deducting changes in the carrying amount of liabilities recognized in respect of the priority rights granted to investors.
According to the Tianyancha APP, Hongjiu Fruit has completed a total of 6 rounds of financing, and the investors include Alibaba, Tianyi Capital, CMC Capital, Shenzhen Venture Capital, China Merchants Capital, Zhongken Fund, SF Holdings, Guochuang Zhongding and CITIC Construction Investment Capital.
From the product point of view, as of the date of signing of the prospectus, Hongjiu Fruit has formed a fruit product portfolio with durian, mangosteen, longan, dragon fruit, cherry and grape as the core. From 2018 to 2020 and the first half of 2021, the sales revenue of the six major fruits accounted for more than 60% of the total revenue of Hongjiu fruit.
Among them, durian has gradually become the company's most important fruit category in recent years, and its sales revenue has risen from 473 million yuan in 2019 to 2.107 billion yuan in 2020. From 2018 to the first half of 2021, the sales revenue of Hongjiu fruit durian increased from 9.4% all the way to 38%. After dredging the durian sales chain, the overall revenue level of Hongjiu fruit products has also increased significantly.
In terms of supply chain, the fruits of Hongjiu Fruit are directly harvested from the place of origin, and then processed and sorted by their own factories, and finally delivered to customers such as terminal wholesalers and supermarkets.
As of June 30, 2021, it has approximately 400 procurement and supervisory staff in Thailand and Vietnam, and has built 16 fruit processing plants in the region to process fruits into standard products. At present, the proportion of durian, mangosteen, longan and dragon fruit directly harvested by the company is 87.6%; in China, Hongjiu Fruit has set up 57 sorting centers to sort large packages of products into customized small packages according to customer needs.
This also laid the foundation for the fruit branding of Hongjiu Fruit.
As early as 2013, Hongjiu Fruit began to launch its own brand, and by June 30, 2021, the company has established a combination of 18 fruit brands and launched a number of different brands for different fruit categories to differentiate between different product grades and obtain higher profits.
Since 2019, the benefits of branding have begun to appear, and the gross profit margin of Hongjiu fruit brand fruit products exceeds that of non-brand fruits to 19.7%, even when the gross profit margin of the company's various categories of fruits declines in the first half of 2021, the gross profit margin of Hongjiu fruit brand fruits can still reach 16.3%, which is 2.2% higher than that of non-brand fruits.
Hong Jiu Guo also has its hidden worries. The risk warning of the prospectus shows that the price fluctuations and quality changes of fruits purchased from upstream suppliers will have a material adverse impact on the profitability and operating performance of the company. On the one hand, the purchase price of Hongjiu fruit is affected by suppliers, because many suppliers are located outside China, and factors such as customs clearance procedures, foreign policies, and supplier quality control of imported fruits may have an impact on the company's profitability.
In addition, Hongjiu Fruit is a typical family business, as of the date of signing of the prospectus, Deng Hongjiu, his spouse Jiang Zongying, his children Deng Haoyu and Deng Haoji, as well as the employee shareholding platform Chongqing Hezhong and Chongqing Heli collectively held 46.06% of the company's voting rights, as the company's controlling shareholders.