New stock research report | Xiao Caiyuan (00999) starts IPO today, one of the direct-operated chain restaurants in the Chinese mass-market convenience Chinese catering market.

Xiaocaiyuan (00999) is a well-known Chinese mass-market oriented chain of Chinese-style convenience dining restaurants, established in 2013. IPO Date: December 12th to 17th Listing Date: December 20th Joint Sponsors: Huatai International, UBS Group Receiving Bank: CMB Wing Lung Bank Approximately 101 million shares will be issued, with around 90% allocated, around 10% publicly offered, and an additional 15% of over-allotment options. If the public offering is subscribed to at least 15 times but less than 50 times, the public offering proportion will increase from 10% to 30%. If it is subscribed to at least 50 times but less than 100 times, it will increase to 40%. If subscribed to 100 times or more, it will increase to 50%. However, if the allocation is undersubscribed while the public offering is fully subscribed, or both are fully subscribed but the public offering is subscribed to less than 15 times, the public offering proportion can increase to a maximum of 20%, but a lower limit is required for pricing. The IPO price per share is HK$8.5, raising up to approximately HK$8.6 billion, accounting for approximately 8.6% of the total market value, with listing costs of approximately HK$76 million. Based on 800 shares per board lot, the entrance fee is HK$6,868.57. Based on the maximum price of HK$8.5, the market value is approximately HK$10 billion (calculated based on adjusted net profit of approximately RMB 545 million for 2023, with a P/E ratio of approximately 16.9 times). As of the end of August 2024, the average net asset value is approximately RMB 812 million. The public offering is divided into Class A (up to 5 million applicants) and Class B (over 5 million applicants). Business: Revenue for the years 2021 to 2023 were RMB 26.4 billion, RMB 32.1 billion, and RMB 45.4 billion, with revenue for the first eight months of 2024 reaching RMB 35.4 billion. Net profit for the years 2021 to 2023 were RMB 2.27 billion, RMB 2.37 billion, and RMB 5.32 billion, with net profit for the first eight months of 2024 at RMB 4 billion. Adjusted net profit for the years 2021 to 2023 were RMB 2.33 billion, RMB 2.37 billion, and RMB 5.45 billion, with adjusted net profit for the first eight months of 2024 at RMB 3.92 billion (excluding one-time factors such as listing expenses, convertible bonds, and fair value changes of derivative financial instruments). Since its establishment in 2013, the company has been committed to providing consumers with affordable home-cooked dishes and thoughtful service. The company has positioned "Xiaocaiyuan" as a well-recognized "family kitchen" for Chinese people. Currently, the company has 663 operating directly operated stores, covering 146 cities or counties in 14 provinces in China. Currently, the company's main store operating area is in the East China region. In terms of store revenue in 2023, "Xiaocaiyuan" ranks first among all brands in the Chinese mass-market oriented Chinese-style dining market, with an average spending of RMB 50 to 100, accounting for 0.2% of the market share. Based on revenue, the market size of Chinese-style dining in the mass-market oriented Chinese-style dining market with an average spending of RMB 50 to 100 in 2023 was RMB 2,252.9 billion, accounting for 55.2% of the overall Chinese-style dining market. The company provides consumers with affordable home-cooked dishes and thoughtful services. For every consumer who walks into a "Xiaocaiyuan" store, the company promises "free delivery of dishes that exceed the promised time (within 25 minutes)", "unconditional return or exchange if dissatisfied with the dishes", and "ensure the quality of ingredients, ten times compensation for any problems". Approximately 40% of the funds raised will be used to continue expanding the store network and increase market penetration; approximately 37% will be used to enhance supply chain capabilities; approximately 13% will be used to upgrade intelligent equipment and digital systems to enhance information technology capabilities; and approximately 10% will be used for operating funds and general corporate purposes. Pre-IPO Financing: From February 2023 to February 2024, the company privately sold equity to a third party, Mr. Song, at a discount of approximately 21.1% to a premium of 18.47% compared to the IPO price, with a six-month lock-up period. Main Shareholder Structure Post Listing: Founder Mr. Wang Shugao and persons acting in concert hold 85% of the shares Early investor Mr. Song holds 6.4% of the shares Other public shareholders hold 8.6% of the shares Comment: Xiaocaiyuan is one of the well-known chain of direct-operated Chinese-style convenience dining restaurants in the Chinese mass-market, established in 2013. Based on the maximum price of HK$8.5, the market value is approximately HK$10 billion, with an adjusted net profit of approximately RMB 5.45 billion for 2023, resulting in a P/E ratio of approximately 16.9 times. This article was contributed by "Guotai Junan Securities", authored by analyst Chen Bohao; edited by GMTEight: Chen Wenfang.