---
title: "The \"Dog Food Economy\" Is Red Hot, and New Third Board Pet Companies Are Rushing to IPO One After Another!"
description: "On July 28, Zhongchong Pet Foods, a pet food company, received IPO approval from the CSRC and is expected to list soon, following the successful A-share listing of Peidi Pet Foods, dubbed the \"first dog food stock.\" Peidi is also the fifth New Third Board company to successfully transfer to the main board in 2017, with Tianyuan Pet and Yiyi Co. also planning IPOs. Behind this wave is the booming pet economy."
author: "吴志"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-08-01"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/mwEJtPL7FX2F4ysnRtXizA"
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---

# The "Dog Food Economy" Is Red Hot, and New Third Board Pet Companies Are Rushing to IPO One After Another!

> On July 28, Zhongchong Pet Foods, a pet food company, received IPO approval from the CSRC and is expected to list soon, following the successful A-share listing of Peidi Pet Foods, dubbed the "first dog food stock." Peidi is also the fifth New Third Board company to successfully transfer to the main board in 2017, with Tianyuan Pet and Yiyi Co. also planning IPOs. Behind this wave is the booming pet economy.

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On July 28, Zhongchong Pet Foods, whose main business is pet food, received IPO approval from the CSRC and is expected to list soon. This is another pet company to go public after Peidi Pet Foods, jokingly called the "first dog food stock," successfully listed on the A-share market.
Peidi Pet Foods has another identity—it is the fifth New Third Board company to successfully "transfer board" in 2017. Following Peidi, two other New Third Board companies, Tianyuan Pet and Yiyi Co., are also planning IPOs. Behind the successive rush of pet stocks to the A-share market is the hot pet economy.
Pet companies are flocking to list
As early as September 2010, Ringpu Biology, known as the "first pet industry stock," listed on the Shenzhen Stock Exchange. Ringpu mainly engages in the R&D, production, and sales of veterinary biological products and preparations.
Peidi Pet Foods, which recently listed, focuses on the R&D, production, and sales of pet food. On April 23, 2015, Peidi was listed on the New Third Board. In November of that year, Peidi began receiving listing guidance from Essence Securities, aiming for the A-share market. On May 10 this year, Peidi's IPO application was approved, making it the first pet food company on the A-share market.
Two months later, Zhongchong Pet Foods, also engaged in pet food production, successfully passed its IPO review on July 18.
**Besides Peidi and Zhongchong, which have already listed, there is still a strong pipeline of pet stocks planning to list on the A-share market.**
Forum Jun noted that on October 20, 2015, Jiangsu Zhongheng Pet Products Co., Ltd. submitted guidance materials to the Jiangsu Securities Regulatory Bureau, starting its listing process; Shanghai Bridge Pet Products Co., Ltd. signed a guidance agreement with CICC in November 2016 and is currently in the listing guidance stage.
On the New Third Board, including Tianyuan Pet, which recently delisted, there are a total of 7 companies whose main business involves the pet industry. Among them, Tianyuan Pet began receiving listing guidance from Haitong Securities in January this year and is now in the IPO queue.
On July 11, another New Third Board pet company, Yiyi Co., submitted filing materials for guidance to the Tianjin Securities Regulatory Bureau and is currently under the guidance of Huarong Securities. This means that since the beginning of this year, three New Third Board pet companies have either successfully or are planning to go public.
In addition, other New Third Board pet companies have also shown strong interest in IPOs. Kou Xinggang, board secretary of Lusi Shares, told Forum Jun in an interview that the company is currently listed on the New Third Board and plans to transfer to the main board in the future when conditions are ripe.
Most pet companies doubled their performance in 2016
In 2017, the capital market saw a big explosion of pet companies, which is not accidental. Forum Jun's statistics show that **in recent years, many pet companies have experienced rapid performance growth.**
For example, Peidi Pet Foods' net profit in 2016 was 80.36 million yuan, a year-on-year increase of 38%; its 2015 net profit was 58.21 million yuan, a year-on-year increase of 106%. Zhongchong Pet Foods achieved a net profit of 74.57 million yuan in 2016, a year-on-year increase of 34%; in 2015, its net profit was 55.68 million yuan, a year-on-year increase of 379%.
**The performance growth of related New Third Board companies is equally impressive, with many achieving growth rates exceeding 100% in 2016.**
For instance, Yiyi Co. achieved a net profit of 40.95 million yuan in 2016, a year-on-year increase of 109%; Lusi Shares achieved a net profit of 22.35 million yuan, a year-on-year increase of 305%; Huahang Shares, Youpai Technology, and Mingwang Rubber & Plastic, three pet companies, all saw net profit increases of over 100%.
Partial financial data of some pet companies in 2016
From the companies' own analysis, the reasons for growth vary slightly across different segments.
Lusi Shares and Huahang Shares mainly produce pet food. In 2016, the significant performance growth of both companies was related to lower raw material prices. Lusi Shares' annual report pointed out that at the beginning of 2016, the company had sufficient raw material inventory at lower average prices, and during the reporting period, raw material prices rose, increasing market prices and boosting profits.
Youpai Technology and Yiyi Co. are both producers of pet hygiene products. Youpai Technology stated that its rapid performance growth in 2016 was mainly due to the market's positive reception of new products, increased orders, and higher gross margins on new products, leading to a substantial increase in net profit.
Yiyi Co. attributed its high-speed growth to good production cost control and good customer relationships, with product sales gross margins steadily rising.
Domestic market potential is huge
Currently, New Third Board pet companies are mainly concentrated in three segments: pet medical care, pet food (snacks), and pet supplies (hygiene products). Against the backdrop of gradually improving living standards, the number of pets in China is rising, and the pet industry has enormous market potential.
At present, China's pet ownership rate still lags far behind developed countries. In 2015, the number of registered pets nationwide reached 100 million, but the proportion of urban households owning dogs was 7.5% in Beijing, 4.5% in Shanghai, and only 1.7% nationwide. In contrast, 55% of households in the United States own pets, and Japan's ratio is also 29%.
Huahang Shares' annual report pointed out that **China's pet population is far from saturation. In the future, as the number of pets continues to grow, pet food consumption will further increase, and the pet food industry will usher in significant growth opportunities.**
Lusi Shares holds the same view, believing that with the continuous improvement of domestic residents' living standards and the gradual reduction in family size, more and more families will start raising pets, bringing huge business opportunities to pet-related production and service industries.
Kou Xinggang told Forum Jun that **the domestic pet food industry entered a period of rapid growth in 2012, and it is expected to maintain a growth rate of 20%-30% over the next five years. This growth expectation has basically become a consensus in the pet industry.**
According to the "2016 China Pet Industry White Paper" jointly released by the Youchong Research Institute and the China Pet Industry Alliance, **in 2016, the overall consumer spending in China's pet industry reached 122 billion yuan, and it is expected that by 2020, the pet market size will exceed 200 billion yuan. From 2017 to 2020, China's pet industry will maintain a high growth rate of 20.5% annually.**
Of course, it's not just pet food companies that benefit. A staff member from Ruipeng Shares, which engages in mid-to-high-end pet medical care, told Forum Jun that based on actual conditions, the domestic pet medical market is consistent with the overall development of the pet industry, maintaining rapid and steady growth. In the future, as public awareness of pet ownership strengthens and pet medical consumption in first-tier cities expands to second- and third-tier cities, there is expected to be more opportunities in the pet medical segment.
In countries with developed pet industries, pet services such as grooming, training, insurance, and funeral services also have huge markets. Currently, these areas in China have yet to be fully explored.
Industry upgrading is on the way
Compared with Western developed countries, China's pet industry started relatively late. As an emerging industry, the domestic pet industry inevitably faces some problems during its development, especially in the pet food sector.
A merchant in Linyi, Shandong, who wholesales dog food, told Forum Jun that **domestic pet food brands are numerous and mixed, mainly concentrated in the low-end segment, with weak competitiveness.** The merchant also said that in recent years, sales of domestically produced pet food have not improved significantly.
Currently, mid-to-high-end products in the domestic pet food market are mainly occupied by foreign products, such as Nestlé and Mars. Domestic companies are at a disadvantage in the pet food competition. According to Kou Xinggang, domestic companies started later than their foreign counterparts, have weaker management and brand influence, and high-end consumers tend to prefer foreign brands when choosing products.
Because of this, several domestic pet food companies mainly engage in OEM production, producing products for foreign clients and exporting them, with a low share of domestic sales. This has led to a situation where mid-to-high-end pet food is mainly imported, while domestic pet food companies mainly export.
In the pet supplies industry, similar problems exist. For example, pet hygiene products have low acceptance in China, and the market is developing slowly. Companies like Yiyi Co., which are major producers, have overseas sales accounting for over 90% of total sales. In this process, companies may face risks such as exchange rate fluctuations and policy changes.
In early 2013, some Chinese pet food companies saw a significant decline in revenue, mainly because the U.S. Food and Drug Administration (FDA) baselessly believed that multiple pet illnesses and deaths were related to the consumption of jerky treats made in China, leading to a year-on-year decline in China's pet food exports to the U.S. since then.
These issues are also of concern to the CSRC. From the cases of Peidi and Zhongchong, which passed their IPO reviews, the stability of overseas sales and policy reliability were key concerns of the issuance examination committee.
For example, Zhongchong was asked to explain the specific circumstances of non-tariff trade restrictions imposed by the U.S. on pet snack products from China, the impact of these measures on the pet food industry, and whether the EU, Japan, and other major countries would adopt similar measures.
**Fortunately, domestic pet companies have already identified these problems. In response to high reliance on overseas sales and weak independent brands, some New Third Board companies have formulated improvement plans, such as setting up overseas subsidiaries and increasing investment in independent brands. Some companies have already achieved certain results.**
**Source: New Third Board Forum (ID: zqsbxsb)**
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