Weilong resumes Hong Kong IPO, planning to raise $500 million: annual retail sales of four major products exceed $78 million

"Revenue in 2021 exceeded $7.6 billion, with net profit surpassing $1.3 billion."

This article is an original piece by IPO Early Insights

Author｜Stone Jin

According to IPO Early Insights, Weilong Delicious Global Holdings Limited (referred to as 'Weilong') has recently restarted its IPO and disclosed the PHIP document on the evening of June 27. The company plans to list on the main board of the Hong Kong Stock Exchange, with Morgan Stanley, CICC, and UBS Group acting as joint sponsors.

IPO Early Insights learned thatWeilong's proposed fundraising for this IPO is approximately $500 million — admittedly, this figure is lower than the $1 billion fundraising plan in the second half of 2021, but under the current market conditions, $500 million still represents a relatively large fundraising scale.。

In 2001, Weilong introduced its first spicy gluten product. As of the latest practicable date, Weilong has 45 types of seasoned flour products and has successfully expanded into vegetable and bean-based products, launching various brands including 'Fengchi' and 'Qinzui Shao' series.In 2021, the annual retail sales of two categories under Weilong (seasoned flour products and vegetable products) exceeded 1 billion yuan, with four individual products (Big Gluten, Konjac Delight, Qinzui Shao, and Small Gluten) each surpassing 500 million yuan in annual retail sales.。

Typically, Weilong launches one to two new products into the market every year. As of the latest practicable date, Weilong has more than four products currently in development. Among them, Weilong plans to introduce new vegetable products in 2024, and from 2023 to 2025, it will launch new bean-based and other products, including soy-based products, meat products, and meal replacements.

According to Frost & Sullivan,Based on 2021 retail sales, Weilong ranks first among all spicy snack companies in China, with a market share of 6.2%, which is 3.9 times that of the second-largest player. It also leads in market share within the seasoned flour products and spicy vegetable snack subcategories.。

Regarding user demographics, according to the Frost & Sullivan consumer survey results,95.0% of Weilong’s consumers are 35 years old or younger, and 55.0% are young people aged 25 years or younger.At the same time, Weilong is the most recognized and beloved spicy snack brand in China and ranks as the top snack brand among individuals aged 25 years or younger in terms of brand awareness.

As of December 31, 2021, Weilong had a total of four factories in Henan Province: Pingping Factory, Luohe Weilai Factory, Zhumadian Weilai Factory, and Weidao Factory.

To meet market demand, Weilong plans to increase the production capacity of its flavored noodle products by 90,000 tons, vegetable products by 72,000 tons, and bean products and other items by 14,745 tons before 2025. Additionally, Weilong has planned to add one more factory in East China, which is scheduled to begin operations in 2023 and reach full capacity by 2025, further increasing Weilong's overall production capacity by 59,400 tons.

In terms of financial data.From 2019 to 2021, Weilong’s revenue reached 3.385 billion yuan, 4.12 billion yuan, and 4.8 billion yuan respectively, with a compound annual growth rate (CAGR) of 19.1%, far exceeding the CAGR of 4.2% for the leisure food industry during the same period.。

In terms of product categories, vegetable products have seen the fastest growth - revenues generated from vegetable products were 665 million yuan, 1.168 billion yuan, and 1.664 billion yuan from 2019 to 2021, accounting for 19.6%, 28.3%, and 34.7% of total revenue respectively. Among them, the 'Wind-Dried Seaweed' product, made from high-quality kelp using pasteurization technology and streamlined processing to retain the natural freshness, aroma, tenderness, crispness, and color of seaweed, surpassed 100 million yuan in retail sales within a year of its launch.

In terms of distribution channels, from 2019 to 2021, Weilong's online business achieved a compound annual growth rate of 48.6%, with online channel revenues accounting for 7.4%, 9.3%, and 11.5% of total income respectively. Moreover, as of December 31, 2021, Weilong collaborated with over 1,900 offline distributors, covering approximately 690,000 retail terminals across China.

From 2019 to 2021, Weilong's net profits were 658 million yuan, 819 million yuan, and 827 million yuan, with profit margins of 19.4%, 19.9%, and 17.2% respectively, compared to an average net profit margin of about 10% for China's leisure food industry in 2021.。

On March 31, 2021, Weilong completed its first and last round of financing before its IPO, marking its first fundraising since its establishment over 20 years ago.This round of financing amounted to 659 million US dollars. Among the investors, CPE Yuanfeng invested 218 million US dollars in Weilong, while Hillhouse Capital, as co-leading investor, injected 110 million US dollars. Tencent and Yunfeng Capital each contributed 60 million US dollars, Sequoia China, Tianyi Capital, and Hou Sheng Investment separately provided 27 million US dollars, and Haosong Capital invested 20 million US dollars. Subsequently, on June 18, 2021, Henan Capital, located where Weilong is based, also invested 110 million US dollars in Weilong.

At that time, Weilong was valued at approximately 9.4 billion US dollars. On April 27 this year, the aforementioned investors purchased additional ordinary shares issued by Weilong.

By this point, CPE Yuanfeng held 4.47% of Weilong's shares before the IPO, making it the largest institutional investor; Hillhouse Capital and Henan Capital each held 2.26% of Weilong’s shares, Tencent and Yunfeng Capital held 1.23% respectively, Sequoia China, Tianyi Capital, and Hou Sheng Investment each held 0.55%, and Haosong Capital held 0.41% of the shares.

Weilong emphasized that the participation of well-known strategic and financial investors reflects their recognition of its business strategy and corporate culture. These investors are willing to contribute valuable experience and insights into the capital markets to support its future development and help achieve long-term growth.。

Weilong stated in the prospectus that the net proceeds from the IPO will be mainly used to expand and upgrade production facilities and the supply chain system, prudently invest in and acquire companies with synergistic effects on its business, further expand sales and distribution networks, build the brand, engage in research and development activities to enhance R&D capabilities, advance the digital and intelligent transformation of its operations, as well as serve as working capital and for general corporate purposes.

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