On June 27th, 2024, Zhou Liu Fu Jewellery Co., Ltd. (referred to as "Zhou Lufu"), from Guangdong Shenzhen, submitted a prospectus to the Hong Kong Stock Exchange, planning to issue H shares on the main board of Hong Kong and apply for full circulation.
Chow Tai Fook made multiple attempts to go public on the A-share market, but ultimately withdrew its application in November 2023 and requested to be listed on the Hong Kong Stock Exchange.
Link to Chow Tai Fook's prospectus:
https://www1.hkexnews.hk/app/sehk/2024/106572/documents/sehk24062700763_c.pdf
Main Business
Established in 2004, Chow Tai Fook is a leading and rapidly growing jewelry company in China that integrates development and design of jewelry products, procurement and supply, franchising, and brand operations. Through comprehensive retail networks and online and offline modes, it provides customers with a variety of high-quality jewelry product combinations, mainly including gold jewelry and diamond-inlaid jewelry.
According to Frost Sullivan's data, based on the number of stores in China, Chow Tai Fook ranked among the top five brands in the Chinese jewelry market from 2017 to 2023, and ranked first in terms of composite annual growth rate of jewelry revenue from 2021 to 2023 among national jewelry companies in China, with a composite annual growth rate of 36.0%, including a composite annual growth rate of 53.7% in the e-commerce sector, far exceeding the industry average of 13.8% and 18.9% during the same period.
As of December 31, 2023, Chow Tai Fook's total number of offline sales network stores has reached 4,383 (4,288 franchise stores and 95 self-operated stores), covering 31 provinces, 301 prefecture-level cities and district-level administrative zones, and is the fastest company in China's jewelry brand to reach 4,000 stores from its establishment. According to Frost Sullivan, as of December 31, 2023, based on the number of stores in China, Chow Tai Fook ranked fourth among Chinese jewelry brands, and ranked third in terms of offline store numbers in the company's home region in southern China among Chinese jewelry brands.
Chow Tai Fook's revenue mainly comes from franchise mode, self-operated stores, and online sales.
For revenue from franchise mode, the company's revenue mainly comes from selling products to franchise stores, collecting franchise service fees from franchisees, collecting product access fees from franchisees, and other service fees including supply chain management fees from authorized suppliers, decoration management fees from decoration service providers, and performance guarantees fees related to diamond-inlaid jewelry (mainly performance guarantee fees in 2021) from franchisees.
Revenue from self-operated stores and online sales channels mainly comes from selling gold jewelry, diamond-inlaid jewelry, and other products.
Shareholder Structure
According to the prospectus, in Chow Tai Fook's pre-IPO shareholding structure,
Mr. Li Weizhu holds 36.62% and 27.46% through Ruoshui United and Shangshan United, respectively;
Creater Investment (Mr. Li Weizhu 82.00%, GP) holds 2.64%.
Creater Investment's other shareholders include Mr. Xie Mingyu (13.33%), Mr. Zhong Xipeng (2.67%), and Mr. Wu Yang (2.00%).
Mr. Li Weizhu can exercise approximately 66.72% of the voting rights mentioned above.
Mr. Li Weipeng (Mr. Li Weizhu's elder brother) holds 26.97% through Qiankun United;
Mr. Li Weizhu and Mr. Li Weipeng are acting in concert, with a total holding of 93.70%, making them the controlling shareholder group.
Shao Bo Investment holds 1.44%;
Shao Bo Investment's shareholders include Mr. Liao Shuwen (3.19%, GP), with LP including Mr. Li Weizhu (86.76%), Mr. Wu Zhuanglin (1.96%), Mr. Wu Yang (4.90%), Ms. Li Caiping (1.96%), and Ms. Lin Liuzhi (1.23%).
Mayfair Venture Capital holds 1.21%;
Mayfair Venture Capital's shareholders include Ms. Li Yanmei (7.89%, GP), with LP including 46 current or former employees (a total of 92.11%).
Other investors include:
Xianglong Chuangmei (Business Cooperation Partner Investment Platform), holding 1.89%;
Shareholders of Xianglong Chuangmei: company employee Lin Xiangjie (0.70%, GP), 16 LPs are suppliers, authorized suppliers and franchisees of the company,
Yongcheng Shi Wu Hao controlled by Wu Yongping, holding 0.68%;
Zhang Changcheng, through Di'ai Jewelry, holding 0.47%;
Mingyang Investment (Xu Lizhen 40.28%, Jiang Chaokai 37.32%, Chen Songqing 22.39%), holding 0.35%;
Zhengfu Investment (Mr. Zhou Zhenhui 58%, Ms. Zheng Lingjuan 42%), holding 0.27%.
Management Team
The board of directors of Zhou Lufu is composed of eight directors, including:
4 executive directors: Mr. Li Weizhu (Chairman), Mr. Li Weipeng (Vice Chairman and General Manager, brother of Li Weizhu), Mr. Xie Mingyu (Deputy General Manager), Mr. Zhong Xipeng (E-commerce Director, Li Weizhu's brother-in-law);
1 non-executive director: Ms. Zhong Yingqin (Li Weizhu's spouse);
3 independent non-executive directors: Mr. Liu Guoxun, Ms. Yang Lan, Mr. Guo Qiuquan.
3 supervisors: Ms. Lin Liuzhi, Ms. Li Caiping, Mr. Ni Xuepeng.
In addition to the executive directors, the management team includes the deputy general manager and secretary of the board of directors, Wu Yang, the deputy general manager and financial director, Xu Zhili, the general manager of the brand management center, Liu Penglong, the general manager of the self-operated management center, Liao Shuwen, and the deputy director of the product quality control center. Director Zhao Zhiping.
Corporate Performance
According to the prospectus, in 2021, 2022 and 2023, Zhou Lufu's operating income was RMB 2.783 billion, RMB 3.102 billion and RMB 5.15 billion, and the corresponding net income was RMB 425 million, RMB 575 million and RMB 660 million.
Intermediary Team
The main intermediary team for Zhou Lufu's IPO includes: CITIC Securities, China International Capital Corporation jointly as its sponsors; Ernst & Young as its auditor; Zhong Lun and Pu Heng respectively as its company lawyers in China, and its lawyers in Hong Kong and the United States; Haiwen and Sullivan & Cromwell as its brokerage lawyers in China, and in Hong Kong and the United States; Foster Sullivan as its industry consultant.