Mainland food company Dali Foods Group began trading on the Main Board of the Hong Kong Stock Exchange today (November 20). According to the offering results, the issue price was set at HK$5.25 per share, with net proceeds of HK$8.646 billion. The stock broke its issue price on debut, closing at HK$5.04, down 3.81%, with turnover of HK$516 million.

Dali Foods Group is controlled by Xu Shihui and his family, with private equity fund CDH Investments holding a 3% stake. In the recently released 2015 Hurun China Rich List, the Xu Shihui family ranked 262nd with assets of HK$11.5 billion. After the listing, the Xu Shihui family still holds absolute control, owning 85% of Dali Foods post-IPO. Based on the issue price of HK$5.25 per share, the market value is as high as HK$73.491 billion. (China Want Want's current market value is approximately HK$80 billion)

According to Dali Foods' data, its annual revenue in 2014 was RMB 14.9 billion, with net profit of RMB 2.1 billion. From January to September this year, Dali Foods' operating revenue reached RMB 12.847 billion, a year-on-year increase of 14.1%. Dali Foods has a well-balanced portfolio, with six major segments: pastries, potato-based puffed snacks, biscuits, herbal tea, compound protein drinks, and functional beverages. The prospectus shows that from 2012 to 2014, Dali Foods' revenue was RMB 10.8 billion, RMB 12.8 billion, and RMB 14.9 billion, respectively. According to the announcement, the funds raised by Dali Foods will be mainly used for developing new products, expanding and improving production capacity, strengthening sales and promotion, and reserving for future mergers and acquisitions.

The listing of Dali Foods may bring more development opportunities for Heqizheng, but Zhu Danpeng denied this. "For Dali Foods, Heqizheng contributes the second-highest revenue, but its revenue share is also shrinking. Dali Foods has other categories it is better at, such as baked goods and potato chips. Therefore, the listing is more about Dali Foods moving towards standardization and transparency, rather than giving a significant boost to a single category."

Zhu Danpeng further analyzed that as competition among herbal tea companies intensifies in the future, the ideal state for Heqizheng is to maintain its position as the industry's third player. "After all, the gap between Heqizheng and Wanglaoji is still large. Wanglaoji not only has strong brand influence but also strong operational capabilities, so it is highly unlikely for Heqizheng to catch up with these two. For Heqizheng, which far surpasses the fourth player, maintaining the third position is also easy. Therefore, the herbal tea industry landscape will not be disrupted by Heqizheng's listing, but the entire industry will become more transparent in data as a result of Heqizheng's listing."

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