IPO Flash | Country Kitchen Submits Second Filing, Aiming to Become One of China's Largest Chinese-Style Fast-Food Groups

According to Futu News on August 5, the HKEX website shows that Xiangcunji has filed its second listing application, with Goldman Sachs and China Silver International serving as joint sponsors.

Company Overview

Country Kitchen is a leading Chinese fast-casual group in China's rapidly growing restaurant industry, committed to delivering high-quality, diverse, and affordable cuisine to consumers through quick, attentive service. Founded in Chongqing in 1996, Country Kitchen was launched by co-founders Ms. Li Hong and Mr. Zhang Xingqiang, who shared a simple vision: to offer customers delicious, reasonably priced meals that deliver exceptional value. Today, the company has grown into one of China's largest fast-casual Chinese restaurant groups; as of May 31, 2022, its two flagship brands—Country Kitchen and Mr. Rice—operated a total of 1,146 company-owned restaurants.

Q&M Dental is the company's first brand, founded in 1996. For the past 25 years, it has been committed to providing delicious meals with exceptional value, making it the go-to choice for everyday dining for people of all walks of life. To meet the diverse dining needs of customers across different age groups, Q&M Dental has opened restaurants in various commercial districts, offering a wide range of options throughout the day. In 2020, Q&M Dental was named the most popular Chinese fast-food restaurant among young people by Alipay. As of May 31, 2022, the company operated 564 Q&M Dental restaurants nationwide.

Mr. Rice was founded in 2011, reflecting the company's commitment to reimagining the fast-casual dining experience and catering to diverse customer preferences. The brand has introduced an à la carte (rather than per-plate) pricing model and a small-bowl dish format, offering customers greater choice within a fixed budget. According to a Frost & Sullivan report, from January 2019 to December 2021, Mr. Rice recorded the highest chain-store growth rate—114.2%—among China's top five wholly owned Chinese fast-casual restaurant groups. As of May 31, 2022, the company operated 582 Mr. Rice restaurants across China.

Financial Status

The prospectus shows that Rural's total revenue for the years 2019 to 2021 was RMB 3.257 billion, RMB 3.161 billion, and RMB 4.618 billion, respectively, representing a compound annual growth rate of 19.07%. The company reported a net profit of RMB 82.7 million in 2019, a net loss of RMB 2.42 million in 2020, and a net profit of RMB 109 million in 2021. Adjusted net profits for the same period were RMB 82.7 million, RMB 11.93 million, and RMB 182 million, with corresponding adjusted net profit margins of 2.5%, 0.4%, and 3.9%, respectively.

Industry Overview

In China, the accelerating pace of life has driven demand for fast-food restaurants, leading to rapid growth in the sector over the past decade. In addition, the ongoing urbanization and development of major Chinese cities have spurred the swift expansion of fast-food restaurant networks, further boosting the growth of the fast-food market.

According to a Frost & Sullivan report, although revenue from company-operated chain Chinese fast-food restaurants accounts for only a small share of the total revenue in China's Chinese fast-food market, they posted the highest growth rate—15.0%—from 2016 to 2019 and are expected to maintain a compound annual growth rate of 16.9% from 2021 to 2026.

Equity Structure

According to data from Tianyancha, Xiangcunji has completed four rounds of financing, with investors including Sequoia China and Haina Asia Venture Capital Fund, among others.

Regarding the equity structure: Haocheng holds 53.15% of the shares, Tiancheng holds 20.42%, SIG holds 14.36%, Sequoia China holds 7.88%, and Giant Strength holds 4.00%.

Use of Funds

The Company intends to use the net proceeds from the fundraising for the following purposes: expanding the Company's restaurant network, deepening market penetration, renovating existing restaurants as needed, strengthening supply-chain capabilities, and enhancing technological capabilities while improving operational efficiency.

Click to view the prospectus

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