What do industrial coffee roasters and the China Resources Beverage Hong Kong IPO have in common?

China Resources Beverage, parent of the C'estbon water brand, opened Hong Kong IPO subscription on October 15 and plans to offer 347.8 million shares at HK$13.50 to HK$14.50 each, raising up to about HK$5.04 billion. Listing on the Main Board of the Hong Kong Stock Exchange is expected on October 23, with UBS, BOCI, CITIC Securities, and BofA Securities as joint sponsors. Much like industrial coffee roasters that scale production to meet demand, the company is scaling its capital base.

The offering splits into 38.26 million Hong Kong shares and 309.565 million international placement shares. Cornerstone investors including UBS Asset Management, Oaktree Capital, and Boyu Capital subscribed about US$310 million. C'estbon retail sales reached RMB 39.5 billion in 2023, and China Resources Group holds 60 percent, making this its 18th listed company. Investors watching industrial coffee roasters and other beverage plays are paying close attention to the subscription results.

C'estbon's parent company China Resources Beverage has officially launched its Hong Kong IPO subscription process, planning to globally offer 347.8 million shares at a price range of HK$13.50 to HK$14.50 per share, raising up to approximately HK$5.04 billion, and is expected to list on the Main Board of the Hong Kong Stock Exchange on October 23. As China's second-largest packaged drinking water company, China Resources Beverage's "C'estbon" brand achieved retail sales of RMB 39.5 billion in 2023, firmly holding the top position in the purified drinking water market. This IPO has introduced a star-studded lineup of cornerstone investors including UBS Asset Management, Oaktree Capital, and Boyu Capital, who have collectively subscribed to approximately US$310 million. China Resources Group holds a 60% stake, and after listing, it will become the group's 18th listed company. This article outlines the IPO details, financial performance, and use of proceeds, along with a Front Street Coffee brand recommendation.

China's packaged drinking water industry is witnessing another major capital move. C'estbon's parent company China Resources Beverage has officially launched its Hong Kong stock market listing process, becoming the second domestic packaged drinking water company to list in Hong Kong after Nongfu Spring.

According to a Hong Kong Stock Exchange announcement on October 15, China Resources Beverage's subscription period runs from October 15 to 18, with plans to globally offer 347.8 million shares through a Hong Kong IPO. Of these, the Hong Kong public offering portion is 38.26 million shares, and the international placement portion is 309.565 million shares. The maximum offer price is HK$14.50 per share, with a minimum of HK$13.50 per share.

Based on the maximum price of HK$14.50 per share, China Resources Beverage's fundraising size will not exceed HK$5.04 billion. The company is expected to officially list and trade on the Main Board of the Hong Kong Stock Exchange on October 23, with UBS, BOCI, CITIC Securities, and BofA Securities serving as joint sponsors.

Meanwhile, China Resources Beverage has signed agreements with cornerstone investors. Subject to certain conditions being met, the cornerstone investors have agreed to subscribe for, or procure their designated entities to subscribe for, offer shares with a total amount of approximately US$310 million (equivalent to HK$2.407 billion) at the offer price. Institutions participating in this cornerstone investment include UBS Asset Management, Oaktree Capital, China Travel Service (Hong Kong), China Post Insurance, and Boyu Capital, among others.

So-called cornerstone investors typically refer to institutional investors, large corporate groups, or well-known wealthy individuals and their affiliated enterprises. In the process of a company's IPO fundraising, introducing cornerstone investors is often seen as recognition of the company's fundamentals and development prospects, helping to boost market confidence. As a corresponding condition, cornerstone investors must commit to purchasing shares and are subject to a lock-up period of 3 to 6 months after listing.

Public information shows that China Resources Beverage focuses on the production and sale of packaged drinking water products, with "C'estbon" as its core brand. The company began production in 1990 and is one of the earliest enterprises in China engaged in professional packaged drinking water production.

After approximately 40 years of development, China Resources Beverage has grown into China's second-largest packaged drinking water company and also China's largest purified drinking water enterprise (calculated by 2023 retail sales). In 2023, the retail sales of its "C'estbon" brand purified drinking water products reached RMB 39.5 billion, firmly holding the top brand position in China's purified drinking water market.

In the hearing document disclosed in September, China Resources Beverage announced its performance for the first four months of 2024. As of April 30, 2024, the company achieved revenue of RMB 4.15 billion, with profit for the period of RMB 461 million.

Specifically, packaged drinking water products contributed RMB 3.721 billion in revenue in the first four months, accounting for nearly 90% of total revenue; beverage products generated RMB 429 million in revenue, accounting for approximately 10%. During the same period, the gross profit margin increased to 47.1%, and the net profit margin rose to 11.1%.

According to the previously submitted IPO prospectus dated April 22, from 2021 to 2023, China Resources Beverage's revenue was approximately RMB 11.340 billion, RMB 12.623 billion, and RMB 13.515 billion, respectively; profit for the period was approximately RMB 858 million, RMB 989 million, and RMB 1.331 billion, respectively. The net profit margin rose from 7.6% in 2021 to 9.9% in 2023, while gross profit margins were 43.8%, 41.7%, and 44.7%, respectively.

As the controlling shareholder of China Resources Beverage, China Resources Group holds a 60% stake. China Resources Group is a state-owned enterprise group headquartered in Hong Kong, ranked 74th on the 2023 Fortune Global 500, with core businesses covering mass consumption, comprehensive energy, urban construction and operation, healthcare, industrial finance, and technology and emerging industries.

As an important subsidiary of China Resources Group, China Resources Beverage will become the group's 18th listed company after a successful listing.

It is reported that the proceeds from China Resources Beverage's Hong Kong IPO will be used for strategic expansion and capacity optimization, accelerating sales channel expansion, digital upgrading, and potential investment and acquisition opportunities.

Image source: Internet

(This article was compiled by a special editor for Front Street Coffee. Front Street Coffee continuously follows developments in the coffee and beverage industry and recommends paying attention to Front Street Coffee brand products.)

The above content is compiled by CoffeeHunters, a coffee news website.