After continuously avoiding the pitfalls of plummeting stocks like QINIU INTELLIGENT, TAIMEI MEDICAL, and RONGLI CONSTRUCTION, should we subscribe to CHINA RESOURCES BEVERAGE?

Qiniu Intelligence $QINIU(02567.HK) plummeted 56.7% on its first day of listing today, setting a new record for the year's worst IPO debut.

Previously, Taimei Medical also dropped 29.2% on its first day, and Rongli Construction fell 15%.

This wave of IPOs has been quite hot, mainly driven by the surge of CAROTE.

CAROTE doubled in the gray market but still rose 58.3% on its debut due to retail investors taking profits (since retail investors held 50% of the shares).

Coinciding with this IPO wave, we heavily subscribed to CAROTE while avoiding Qiniu Intelligence, Taimei Medical, and Rongli Construction—perfectly dodging the pitfalls.

Here’s the subscription plan for CAROTE shared by StockPro earlier:

Here’s StockPro’s reasoning for skipping Qiniu Intelligence, Taimei Medical, and Rongli Construction:

Someone asked: Since Qiniu’s drop set a new record today, which stock held the previous record?

This might sting for some IPO enthusiasts—it was Zhonggan Communications, another hot IPO at the time.

Zhonggan Communications was oversubscribed over 100x but plunged 46.4% on its debut.

StockPro also avoided Zhonggan Communications, as shown below:

The latest IPOs include China Resources Beverage $CR BEVERAGE(02460.HK) and Horizon Robotics $HORIZONROBOT-W(09660.HK). Today, we’ll focus on China Resources Beverage, as the market is divided on it.

1. Quantitative + Qualitative Analysis of China Resources Beverage

China Resources Beverage has been hyped for a long time before its official listing.

The aggressive marketing made it seem like a surefire winner, so many IPO investors loaded up their funds, ready to go all in.

StockPro will first analyze it qualitatively, then quantitatively.

1.1 Qualitative Analysis of China Resources Beverage

In StockPro’s IPO framework, new listings are categorized into three types:

High-conviction IPOs, speculative bets, and arbitrage plays—each requires a different strategy.

High-conviction IPOs demand heavy or all-in subscriptions, like the recent CAROTE.

Most speculative bets are skipped, with a few lightly subscribed.

Arbitrage plays depend on valuation discounts, like the recent Midea Group.

So, which type is China Resources Beverage?

Due to the hype, many think it’s a high-conviction play.

Not quite. With Nongfu Spring $NONGFU SPRING(09633.HK) as the industry leader, China Resources’ valuation can’t surpass it.

Thus, StockPro classifies it as an arbitrage play.

Whether to subscribe depends on the valuation discount.

So, let’s compare China Resources and Nongfu quantitatively.

1.2 Quantitative Analysis of China Resources Beverage

We’ll compare profitability and growth metrics.

① Profitability: ROE, gross margin, and net margin—especially ROE.

Buffett once said: ROE is the core metric for measuring a company’s profitability. Consistently high ROE indicates strong earnings power.

Munger added: Over time, an investor’s returns will approximate the company’s ROE.

From 2021-2023, Nongfu’s ROE was 40%, 36%, and 45.6%—a king-tier performer, even surpassing Kweichow Moutai.

China Resources’ ROE: 18.7%, 19.5%, 21.3%.

Nongfu’s ROE is twice as high—a total mismatch.

Gross margin: Nongfu (59.5%, 57.5%, 59.5%) vs. China Resources (43.8%, 41.7%, 44.7%).

Nongfu’s higher margins reflect its strong brand moat.

Net margin is even worse: Nongfu (24%, 25.5%, 28.3%) vs. China Resources (7.6%, 7.8%, 9.8%).

Note: Single-digit net margins are rare in the beverage industry. This shows China Resources lacks a moat—a fatal flaw!

In profitability, Nongfu is two tiers above China Resources—a complete 碾压。

② Growth: Revenue is key, as profits can be manipulated.

Nongfu’s 2021-2023 revenue CAGR: 20%.

China Resources’ CAGR: 9.3%.

Again, Nongfu doubles China Resources.

In growth, Nongfu is two tiers ahead—another 碾压。

3. Subscription Plan

Quantitative and qualitative analysis shows Nongfu crushes China Resources in profitability and growth.

China Resources’ single-digit net margin and revenue growth suggest no moat.

Thus, China Resources’ fair valuation should be at least a 30% discount to Nongfu.

Nongfu’s static PE is 24.8x, so China Resources’ fair PE: 24.8 × 0.7 = 17.4x.

But China Resources’ IPO mid-price implies a 22x PE.

For a moat-less, slow-growth beverage firm, 22x is overpriced. StockPro is skipping this one!

As for Horizon Robotics, StockPro hasn’t reviewed its prospectus yet. But with a HK$50B IPO valuation, it’s no easy bet either—analysis coming soon!

That’s all for today. Hope this helps! I’m StockPro, a 财报-reading，港股打新-loving investor focused on long-term + short-term plays. See you next time!