New Stock News | Xiaocaiyuan Submits Application to Hong Kong Stock Exchange Again to Operate Direct-Operated Chain Restaurants in China's Popular Casual Chinese Food Market

According to the disclosure made by the Hong Kong Stock Exchange on July 16th, Xiao Caiyuan International Holdings Limited (referred to as Xiao Caiyuan) has submitted an application for listing on the main board of the Hong Kong Stock Exchange, with Huatai International and UBS Group as its joint sponsors. It is reported that the company had previously submitted a listing application to the Hong Kong Stock Exchange on January 16th. The prospectus previously submitted disclosed that Xiao Caiyuan is one of the well-known Chinese popular casual dining market direct chain restaurants, ranking among the top in the industry in terms of business scale and growth rate. According to Frost & Sullivan data, the Chinese popular casual dining market is a sub-segment of the Chinese dining market with an average customer spending below RMB 100. As of the latest feasible date, Xiao Caiyuan has 623 operating direct stores, covering 135 cities or counties in 13 provinces in China. Currently, its main store operations are located in the eastern region of China, with store networks expanded to other regions in China. According to Frost & Sullivan data, in terms of store revenue in 2023, Xiao Caiyuan ranks first among all brands in the Chinese popular casual dining market, with an average customer spending ranging from RMB 50 to RMB 100, accounting for 0.2% of the market share. In terms of revenue, the size of the Chinese popular casual dining market with an average customer spending between RMB 50 to RMB 100 in 2023 is RMB 2,252.9 billion, accounting for approximately 55.2% of the overall Chinese dining market. In terms of finances, the company's revenue in 2021, 2022, and 2023 was RMB 2.646 billion, RMB 3.213 billion, and RMB 4.549 billion respectively. During the same period, the company's annual profit was RMB 227 million, RMB 238 million, and RMB 532 million respectively. As of the four months ending on April 30, 2024, compared to the same period in 2023, Xiao Caiyuan has shown stable expansion and growth in store network, revenue, and net profit, with a relatively stable net profit margin of 11.5%. As of the four months ending on April 30, 2024, the company opened 62 new stores, with revenue and net profit of approximately RMB 1.68 billion and RMB 193.9 million respectively. As of the four months ending on April 30, 2024, compared to the same period in 2023, the same-store sales and store-level operating profit margin of Xiao Caiyuan have decreased. This is mainly due to (i) the base effect caused by the rapid increase in consumer spending in the Chinese dining market in the first few months of 2023 as the epidemic gradually disappeared, consistent with trends in other consumption sectors, (ii) adjustments to menu prices to cater to consumer preferences and demonstrate a long-term commitment to providing customers with a high-value experience, and (iii) as of April 30, 2024, most of the new Xiao Caiyuan stores opened in the four months ending on April 30, 2024 are still in the initial stage of development. The prospectus specifically warns that the intense competition in the Chinese dining industry may hinder Xiao Caiyuan's ability to improve or maintain revenue and profitability. Competition in the Chinese dining industry is fierce in terms of food quality and consistency, taste, pricing, ambiance, service, location, quality ingredients supply, and employees. According to Frost & Sullivan data, the Chinese popular casual dining market is highly fragmented, and participants in this market face intense competition. In 2023, the market size of the Chinese popular casual dining market in terms of revenue was RMB 3,618.7 billion, while the revenue of the top five brands in the Chinese popular casual dining market ranged from RMB 2 billion to RMB 4.5 billion. Stores of Xiao Caiyuan everywhere face strong competition from various local stores and regional and international chain stores. The company's competitors also provide dining and delivery services. Some competitors have a long history of operation, stronger financial, marketing, talent, and other resources compared to the company, and many competitors have long-standing store operations in the markets where Xiao Caiyuan has stores or intends to open new stores. In addition, other companies may develop similar operational concepts and open new stores targeting the same customer group, leading to increased competition. If Xiao Caiyuan fails to successfully compete with other restaurants in the market, its ability to improve or maintain revenue and profitability may be hindered, leading to loss of market share, which could significantly negatively impact its business, financial condition, operational performance, or cash flow. Xiao Caiyuan may also need to improve or refine elements of its store network, develop its concepts, and compete with emerging popular new restaurant styles or concepts. Xiao Caiyuan stated in the prospectus that it cannot guarantee the successful execution of such improvements or that such improvements will benefit the company as expected, or may not benefit the company at all.