Chinese seafood processor and convenience seafood distributor Xianmeilai Food Co. is once again going for an initial public offering.
This is the third time Xianmeilai Food has filed for an IPO on the stock market listing in Shanghai Stock Exchange, following unsuccessful attempts in 2021 and 2022. The privately owned company is seeking to raise CNY 600 million (USD 96 million, EUR 84 million) to expand its distribution and logistics network as it bets big on growing Chinese demand for convenience meals.
Established in 2006 and operating out of the coastal city of Beihai in southern Guangxi province, Xianmeilai mainly sells prepared vegetable products but also has a sizeable seafood business, including packaged breaded cod and shrimp for retail. The firm, which claims to be the first Chinese “ready-made meals” firm to list publicly, delayed its previous IPO attempts after discrepancies arose in its procurement disclosures, but is trying again to cash in on a theme growing in popularity with investors.
In a report shared with SeafoodSource, market research group Mintel projected 9.9 percent annual growth in Chinese demand for ready-made meals through 2026, when the market will be worth an estimated CNY 346.5 billion (USD 55.4 billion, EUR 48.5 billion). China’s ready-made product market grew 9.6 percent in 2021 to a total retail value of CNY 216.4 billion (USD 34.6 billion, EUR 30.2 billion).
Xianmeilai’s income dropped from CNY 911 million (USD 145 million, EUR 127.5 million) in 2019 to CNY 849 million (USD 135.8 million, EUR 118.8 million) in 2020, before rebounding to CNY 915 million (USD 146.4 million, EUR 128 million) in 2021. The company booked profits of CNY 89.7 million (USD 14.3 million, EUR 12.5 million) in 2019, CNY 90.2 million (USD 14.4 million, EUR 12.6 million) in 2020, and CNY 81.1 million (USD 12.9 million, EUR 11.3 million) in 2021. In 2022, its profits inched up to CNY 85 million (USD 11.9 million, EUR 11.1 million), still below its pre-Covid totals.
Boosting Xianmelai’s outlook is the fact that one of its key customers, restaurant operator Haidilao International Holdings, returned to profitability in 2022, according to a recent circular to investors. The company, best known for its hotpot casual dining restaurant chain, is projecting profits of CNY 1.3 billion (USD 182 million, EUR 169 million) in 2022, compared to a loss of CNY 4.1 billion (USD 574 million, EUR 533 million) in 2021. In 2022, the company’s revenue fell 15.8 percent to CNY 34 billion (USD 4.76 billion, EUR 4.42 billion) as a result of Covid’s impact on demand.
However, Xianmeilai will face off against larger, established players that have also moved or doubled down on ready-made foods, like Guolian Aquatic and Fujian Anjoy Food Co., as well as Sanquan Foods and Zhengzhou Synear Food Co., both of which have built huge scale in pork processing and are now moving into the frozen seafood snack market.
Speaking on condition of anonymity, a seafood executive in Qingdao familiar with the company questioned Xianmeilai’s ability to grow its profits.
“There is too much emphasis on the potential of the ready-made meals theme, and too many companies claim to be leaders in this field,” the Qingdao executive told SeafoodSource.
Market watchers commenting in the online comments section of the Securities Daily, a newspaper published in Shanghai, have pointed to competition from larger players as well as a reliance on large retailer RT Mart as Xianmeilai’s main weaknesses.
Alongside more competition, Xianmeilai is also facing weaker domestic demand, exacerbated by the recovery from Covid restrictions and an absence of government cash payments akin to what many Western consumers received via Covid relief funds during the pandemic. China’s consumer price index (CPI) increased from 0.9 percent year-on-year in January to 1.5 percent year-on-year in March, but core CPI (excluding food and energy) fell from 1.2 percent to 1.1 percent year-over-year.
Xianmeilai goes to the markets just as a new IPO system introduced by China is making share sales on Chinese exchanges more market-oriented. The most-prominent change made by China’s central government recently is the elimination of previous limits on the movement of share prices, with the goal of encouraging more listings.
With China's newly liberalized initial public offering (IPO) market outperforming that of the United States, it may be an opportune time for Xianmeilai to go to the markets. U.S. initial public offerings are subdued as investors wait out high inflation rates and turmoil in the banking sector. American IPOs were down 40 percent year-on-year in the first four months of 2023, according to information platform Dealogic. IPOs in China accounted for USD 19.5 billion (EUR 18 million) , or 53 percent of the total deal flow in the first four months of 2023, according to Dealogic.
China is keen to harness its stock exchanges to funnel money to policy priorities of the central government, such as developing home-grown technology in areas like artificial intelligence and semiconductors. Improving the country’s food security through innovation in food production is also a government priority.
Photo courtesy of Xianmelai Food Co.
