Eleanor Wang
Cantonese hot pot giant Laowang has filed a second application for an initial public offering in Hong Kong after its previous one lapsed amid the two-year Covid pandemic that's ravaged the city's restaurant industry.
In 2021, the chain's revenue rose 15.5 percent to 1.29 billion yuan (HK$1.59 billion) year-on-year, while its profit fell 79.3 percent to 14 million yuan.
Laowang ranked first both revenue and the number of restaurants in the Cantonese hot pot sector in 2020, according to a commissioned Frost & Sullivan report.
The report also states that the Cantonese hot pot market is the fastest-growing segment within the entire hot pot market in terms of revenue, amid rising demand for healthy dining options.
As such, Laowang says it is well-positioned to cash in on the strong market momentum, thanks to its focus on healthy dining options.
If the IPO is successful, Laowang will become the third hot pot stock in Hong Kong.
Two major Chinese hot pot brands - Haidilao (6862) and Xiabuxiabu (0520) are already listed in Hong Kong. And both have been hit by losses and partial closures in 2021.
Haidilao had a net loss of 4.16 billion yuan compared to a net profit of 309.3 million yuan for the previous year while Xiabuxiabu reported a loss of 293 million yuan compared to a profit of 1.837 million yuan in 2020.
Sichuan hot pots account for 64.9 percent of China's hot pot market, but Laowang focuses on food for the health-conscious.
The chain is famous for its stewed chicken and pork tripe soup and takes pride on the quality of its ingredients.
Its pork belly is imported from Denmark where the pigs are fed on an all-day vegetarian diet, while its shabu-shabu beef for main courses comes from Australia and the US.
From 2019 to 2020, these imports accounted for 26.9 percent and 27.7 percent respectively of the total cost of ingredients, but 2021 saw pork imports decrease to 15.6 percent of total costs due to price increases abroad.
Its other two signature dishes are clay pot rice with Chinese sausage and water chestnut and saccharin juice.
The majority of Laowang's customers are young people. Its Member's Club is 9.3 million strong, and among the 1.4 million who indicated their age group, around 72 percent were under 35. This is why Laowang operations are focused on the younger crowd.
However, its performance has been on a downward trend.
Its adjusted net profit fell from 79.91 million yuan to 13.96 million yuan from 2019 to 2021, while the table turnover rate dropped from 3 times a day to 2.5 and 2.3 over the same period.
Amid the decline in profits, Laowang had divided its restaurants into three distinctive brands.
Its flagship Want Hotpot caters to upscale dining, Guoji Hotpot focuses on solo dining, while Soup for the Soul is a fast casual restaurant for small gatherings and caters to younger clientele, and the average spend per customer at these three brands is 124.4 yuan, 109.9 yuan and 108.7 yuan respectively.
It currently operates 146 Want restaurants, two Guoji restaurants, and two Soup for the Soul restaurants in Greater China.
Meanwhile, the company has continued with a shop expansion plan to capture traffic in upscale shopping centers.
Ahead of the IPO process, Laowang had raised approximately 94.36 million yuan from 18 investors. One of these is China International Capital Corporation, which holds 2.09 million shares of Laowang through its subsidiaries, and is one of the co-sponsors of the IPO.
Huatai International is the other co-sponsor.
