Little Vegetable Garden (00999) is a well-known chain of restaurants directly managed by the popular Chinese restaurant market in China. It was established in 2013.

Issue Date: December 12 to 17

Listing date: December 20

Co-sponsors: Huatai International, UBS Group

Beneficiary Bank: China Merchants Wing Lung Bank

Approximately 0.101 billion shares were sold, about 90% were placed, about 10% were publicly sold, and about 15% over-allotted shares

If the public sale subscription is 15 times at least 50 times, the public sale ratio will increase from 10% to 30%, 50 times at least 100 times to 40%, and back to 50% if the subscription is 100 times or more; however, if the placement is not full and the public sale is full, or the public sale is full and the public sale is less than 15 times, the public sale ratio can be increased from 10% to a maximum of 20%, but a limited price is required

The offering price per share was HK$8.5, and the maximum amount raised was about HK$0.86 billion, accounting for about 8.6% of the total market value. The listing cost was approximately HK$76 million

Based on 800 shares per lot, entry fee HK$6,868.57

Based on the above price limit of HK$8.5, the market value is about HK$10 billion (based on adjusted net profit of about RMB 0.545 billion over 23 years, the price-earnings ratio is about 16.9 times)

As of the end of August '24, the average net asset value was approximately RMB 0.812 billion

The public sale is divided into Group A (applicants with 5 million or less) and Group B (applicants with 5 million or more)

Business:

Revenue for year 21 to 23 was RMB 2.64 billion, RMB 3.21 billion, RMB 4.54 billion, respectively, and revenue for the first eight months of '24 was RMB 3.54 billion;

Net profit for year 21 to 23 was RMB 0.227 billion, RMB 0.237 billion, RMB 0.532 billion respectively, and net profit for the first eight months of '24 was RMB 0.4 billion;

The adjusted net profit for years 21 to 23 was 0.233 billion yuan, 0.237 billion yuan, and 0.545 billion yuan respectively, and the adjusted net profit for the first eight months of '24 was 0.392 billion yuan (if not involving one-time factors such as listing expenses, changes in fair value of convertible bonds and derivative financial instruments);

Since its establishment in '13, the company has been committed to providing consumers with home-style dishes and thoughtful service at affordable prices. The company turned the “small vegetable garden” into a “family kitchen” for the Chinese people, which is widely recognized by customers. Currently, the company has 663 direct stores in operation, covering 146 cities or counties in 14 provinces in China. Currently, the company's main store operations are located in East China;

In terms of store revenue in 23 years, “Little Vegetable Garden” ranked first among all brands in China's popular convenient Chinese restaurant market, with a customer unit price of 50 yuan to 100 yuan, accounting for 0.2% of the market share. In terms of revenue, the size of the mass convenience Chinese restaurant market with a customer unit price of 50 yuan to 100 yuan was RMB 2252.9 billion in 2023, accounting for about 55.2% of the overall Chinese restaurant market;

The company provides consumers with home-style dishes and attentive service at affordable prices. For every consumer who walks into the “Little Vegetable Garden” store, they promise to “give away the dish for free if they are overtime (promise to be served within 25 minutes)”; “if they are not satisfied with the dish, return it unconditionally”; “ensure high-quality ingredients, and pay tenfold if there is a problem”;

About 40% of the fund-raising proceeds are used to continuously expand the store network and increase market penetration; about 37% is used to enhance supply chain capabilities; about 13% is used to upgrade intelligent equipment and digital systems to improve information technology capabilities; and about 10% is used for working capital and general corporate purposes.

Financing before the initial public sale:

An independent third party, Mr. Song, sold shares from February '23 to February '24. At that time, the sale price was discounted by about 21.1% to a premium of 18.47% from the offer price, and a six-month ban period was set up.

Post-listing major shareholder structure:

Founder Mr. Wang Shugao and those acting in concert hold 85% of the shares

The previous investor, Mr. Song, held 6.4% of the shares

Other public shareholders hold 8.6% of the shares

Brief review:

Xiao Caiyuan is one of the famous chain restaurants directly managed by the Chinese popular convenient Chinese restaurant market. It was established in 2013.

Based on the above price limit of HK$8.5, the market value is about HK$10 billion. Based on adjusted net profit of about RMB 0.545 billion over 23 years, the price-earnings ratio is about 16.9 times.

This article is contributed by “Xincheng Securities”. Authors: Chen Bohao, analyst at Xincheng Securities; Chen Wenfang, editor of Zhitong Finance.