The 'largest fruit retailer' surged over 20% during its first day of trading! Market value briefly exceeded the 10 billion threshold

After submitting its listing application to the Hong Kong Stock Exchange four times, China's 'largest fruit retail operator'$PAGODA GP (02411.HK)$successfully went public on the Hong Kong stock market on January 16.

On its first day of trading, the stock opened 16.4% higher at HKD 6.52. As of press time, the latest price is HKD 6.32, up 12.86%, with intraday gains exceeding 20%. The total market capitalization stands at HKD 9.837 billion, once surpassing the HKD 10 billion mark.

On January 13, Pagoda announced the allocation results. The company plans to globally issue 78,947,500 shares, with 10% allocated to the Hong Kong public offering and 90% for international placement. The over-allotment option has not yet been exercised. The offer price has been set at HKD 5.60 per share, with H-shares traded in board lots of 500 shares.

According to Pagoda’s prospectus, data from consulting firm Frost & Sullivan shows,based on fruit sales revenue in 2021, Pagoda is China's largest fruit retailer,accounting for 1.0% of China’s total market share (the top five combined account for 3.6% of the total market share), with 5,645 offline stores across 22 provinces and 140 cities domestically.

From 2019 to the first half of 2022, Pagoda's revenues were RMB 8.976 billion, RMB 8.853 billion, RMB 10.289 billion, and RMB 5.915 billion respectively. Over three and a half years, Pagoda generated a total operating revenue of RMB 34 billion,breaking through the RMB 10 billion mark in 2021, marking an important milestone in the company's history.

The net profits for the same period were RMB 2.48 billion, RMB 456.58 million, RMB 2.21 billion, and RMB 1.9 billion respectively, achieving a total net profit of approximately RMB 7 billion. Gross profit margins were 9.8%, 9.1%, 11.2%, and 11.5% respectively.

Source: Baiguoyuan Prospectus

Sales of fruits and other food items are Pagoda's main source of revenue. From 2019 to the first half of 2022, its income from fruit and other food sales was RMB 8.75 billion, RMB 8.637 billion, RMB 9.992 billion, and RMB 5.731 billion respectively, accounting for 97.5%, 97.6%, 97.1%, and 96.9% of the total revenue during the same periods.

Revenue from fresh fruit sales reached RMB 8.448 billion, RMB 8.33 billion, RMB 9.485 billion, and RMB 54.493 million respectively, accounting for approximately 96.5%, 96.4%, 95.0%, and 95.1% of the total revenue from fruit and other food sales during the same periods.

In addition, royalty and franchise income, membership revenue, and other income also contribute to its overall revenue mix. Although these three revenue streams combined account for less than 5% of total income over the years,their gross profit margin has consistently remained at 100%.

In terms of product portfolio, in addition to fruits, Pagoda is introducing more fresh produce on its APP and mini-programs.According to the prospectus, Pagoda launched its premium ingredients brand 'Panda Fresh' in 2020. The current range of products includes vegetables, fresh meat and seafood, grain and oil, dairy products, etc.

In terms of sales channels, Pagoda not only emphasizes the development of offline stores but also actively explores online platform sales.This includes the Pagoda APP, the Pagoda+ WeChat mini-program, official flagship stores on Tmall, JD.com, and Douyin, as well as partnerships with third-party delivery and in-store platforms like Meituan, Ele.me, and Koubei to provide real-time fruit delivery to consumers.

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