For Red Star Cold Chain, short-term fluctuations driven by non-fundamental factors do not undermine its long-term logic but instead offer rational investors an opportunity to thoroughly assess its true value.
On January 13, Red Star Cold Chain (01641) experienced a roller-coaster trading session on its first day of listing on the Hong Kong Stock Exchange: the stock opened nearly 60% higher in the morning, surged to a high of HKD 19.7, but ultimately closed at HKD 12.3, only slightly above the issue price. For a company that had garnered significant market attention with its public offering being subscribed 2,309.25 times, such a closing performance came as a surprise to some market participants.
However, those familiar with the recent IPO market environment in Hong Kong would recognize this is not an isolated case. Since the recovery of the Hong Kong IPO market, attractive returns from 'subscribing to new shares' have drawn a large number of retail investors. It has become commonplace for investors to cash out shortly after allocation either in the gray market or on the first day of listing. Aside from this technical selling pressure leading to a pullback in share prices on the debut day, macro factors such as turbulence related to the Federal Reserve and geopolitical risks on January 13 also heightened risk aversion in the Hong Kong market. The three major indices similarly exhibited a pattern of opening high and closing low, further amplifying volatility in newly listed stocks.
While short-term fluctuations in stock prices reflect market sentiment and capital dynamics, a company’s long-term value is rooted in industry prospects and its fundamental business conditions. For Red Star Cold Chain, the temporary volatility driven by non-fundamental factors does not undermine its long-term investment thesis but instead offers rational investors an opportunity to closely examine its intrinsic value.
For potential investors, the most pressing question remains: does the current stock price adequately reflect the true value of Red Star Cold Chain, or does it present a valuation mismatch and investment opportunity?
From an industry perspective, the cold chain sector demonstrates strong growth certainty.
As a critical link between production and consumption, cold chain logistics serves as the core mechanism to unlock consumer potential and ensure smooth supply chain operations. Its long-term growth prospects are increasingly clear, supported by both policy incentives and rising demand.
According to the "2025 Cold Chain Logistics Industry Market Size and Leading Enterprise Analysis" report published by Forward Industry Research Institute on January 22, 2026, the market size of China's cold chain logistics industry was approximately CNY 540 billion in 2024, with a five-year compound annual growth rate (CAGR) of 9.59%. Fresh agricultural products emerged as the fastest-growing category. The central region, characterized by dense populations and abundant agricultural resources, recorded market growth rates surpassing the national average.
This data aligns with the 2024 cold chain logistics operational statistics released by the China Federation of Logistics and Purchasing (CFLP). The latter shows that China's cold storage capacity increased by 11.0% year-on-year in 2024, reaching 253 million cubic meters.
(Data source: China Federation of Logistics and Purchasing, Chart prepared by Forward Industry Research Institute)
In recent years, the demand side of cold chain logistics has witnessed structural explosive growth. On one hand, emerging consumption scenarios such as pre-prepared meals and fresh e-commerce have rapidly gained traction. Various industry reports indicate that the market size for pre-prepared meals in China reached CNY 485 billion in 2024, representing a year-on-year increase of 33.8%. This figure is expected to continue growing in the coming years, potentially exceeding CNY 749 billion by 2026. As the foundation ensuring product quality and expanding sales reach, the demand for cold chain logistics will remain robust alongside the expansion of these industries.
(Data source: China Federation of Logistics and Purchasing, Chart prepared by Qianzhan Industry Research Institute)
On the other hand, the cold chain circulation rate for agricultural products has been continuously increasing. Data from the Cold Chain Logistics Professional Committee of the China Federation of Logistics and Purchasing shows that in 2023, the origin cold chain circulation rates (low-temperature processing rates) for fruits and vegetables, meat, and aquatic products in China were 23%, 78%, and 80%, respectively, while the average level of corresponding indicators in developed countries ranges between 80%-95%. Among these, the cold chain circulation rate for fruits and vegetables has the largest room for improvement (see chart above).
In short, driven by multiple layers of demand, the long-term growth logic for the cold chain logistics industry remains robust.
Stable investment targets: solid fundamentals with core advantages standing out
A deeper analysis of Hongxing Cold Chain's true value reveals that 'low-profile' and 'steady' are the most prominent labels for this company, with its core competitiveness rooted in deep industrial foundations and a unique business model.
First, its regional leadership position is stable, and its scale barriers are difficult to replicate.
Hongxing Cold Chain originated from Changsha Hongxing Village, known as the 'First Village of Hunan,' and evolved from the agricultural industrialization giant Hongxing Industrial Group. Initially established to address the frozen storage and store rental needs of merchants at the Hongxing Agricultural Wholesale Market, the company has grown over two decades into the largest cold storage service provider in central China and Hunan Province, with operations extending across eight provinces nationwide.
In terms of core assets, the company’s two major warehousing bases located in Yuhua District, Changsha, have a total designed storage capacity exceeding one million cubic meters, with available storage capacity surpassing 230,000 tons, accounting for 18.2% of Hunan Province's total available cold chain storage capacity. This area serves as Changsha's core logistics hub, adjacent to the Hongxing Agricultural Wholesale Market, reducing transportation radius by more than 30% compared to competitors, and highlighting significant land scarcity. In terms of market share, the company holds a commanding 54.7% share of the frozen food storefront rental services market in Hunan Province, far surpassing competitors, establishing a solid regional monopoly advantage.
Second, a unique business model fosters high customer stickiness and profitability.
Based on an in-depth understanding of merchant needs, Hongxing Cold Chain has created a distinctive operating model featuring 'front store, back warehouse, on-site storage, and real-time transactions,' seamlessly integrating warehouse 'back-end' functions with storefront 'front-end' sales.
This model offers dual value to merchants: first, it reduces overall costs, with combined warehousing and storefront leasing prices lower than standalone rentals, effectively alleviating operational pressures; second, it enhances operational efficiency, reducing inventory turnover days and significantly improving real-time transaction response speed. While markedly boosting transaction efficiency and convenience for merchants, this model has also fostered exceptionally high customer loyalty—data shows that in the first half of 2025, nearly 80% of customers utilized both warehousing and leasing services simultaneously, with storefront occupancy rates consistently exceeding 94%, and renewal rates remaining above 90%.
In terms of profitability, from 2022 to the first half of 2025, the company's gross margin remained consistently above 50%, reaching 52.8% in 2024, while the average gross margin for the domestic cold chain warehousing industry during the same period was only 28.7%. Net profit margins stabilized between 33% and 38%, demonstrating strong operational resilience.
Third, its high dividend attribute stands out, with robust cash flow supporting long-term development.
Beyond its solid operational fundamentals, Hongxing Cold Chain’s high dividend characteristics have further enhanced its investment appeal. From 2022 to date, the company has distributed approximately CNY 240 million in cash dividends, with payout ratios of 35%, 38%, and 40% for 2022, 2023, and 2024 respectively, averaging a dividend payout ratio of 37.7%, significantly higher than the average dividend levels in the Hong Kong stock market.
In terms of financial health, the company’s debt-to-asset ratio has consistently remained below 35%, standing at 33% in the first half of 2025, with no interest-bearing liabilities, reflecting a sound financial structure. Operating cash flow has remained consistently positive, adequately covering net profits and capital expenditures, providing solid support for the continuation of dividend policies and business expansion.
Growth potential remains untapped, with regional expansion set to unlock new value ceilings.
However, viewing Hongxing Cold Chain solely as a high-dividend stock clearly underestimates its growth potential.
As mentioned in the prospectus regarding the use of IPO proceeds, the company plans to allocate 57.5% (approximately HKD 145 million) over the next four years to build a new processing plant and expand its frozen food warehousing facilities, equipping them with processing equipment and systems to provide frozen food processing services. Approximately 19.7% (around HKD 50 million) will be used over the next four years to pursue strategic acquisitions and partnerships to enhance integrated supply chain capabilities and strengthen its position in the full cold chain ecosystem.
According to Zhitong Finance, Hongxing Cold Chain has already established a comprehensive full-service cold chain matrix: starting with warehousing operations, the company collaborates with third-party logistics providers in trunk transportation and loading/unloading segments, equipped with professional refrigerated fleets, equipment, and real-time tracking systems. In areas such as inventory management consulting, packaging, labeling, and quality inspections, the company also provides a range of value-added services. Looking ahead, there are plans to engage in strategic cooperation with upstream suppliers like logistics service providers and downstream partners such as pre-made food producers, deepening its integrated supply chain service model.
For the central market, where the company is poised to focus its efforts next, it is not unprepared: public reports indicate that in recent years, the major shareholder, Hongxing Industrial, has made extensive strategic moves in the central region, creating the largest modern agricultural products trading platform in Central and Southern China—the Hongxing Global Agricultural Wholesale Center—which has established an agricultural product distribution network capable of serving the six central provinces and a consumer base of 280 million people.
On December 30, 2025, information from the Changsha Land and Resources Online Trading System showed that a commercial service facility land parcel, covering an area of 135,518.82 square meters in Baizhu Village, Tiaoma Town, Yuhua District ([2025] Changsha City No. 083), with a plot ratio ≤ 2.0, was acquired by Hunan Red Star Market Agricultural Products Co., Ltd. (whose largest shareholder is also Red Star Industrial) at a base price of 193 million yuan. The site may be used for agricultural product distribution, cold chain logistics, or supporting commercial development, further promoting urban-rural integration and rural revitalization.
Although the final development schedule for this commercial land remains unclear, it often reflects a holistic approach where production, sales, and operations are integrated. The majority shareholder's mature pipeline network and existing customer resources will serve as the strongest endorsement for Red Star Cold Chain’s expansion plan.
Investment Opportunities Amid Value Mismatch
The average PE-TTM for the cold chain logistics sector in Hong Kong and mainland China stock markets currently ranges from 15 to 20 times, with a PB of 2.0 to 2.5 times (Wind data, January 2026). As of January 22, 2026, after a nearly 20% rebound in its share price, Red Star Cold Chain's PE-TTM stands at only 11.59 times, with a PB of 0.85 times, significantly below the industry average, indicating a notable valuation discount.
(Table of comparable company valuations in the sector, as of January 22, 2026)
Industry analysts from Zhitong Finance noted that the current discount might primarily stem from two factors: first, liquidity discounts in the Hong Kong stock market for regional enterprises; second, investor concerns over uncertainties regarding out-of-province expansion. However, Red Star Cold Chain possesses dual attributes of stable cash flow assets and high-growth certainty. In the short term, gross margins exceeding 50% and dividend payout ratios above 37% provide a solid safety margin. Over the long term, market expansion in central China and value chain extension create significant growth potential. The current share price has yet to fully reflect the company’s asset value, earnings resilience, and growth prospects, making its undervaluation characteristics particularly prominent. As the company steadily expands in central China, continues its high-dividend policy, and upcoming financial reports reaffirm profitability, the market will gradually recognize its true value. This marks the beginning of value discovery and a prime investment opportunity.
In summary, for investors seeking stable growth, this short-term market sentiment-driven fluctuation may present a rare opportunity to position themselves in a leading regional cold chain enterprise.
