The Capital Conundrum of Dongpeng Beverage: Distributing ¥5.4 Billion in Profits While Raising Capital in Hong Kong with Over ¥10 Billion Cash on Hand | IPO Watch

Dongpeng Beverage (Group) Co., Ltd. (“Dongpeng Beverage”) recently filed a prospectus for a proposed initial public offering on the Hong Kong Stock Exchange. The company’s financial profile and fundraising rationale have attracted scrutiny because Dongpeng’s revenue is heavily concentrated in energy drinks—at least 70% of annual sales derive from that category—yet the business has delivered sustained top‑line and profit growth throughout the reporting period.

Dongpeng’s business mix is dominated by energy drinks, supplemented by sports beverages and other drink lines. During the reporting period covering 2022–2024 and January–June 2025, energy drink sales amounted to ¥8,221 million, ¥10,354 million, ¥13,303 million and ¥8,361 million, representing 96.6%, 91.9%, 84.0% and 77.9% of total revenue in the respective periods. Supported by this core category, the company reported revenue of ¥8,500 million, ¥11,257 million, ¥15,830 million and ¥10,732 million, and net profit of ¥1,441 million, ¥2,040 million, ¥3,326 million and ¥2,375 million across the same intervals. From 2022 to 2024, compound annual growth rates for revenue and net profit were 36.47% and 51.92% respectively. Frost & Sullivan data cited in the prospectus indicate that Dongpeng has ranked first in China’s functional beverage market by sales volume since 2021, attaining a 26.3% share in 2024 and holding a 23.0% share by retail value.

Despite robust operating performance, the company’s capital deployment choices have prompted questions. Dividend distributions during the reporting period totaled ¥5,400 million—¥800 million, ¥1,000 million, ¥2,300 million and ¥1,300 million in each reporting year—equivalent to 58.81% of cumulative net profit of ¥9,182 million. Concurrently, Dongpeng is pursuing a Hong Kong listing to raise funds for capacity expansion, supply‑chain upgrades, brand building, channel network expansion, overseas market development and working capital replenishment. The juxtaposition of sizeable shareholder payouts and a near‑term equity fundraising initiative has drawn market attention and debate over the necessity of external financing.

The company’s cash position and operating cash generation underscore the perceived tension. At year‑end 2022, 2023 and 2024 and as of June 30, 2025, term deposits, restricted bank deposits, cash and cash equivalents aggregated to ¥2,918 million, ¥6,167 million, ¥6,026 million and ¥6,936 million respectively, reflecting a sustained cash‑asset base above ¥6,000 million since 2023. When financial assets measured at fair value through profit or loss—primarily wealth‑management products—are included (¥3,642 million, ¥1,548 million, ¥4,897 million and ¥3,913 million in the same periods), available “cash‑like” assets exceeded ¥10,000 million in 2024 and in the first half of 2025. Operating cash flow performance reinforced self‑funding capacity: net cash inflows from operating activities were ¥2,026 million, ¥3,281 million, ¥5,789 million and ¥1,740 million across the reporting intervals, cumulating ¥12,836 million over three and a half years.

Management articulates several rationales for pursuing a Hong Kong IPO despite substantial liquidity, including optimizing the financial structure to ease dual pressures of high deposits and loans, reducing interest costs, facilitating overseas expansion via dual‑currency financing, and enhancing the company’s international profile. Nevertheless, against the backdrop of more than ¥10 billion in cash‑like assets and consistent operating cash generation, the proposal to raise additional working capital through equity issuance has left some market participants unconvinced of its immediate necessity.

The prospectus highlights both Dongpeng’s concentrated product exposure and its leadership position in China’s functional beverage sector, while revealing a capital strategy that combines aggressive shareholder returns with a plan to access public capital markets in Hong Kong. Observers will likely scrutinize how proceeds are allocated and whether the proposed use of funds materially advances the company’s strategic objectives given its existing liquidity and internal cash‑generation capabilities. (Reported by Company Watch | Author: Deng Haotian | Editor: Cao Shengyuan)