【HK IPO】Green Tea Restaurant: Finally here after five attempts to list in Hong Kong!

I. Basic Information

1.1 Company Profile

$GREEN TEA GROUP(06831.HK), a well-known casual Chinese restaurant operator in mainland China, opened its first Green Tea Restaurant in Hangzhou in 2008. As of the latest practicable date, the restaurant network includes 493 outlets, covering 21 provinces, four municipalities, two autonomous regions in mainland China, and the Hong Kong Special Administrative Region.

1.2 IPO Information

II. Fundamental Analysis

2.1 Financial Data

Revenue: The company achieved revenues of RMB 2.375 billion, RMB 3.589 billion, and RMB 3.838 billion in 2022, 2023, and 2024, respectively, with a CAGR of 27.12%. According to the company's prospectus, the CAGR of the mainland catering market from 2020 to 2024 was around 9% (13.6% for chains and 7.7% for non-chains). At first glance, the company's growth seems rapid, but the YoY growth rate in 2024 was only 6.9%, even lower than the industry average.

Profit: The company's net profits in 2022, 2023, and 2024 were RMB 17 million, RMB 296 million, and RMB 350 million, respectively, with a CAGR of 353.74%. The seemingly explosive profit growth was mainly due to the low base in 2022. However, the net profit in 2024 grew by 18.2% YoY, higher than the revenue growth rate, indicating improved profitability.

2.2 Industry Development

The mainland catering market can be divided into chain and non-chain restaurants, with the market being highly fragmented and dominated by non-chain restaurants.

In 2024, chain restaurants accounted for only 23.3% of total restaurant revenue, compared to 59.2% in the U.S. and 52.3% in Japan, indicating significant growth potential.

From 2024 to 2029, the total revenue of chain restaurants in mainland China is expected to grow at a CAGR of 8.2%, higher than the 6.8% CAGR for non-chain restaurants.

2.3 Company Position

The casual Chinese restaurant market in mainland China is highly fragmented, with numerous players.

In 2024, the top five brands accounted for about 3.9% of the total revenue in the casual Chinese restaurant market. Green Tea brand restaurants generated RMB 3.8 billion in revenue, capturing a 0.7% market share, ranking fourth.

In terms of the number of restaurants, by the end of 2024, Green Tea Group had 465 outlets, ranking third among casual Chinese restaurant brands in mainland China.

III. Cornerstone Investors and Sponsors Analysis

Cornerstone Investors: The company has introduced eight cornerstone investors for this IPO, subscribing a total of HKD 672 million (USD 87.33 million). At the mid-point of the offering price range, their subscriptions account for 55.57% of the total shares issued. According to the agreement, the lock-up period for cornerstone investors is six months...

Sponsors: The sponsors for this IPO are Citigroup Global Markets Asia and CMB International. Historically, Citigroup Global Markets Asia's sponsored projects have a 25% probability of rising on the first day of trading, though it has sponsored few projects. CMB International's sponsored projects have a 66.66% probability of rising on the first day of trading.

IV. Lottery Rate Analysis

The Hong Kong public offering consists of 16.8364 million shares, with each lot comprising 400 shares, totaling 42,091 lots. The current margin financing multiple is 62x and is expected to exceed 100x, triggering a 50% clawback. Thus, Groups A and B will each receive 105,227 lots. Based on 9,000-12,000 applicants, the estimated lottery rate for one lot is 75%, and applying for two lots will likely secure one lot...

It's worth noting that among the 168 million shares offered in this IPO, 30% (50.509 million shares) are being sold by existing shareholders, indicating their eagerness to cash out.

V. Comprehensive Analysis and Rating of the IPO

1. From a fundamental perspective, the company's fundamentals are decent, but it has passed the high-growth phase, showing signs of fatigue.

2. From a brand recognition perspective, the company is a well-known chain in the Chinese catering industry, ranking third by revenue.

3. From the cornerstone investors' perspective, eight cornerstone investors subscribed HKD 672 million (USD 87.22 million), accounting for 55.57% of the total offering. This subscription ratio seems high, but when spread across the investors, it's not substantial.

4. From the market environment perspective, the Hong Kong IPO market is currently very hot, with recent IPOs performing well, indicating strong market sentiment...

5. From a valuation perspective, the company's current valuation is HKD 4.842 billion, with a P/E ratio of 12.96x. Among listed catering companies in Hong Kong, this valuation is not expensive. Recently listed Xiaocaiyuan has a P/E of 14.85x, Jiumaojiu 60x, Haidilao 18x, Tam Jai 27x, and Café de Coral 15x. By comparison, Green Tea Group's valuation is reasonable.

6. From a liquidity perspective, the company is issuing 168 million shares, aiming to raise HKD 1.2 billion. Cornerstone investors subscribed HKD 670 million, leaving approximately HKD 530 million as the free float. The selling pressure will undoubtedly be significant...

7. Overall, Green Tea Group isn't a must-have, feeling like "neither fish nor fowl." More importantly, major shareholders aren't optimistic, cashing out even before the lock-up period ends. Well, might as well give it a casual try...

$DRINDA(02865.HK) $CATL(03750.HK) $AUNTEA JENNY(02589.HK) 

Disclaimer:

1. This article represents only one opinion and should not be taken as any investment advice. The stock market is unpredictable, with ups and downs, so caution is advised.

2. Before making any investment decisions or transactions, please assess your financial situation carefully or consult professional investment institutions.

3. If you find this article interesting, likes, comments, and shares are highly appreciated.