IPO | “Bird's Nest's First Stock” Tsubameya will be offering shares now and is expected to be listed on December 12

Sale Overview

According to Futu News on November 30th,$YAN PALACE (01497.HK)$The announcement was announced that it will issue 32 million shares from November 30 to December 7. The company plans to issue 32 million shares, including a public sale of 3.2 million shares and 28.8 million international shares, with an issue price of HK$8.80-11.00 per share, and 400 shares per lot. It is expected to be listed on December 12.

Company Overview

The company is a leading brand in the Chinese bird's nest product market and is committed to R&D, production and sales of high-quality modern bird's nest products. According to the Frost & Sullivan report, in 2022, in terms of retail sales, the company was the largest bird's nest product company in the traceable bird's nest market in China, with a market share of 14.0%. According to the same source, in 2022, in the Chinese market for bird's nest products, the company also ranked first in terms of the number of stores that specialize in bird's nest and the number of imports certified by the Chinese Academy of Medical Examiners. The company already has advanced and mature product development capabilities, a diversified product portfolio, a sound quality assurance mechanism, and a perfect sales network, which gives the company a head start in market competition.

China has an extensive cultural base and consumption history of eating bird's nest, and has always been the main market and largest consumer place for bird's nest products. Driven by improved living standards and increased health awareness among Chinese consumers, bird's nest has been viewed by many Chinese consumers as a health food product with multiple benefits.

As an industry leader, the company's performance is superior to the industry average. According to the Frost & Sullivan report, from 2020 to 2022, the company's total retail sales also grew at a high CAGR of 12.3%, 8.6 percentage points higher than the industry average and was at the highest level among the top five bird's nest brands in the same year.

Financial Overview

In terms of financial conditions, the company's total revenue from 2020 to 2023 was 1,301 million yuan, 1,507 million yuan, and 1,730 billion yuan respectively. The compound growth rate of total revenue from 2020 to 2023 reached 15.31%. Net profit for the same period was 123 million, 172 million yuan, and 206 million yuan respectively, with a compound net profit growth rate of 29.41%.

Industry Overview

Traditionally, the raw material bird's nest is mainly used to produce pure bird's nest products. Pure bird's nest products include dried bird's nest and products made from bird's nest and water (with or without adding rock sugar or sugar substitute). Pure bird's nest products accounted for RMB 39.9 billion in the Chinese market in 2022. However, in recent years, production technology and process processes have made significant progress and changes, leading to major changes in product types. As a result, these products are favored by customers and have promoted the rapid development of the bird's nest+ and + bird's nest markets, both of which have huge potential for future growth.

Bird's nest products are ready-to-eat bird's nest products (bird's nest feed ratio ≥ 1%) by adding other ingredients and/or nutrients (such as ginseng, sea cucumber and flower gum). In 2022, the market size of these raw materials in China was RMB 80 billion, indicating that the market potential for bird's nest+ products is huge.

Bird's nest and its extract can also be used in other foods, beverages and skin care products, called + bird's nest products. The bird's nest feed ratio for these products is < 1%. Typical examples include skin care products (such as masks, lotions, and serums) and food and beverage products (such as dairy products, packaged porridge, and energy drinks). In 2022, the total market size of these foods, beverages and skincare products exceeded RMB 450 billion.

In terms of retail sales, the market size of the bird's nest industry grew at a CAGR of 27.2% from RMB 12.9 billion in 2017 to RMB 43 billion in 2022, and is expected to reach RMB 92.1 billion in 2027. The CAGR from 2022 to 2027 is expected to be 16.5%.

Cornerstone investors

On the part of Cornerstone investors, several Cornerstone investors agreed to subscribe for the number of shares to be subscribed at the sale price, totaling about US$16 million (assuming that the over-allotment rights were not exercised, calculated at the median issue price). Cornerstone investors include PT. Anugerah Citra Walet Indonesia, PT Niaga Cakrawala Sukses, PT Esta Indonesia, Value Partners Hong Kong Limited and Value Partners Limited (all wholly-owned subsidiaries of Value Partners Group (00806)), Wu Chen and Huang Chengguang.

Use of funding

In terms of use of financing, the net proceeds of the company were approximately HK$262.6 million (based on the median issue price, assuming that the over-allotment rights were not exercised). According to the prospectus, the company plans to use the net proceeds from the sale of shares for the following purposes: about 10% for R&D activities to expand the product portfolio and enrich product functions; about 25% to expand and consolidate sales networks; about 15% to strengthen brand building and marketing and promotion efforts; about 35% to strengthen supply chain management capabilities; about 5% to strengthen digital infrastructure; and about 10% for working capital and other general corporate purposes.

Reminder: Starting from November 22, 2023, the Hong Kong Stock Exchange's FINI system will be officially launched, and all Hong Kong stock IPOs will pass the FINI process.

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