“Investor Network” Zhang Wei

Another new domestically produced tea is planning to go public in Hong Kong.

On February 14, Western Valentine's Day, the 5th day of the Chinese Lunar New Year, the New Year is in full swing. Shanghai Aunt (Shanghai) Industrial Co., Ltd. (hereinafter referred to as “Shanghai Aunt”) disclosed a prospectus and plans to be listed on the Hong Kong Stock Exchange.

According to the prospectus, Aunt Shanghai plans to raise capital for purposes such as improving digital capabilities, developing products and equipment, strengthening supply chain capabilities, and enhancing the brand for further expansion, marketing activities, and supplementing liquidity.

According to public information, only Nai Xue's tea (02150.HK) is currently listed in Hong Kong as a new domestic tea brand. Since 2023, Chabaidao, Gu Ming, and Michelle Ice City have successively disclosed prospectus for listing in Hong Kong. Who can become the “second stock” of the new tea after Nai Xue's tea is worth paying attention to.

99% of 7,000 stores are franchisees

According to Baidu Encyclopedia, Aunt Shanghai applied for trademark registration in 2013 and opened her first store in People's Square in Shanghai in July of the same year. The first month's turnover of a single store exceeded 400,000 yuan (RMB, same below). Having tasted the sweetness, the Shanghai aunt immediately replicated her business to places such as Wuxi, Jiangyin, Changzhou, Zhenjiang, and Yangzhou through investment promotion.

By the end of 2015, the number of Aunt's stores in Shanghai had exceeded 200. According to reports, Auntie Shanghai mainly sold whole grain milk tea in the early days. This is a milk tea with grains as an ingredient, suitable for northern consumers to drink hot in winter. Auntie Shanghai also used this to open up the Northern Market.

In 2019, Aunt Shanghai began providing fresh fruit tea and gradually opened the Southern Market. According to the prospectus, as of the third quarter of 2023, the number of Aunt's stores in Shanghai reached 7,297. However, Aunt Shanghai has only 52 self-operated stores; the remaining 7,245 are members, and the number of franchised stores accounts for 99.3% of her total number of stores.

In fact, the business model of “harvesting” franchisees like Auntie Shanghai is common in the new tea drinking industry, and has even become an industry practice.

According to the prospectus submitted by Michelle Bingcheng to A-share in 2022, from 2019 to 2021, the revenue from products sold by franchisees accounted for 95%, 96%, and 95% of its main revenue, respectively. According to the prospectus submitted by Michelle Bingcheng to the Hong Kong Stock Exchange in January of this year, in the first nine months of 2023, Michelle Ice City's revenue from products sold by franchisees was 14.5 billion yuan, accounting for 94% of its main revenue.

Also in January of this year, Gu Ming disclosed a prospectus showing that in the first nine months of 2023, Gu Ming's revenue from products sold to franchisees was 4.2 billion yuan, accounting for about 75% of its main revenue. Tea Baidao, which submitted a statement to the Hong Kong Stock Exchange in August 2023, also stated that sales of goods and equipment to franchisees were the company's core revenue source, and this revenue accounted for 93% to 95% of the company's main revenue during the reporting period.

Aunt Shanghai's income structure is similar to that of the company mentioned above. According to financial data, in the first nine months of 2021 to 2023, revenue from franchisees was 1,557 billion yuan, 2,072 billion yuan, and 2,436 billion yuan respectively, accounting for 95%, 94% and 96% of Shanghai Auntie's main revenue, respectively.

According to reports, the products sold by Aunt Shanghai to franchisees include foodstuffs and other raw materials, equipment, and franchise services. Among them, ingredients and other raw materials and equipment account for more than 75% of total revenue. Aunt Shanghai stated in her prospectus, “We have adopted a business model focusing on franchising. The vast majority of our revenue comes from franchise business, which mainly includes sales of goods and franchise services.”

Revenue and net profit are not as good as peers

Although they all earn money from franchisees, there is still a gap in the revenue and profitability of Shanghai aunts compared to their peers.

According to the prospectus, in 2022 and the first nine months of 2023, Shanghai Aunt's revenue was 2.2 billion yuan and 2,535 billion yuan, respectively; net profit was 149 million yuan and 324 million yuan, respectively. According to the prospectus for the Hong Kong IPO, in 2022 and the first nine months of 2023, Michelle Ice City's revenue was 13.6 billion yuan and 15.4 billion yuan, respectively, and net profit was 2 billion yuan and 2.5 billion yuan, respectively.

Let's take another look at Ancient Tea and Tea Baidao. In 2022 and the first nine months of 2023, Gu Ming's revenue was 5.56 billion yuan and 5.57 billion yuan respectively; net profit was 370 million yuan and 1 billion yuan, respectively. Tea Baidao's revenue in 2021 and 2022 was $3,644 million and $4.232 billion, respectively; net profit was 779 million yuan and 965 million yuan, respectively.

As can be seen, regardless of revenue or net profit, Shanghai Aunt and Michelle Ice City are currently not an order of magnitude. Compared with ancient tea and Baidao tea, Shanghai aunts also have a big gap.

Let's also take a look at the number of stores. As of the end of September 2023, there were more than 32,000 stores in Michelle Ice City, and the number of Guming stores during the same period was 8,578. As of August 8, 2023, the number of Chabaidao stores also exceeded 7,000. Some opinions point out that in a situation where the business is all over the country, the number of franchisees has become the basic competition for various new tea brands, and those who win franchisees win the world.

Judging from the disclosed financial data, the new tea industry has formed a competitive pattern dominated by Nai Xue's Tea (already listed), Gu Ming, Tea Baidao, and Shanghai Aunt (currently in IPO). Furthermore, there are rumors that brands such as Hi Cha and Bawang Chahime may have IPOs.

It is worth noting that after applying for listing in Hong Kong on January 2, Michelle Ice City and Gu Ming attracted the attention of the Securities Regulatory Commission. On January 19 and 26, the Securities Regulatory Commission issued the “Requirements for Supplementary Materials for the Filing of Overseas Issuance and Listing” documents for Michelle Bingcheng and Gu Ming, requesting the two companies to further explain “whether there are situations where user information is provided to third parties and arrangements or measures for personal information protection and data security before and after listing”.

Attorney Wang Rengen, director of Sichuan Fenyu Law Firm, believes that currently the number of registered members of leading companies in the new tea drinking industry is over 10 million. How can overseas listed companies protect the personal information of registered members and ensure the security of relevant data may become the focus of future supervision.

Attorney Wang Rengen also mentioned that if an IPO company does not promptly respond to the supplementary materials requested by the Securities Regulatory Commission, it will be considered a problem and may have an impact on the listing process. Currently, Aunt Shanghai has not received any requests for additional materials. It remains to be seen whether related matters will have an impact on Aunt Shanghai's listing. (Produced by Thinking Finance) ■