---
title: "New Hope Dairy's IPO 'Return', Can the Former Richest Man Reshape the Dairy Industry?"
description: "On April 27, New Hope Dairy Co., Ltd. updated its prospectus on the CSRC website, planning to issue 85.3711 million shares on the Shenzhen Stock Exchange, accounting for 10% of the total shares after issuance. This is New Hope Dairy's second attempt at an IPO. As a dairy company under former Chinese richest man Liu Yonghao, it carries his ambitions for the dairy industry."
author: "中食财经"
publisher: "New Distribution"
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published: "2018-05-05"
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# New Hope Dairy's IPO 'Return', Can the Former Richest Man Reshape the Dairy Industry?

> On April 27, New Hope Dairy Co., Ltd. updated its prospectus on the CSRC website, planning to issue 85.3711 million shares on the Shenzhen Stock Exchange, accounting for 10% of the total shares after issuance. This is New Hope Dairy's second attempt at an IPO. As a dairy company under former Chinese richest man Liu Yonghao, it carries his ambitions for the dairy industry.

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On April 27, New Hope Dairy Co., Ltd. (hereinafter referred to as New Hope Dairy) updated its prospectus on the CSRC website, planning to issue 85.3711 million shares on the Shenzhen Stock Exchange, accounting for 10% of the total shares after issuance.
This is New Hope Dairy's second attempt at an IPO. As a dairy company under former Chinese richest man Liu Yonghao, New Hope Dairy carries Liu Yonghao's plans and vision for the dairy industry. Once the IPO succeeds, what impact will it have on the dairy industry, and can it reshape the dairy landscape?
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**Optimistic about the dairy sector, once planned to list in Hong Kong**
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New Hope Group, which started in the agricultural sector, is highly optimistic about the prospects of the dairy industry. In 2001, Liu Yonghao considered entering the dairy industry.
On July 5, 2006, New Hope Dairy was established, mainly engaged in the operation of milk and dairy products, beverages, and frozen foods. Through mergers and acquisitions, alliances, and integration of regional dairy enterprises, the company quickly laid out more than 10 dairy production enterprises nationwide. Currently, it has established 15 dairy factories across the country, including the largest low-temperature production base in the southwest, the Pidu factory, and the most intelligent low-temperature factory in the Beijing-Tianjin-Hebei region, Mancheng factory, with 12 self-owned milk source bases. It has also established a high-quality dairy industry chain centered on the "Fresh Strategy", a traceable milk system, urban experience factories, and a complete and efficient logistics team, achieving the structural construction of a "1+N" national fleet of regional dairy enterprises.
New Hope Dairy had hoped to enter the capital market early on. In 2015, New Hope Dairy initially planned to list on the Hong Kong Stock Exchange and set up a red-chip structure for this purpose. However, in February 2016, New Hope Dairy stated that due to development needs, the company voluntarily abandoned its overseas listing plan.
On September 29, 2017, New Hope Dairy's IPO application was accepted by the CSRC, and New Hope Dairy Co., Ltd. issued its initial public offering prospectus, marking its first attempt at the A-share market. The first IPO planned to raise 504 million yuan, mainly for the relocation and expansion of Anhui New Hope Baidi Dairy Co., Ltd., marketing network construction and brand promotion, R&D center construction, and enterprise informatization construction projects.
Currently, New Hope Dairy's subsidiaries include Sichuan New Hope Huaxi Dairy, Xichang Sanmu, Yunnan Kunming Xuelan, Yunnan Diequan, Kunming Haizi, Qicaiyun, East China Hangzhou Shuangfeng, Anhui Baidi, Suzhou Shuangxi, North China Hebei Tianxiang, Qingdao Qinpai, Asahi Dairy, and Hunan Nanshan in Hunan. The company has relatively large sales revenue in provinces such as Sichuan, Yunnan, Hebei, and Zhejiang, with strong regional competitive advantages. Its prospectus shows that in 2016, New Hope Dairy's revenue reached 4.053 billion yuan, and net profit reached 146 million yuan.
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**M&A and high debt: New Hope's pain points**
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At the beginning of its entry into the dairy industry, New Hope established the development principle of "M&A + leverage", which determined that while developing rapidly, the company's debt ratio was relatively high.
From 2002 to 2008, New Hope successively acquired more than 10 local dairy enterprises, including Sichuan Huaxi Dairy, Sichuan Yangping Dairy, Anhui Baidi Dairy, Changchun Miaomiao Soy Milk Group, Hebei Tianxiang Dairy, Hangzhou Shuangfeng Dairy, Hangzhou Meilijian Dairy, Qingdao Qinpai Dairy, Yunnan Diequan, and Xuelan Dairy.
Since 2015, New Hope Dairy has completed the acquisition of regional dairy enterprises such as Suzhou Shuangxi, Hunan Nanshan, and Xichang Sanmu, basically determining its market layout.
During the M&A process, New Hope encountered the challenge of integration. As a private company, New Hope has its own unique corporate culture and operating model, while the acquired dairy enterprises were mostly state-owned. The two systems and mechanisms often "collide", and the enterprises go through a painful "running-in period".
Public data shows that starting from 2006, New Hope Dairy continued to incur losses. In 2008 and 2009, New Hope Dairy's revenue was about 1.4 billion and 1.5 billion yuan, but net profit was -18.22 million and 4.25 million yuan, and in the first half of 2010, it also lost 20.01 million yuan. In 2011, New Hope Group spun off New Hope Dairy from the listed company. Starting in 2015, the company carried out a series of asset transfers and integrations, including divesting loss-making assets and re-injecting assets. After a series of restructuring and integration, New Hope Dairy's performance improved significantly. In the first half of 2017, New Hope Dairy's revenue and net profit were 2.085 billion yuan and 95.927 million yuan, respectively.
Due to the M&A model, high debt is another "pain point" for New Hope Dairy. In 2015, 2016, and the first half of 2017, New Hope Dairy's debt ratio was as high as 66.09%, 76.01%, and 72.42%. Among the 10 A-share dairy listed companies, the highest debt ratio in the 2017 interim report was Bright Dairy, at 60.16%. As of June 30, 2017, New Hope Dairy's consolidated debt-to-asset ratio was 72.42%, more than 6 percentage points higher than Bright Dairy.
In response, New Hope Dairy stated that the persistently high debt-to-asset ratio affects the company's financial security. If bank loans shrink or the country adopts a tight monetary policy, and the company cannot obtain bank loans in time, it may have a significant impact on the company's capital turnover.
**"**
**Listing on the capital market: the former richest man may reshape the dairy landscape**
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From New Hope Dairy's prospectus, it can be seen that in 2017, revenue was 4.422 billion yuan, net profit was 216 million yuan, and gross margin was 34.72%.
In terms of sales scale, New Hope Dairy is not as large as the three national dairy enterprises Yili, Mengniu, and Bright Dairy, but it surpasses regional dairy enterprises such as Kedi Dairy, Yantang Dairy, and Tianrun Dairy, ranking among the top regional dairy enterprises.
(All images are from the internet)
In terms of market positioning and marketing strategy, New Hope's brand appeals to "freshness" and plans and lays out accordingly.
New Hope Dairy's criteria for selecting M&A enterprises are generally dairy enterprises around cities. In recent years, New Hope Dairy has vigorously promoted the "Fresh Layout" - controlling pastures, factories, and markets within a "fresh radius" of 150 kilometers around cities, and building a full cold chain guarantee system to ensure seamless connection from "pasture to table". The core of the brand is "freshness", and the most important dimension of freshness is attracting "fresh" young consumers.
In terms of products, New Hope focuses on the low-temperature milk series. From 2014 to the end of June 2017, the proportion of low-temperature milk product sales to total sales continued to increase, from 40.74% to 57.97%, gradually establishing its dominant position among the company's product categories. Correspondingly, from 2014 to 2016, the company's room-temperature milk product sales revenue gradually decreased from 1.916 billion yuan to 1.683 billion yuan. The company hopes to quickly gain market recognition by creating categories such as "24-hour pasteurized fresh milk", "Huorun yogurt series", and "City Memory series yogurt", seizing the market opportunity of consumption upgrading and developing high-quality products.
It should be said that New Hope's strategy has achieved results, and its low-temperature milk series has become one of the fastest-growing product series in the market in recent years.
But it must also be noted that competition in the domestic dairy market is transitioning from room-temperature milk to low-temperature milk. Leading brands such as Yili and Mengniu have increased market investment and product development efforts in low-temperature dairy products. For regional dairy enterprises, the market window is about the next three years. Once they directly collide with the giants, the prospects are unpredictable.
At the same time, New Hope Dairy does not have a significant scale advantage, and its sales expenses are relatively high. In 2016, its costs and sales expenses each increased by about 70 million yuan, resulting in a year-on-year profit decrease of about 150 million yuan.
In addition, low-temperature dairy products require cold chain preservation from production, factory exit, transportation to shelf storage. If the company suffers product quality or food safety issues due to personnel operational negligence, it may cause various losses to the company, thereby having a significant adverse impact on market sales and operating performance.
Therefore, even if New Hope Dairy successfully completes its IPO, it is still difficult to change the current dairy industry pattern, and future trends need further observation.
Source: Zhongshi Finance (ID: ZSCJ-360)
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