Liuliu's Bold Move After A-Share Withdrawal

After abandoning its initial bid for a listing on China's A-share market, Liuliu Orchard Group Co. Ltd., famed for its plum-based snacks, is now aiming high in Hong Kong.

Profit on the Rise: Solid Financials Fuel IPO Aspirations

The company recently reported an impressive 50% profit surge, reaching 148 million yuan last year. This spike in earnings is a significant boost for Liuliu as it gears up for its upcoming IPO, echoing confidence in its future.

From Humble Beginnings to Market Leader

Founded in 1999 by Yang Fan in Wuhu, Anhui province, Liuliu began as a pastry business. However, it shifted gears in 2001 with the launch of its Liuliumei brand, focusing on plums. Fast forward to 2009: the company had expanded its operations to key plum-producing regions and was rising through the ranks of snack industry giants.

Star Power: How Celebrity Endorsement Changed the Game

A pivotal moment came in 2013 when actress Yang Mi endorsed Liuliumei in a television advertisement. Her catchy slogan made the brand a household name, propelling Liuliu into the spotlight it enjoys today.

Market Dominance: Liuliu's Impressive Reach and Sales

By 2024, Liuliu became the top contender in China's fruit-based snack market with 4.9% retail market share. Its products are distributed across 34 provinces, driven by a robust network of 1,396 distributors.

Diverse Product Lines Fueling Revenue Growth

The company has successfully diversified its offerings into three main categories: dried plum snacks, plum jelly, and Western-style plum snacks. Notably, dried plum snacks are the biggest revenue contributors, raking in 970 million yuan and representing 60% of total sales.

Investor Exodus: What's Behind HongShan's Exit?

Despite its successes, concerns linger over Liuliu's reliance on plum products and the volatility of raw material prices, evident in declining gross margins. This, combined with the exit of major backer HongShan, leaves investors questioning the company's future.

Cash Flow Woes: A Growing Concern?

Even as Liuliu enjoys yearly profit boosts, its operating cash flow has been in steady decline, from 200 million yuan in 2022 to just 84.4 million yuan last year. Rising inventory levels and increasing trade receivables further complicate its financial landscape.

Comparative Valuation Challenges Ahead

With few listed peers, Liuliu's valuation comparison is challenging. Weilong, a larger player in the industry, has a high price-to-earnings ratio, while Liuliu’s smaller scale may lead to a lower valuation if concerns over its margins and cash flow persist.

Will Liuliu’s IPO Be a Sweet Success?

As Liuliu prepares to make waves in the Hong Kong market, the industry's eyes are on whether this plum powerhouse can overcome its hurdles and claim a prominent place among snack food leaders.