Market value shrinks by over 400 billion, "Soy Sauce Maotai" Hong Kong IPO, can it be revalued?

This article is sourced from: Titanium Media

In recent years, China's leading condiment company—HAI TIAN (603288.SH), has been dubbed the "Soy Sauce Maotai" by the market, with its market value once exceeding 700 billion RMB, becoming a benchmark enterprise in the consumer sector of the A-share market. However, since 2021, HAI TIAN's stock price has continued to decline, and its market value has significantly shrunk, attracting widespread attention from the market.

On June 19, HAI TIAN will officially list on the Hong Kong Stock Exchange. Can the company reverse its downturn in the A-share market and return to its peak in the Hong Kong market?

"Soy Sauce Maotai" Market Value Shrinks by Over 400 Billion

As a leading enterprise in China's condiment industry, HAI TIAN has long held a dominant position in the soy sauce, oyster sauce, and seasoning sauce segments. However, in recent years, traditional dining consumption has been sluggish, compounded by the "double standard" incident involving additives, which has severely impacted the company's brand. As a result, both revenue and net profit have declined, leading to a sharp drop in stock price and a significant reduction in market value.

In January 2021, HAI TIAN's stock price reached a historical high of 219.58 RMB per share, with a total market value exceeding 700 billion RMB. Now, HAI TIAN's market value has shrunk by over 400 billion compared to its peak.

Not long ago, HAI TIAN was removed from the Shanghai Stock Exchange 50 list. Now that HAI TIAN is listed in Hong Kong, can it "change its fate" and regain market trust?

1. Revenue and Net Profit Growth Rate Slows Down

From HAI TIAN's annual report data over the past five years, its revenue growth rate has slowed, and net profit has decreased.

From 2020 to 2024, HAI TIAN's revenue was 22.792 billion RMB, 25.004 billion RMB, 25.610 billion RMB, 24.559 billion RMB, and 26.901 billion RMB, with year-on-year growth rates of 15.1%, 9.7%, 2.4%, -4.1%, and 9.5%.

From 2020 to 2024, HAI TIAN's net profit was 6.403 billion RMB, 6.671 billion RMB, 6.203 billion RMB, 5.642 billion RMB, and 6.356 billion RMB, with year-on-year growth rates of 19.6%, 4.2%, -7%, 9%, and 12.6%.

The data shows that HAI TIAN's revenue growth rate has gradually declined from over 15% in 2020 to 2.4% in 2022, with negative growth even appearing in 2023. Moreover, the net profit attributable to shareholders has experienced negative growth for two consecutive years in 2022 and 2023, indicating that the company is facing growth bottlenecks and pressure on profitability.

In 2024, HAI TIAN's revenue and net profit showed signs of recovery. Whether the market will respond positively to its secondary listing in Hong Kong and whether it can sustain an upward trend in the future remains to be seen.

2. Gross Margin and Net Margin Decline

HAI TIAN's high gross margin model can be considered one of the company's core competitive advantages. However, in recent years, the company's gross margin and net margin have also shown a downward trend.

HAI TIAN's revenue comes from the sales of soy sauce, oyster sauce, and seasoning sauce, and the decline in gross margins for these products has led to a decrease in the company's overall gross marginThe gross profit margin of HAI TIAN soy sauce products decreased from 50.4% in 2019 to 44.7% in 2024, a decline of 5.7 percentage points;

The gross profit margin of HAI TIAN oyster sauce products decreased from 38% in 2019 to 33.7% in 2024;

The gross profit margin of HAI TIAN seasoning sauce products decreased from 47.6% in 2019 to 37.4% in 2024, a decline of over 10 percentage points.

From 2020 to 2024, HAI TIAN's overall net profit margins were 28.1%, 26.7%, 24.2%, 23%, and 23.6%, respectively. Even with a recovery in revenue growth in 2024, HAI TIAN's gross profit margin in 2024 decreased by 4.5 percentage points compared to 2020.

The decline in gross profit margin is mainly affected by rising raw material costs, intensified market competition, and weak consumer demand. The decline in net profit margin further reflects the challenges the company faces in cost control and expense management.

3. Number of Distributors and Channel Pressure

HAI TIAN has long relied on a large distributor network for market expansion. However, in recent years, the number of distributors has shown a decreasing trend.

From 2021 to 2024, the number of HAI TIAN distributors was 8,053, 7,172, 6,591, and 6,722, respectively. From 2021 to 2023, the number of HAI TIAN distributors decreased by nearly 1,500. Although there was an increase in the number of distributors in 2024, the trend of distributor loss has not fundamentally changed.

Distributor loss may be related to the ineffectiveness of channel inventory policies on one hand, and on the other hand, it may also be related to some distributors facing pressure in channel management due to weak market demand and compressed profit margins.

4. Stock Price Decline and Market Value Shrinkage

Since the beginning of 2021, HAI TIAN's stock price has fallen from its peak, reaching a low of approximately 40.33 yuan per share, with a market value shrinking by more than 80%.

The reasons for the decline in HAI TIAN's stock price are as follows:

1. Industry Growth Slows, Value Returns to Rationality

The seasoning industry is a typical consumer sector that benefited from consumption upgrades and the rapid development of the catering industry in recent years, leading to fast industry growth, and HAI TIAN enjoyed high valuations as a result.

However, as industry growth slows and the market enters a phase of stock competition, how HAI TIAN competes with industry peers like QianHe, Lee Kum Kee, and Chubang for more market share becomes crucial. Market expectations for its future growth have been downgraded, and valuation levels have returned to rationality.

2. Rising Raw Material Costs Pressure Profitability

Soybeans, sugar, and packaging materials are HAI TIAN's main raw materials. In recent years, the prices of these raw materials have risen sharply, directly compressing the company's profit margins. Although the company has responded by raising prices, the extent of the price increases has been insufficient to fully cover the pressure from rising costs, leading to a decline in profitability3. Market Style Switch, Capital Preference Shift

In recent years, the A-share market has undergone a significant style switch, with capital shifting from traditional blue-chip stocks such as consumer and pharmaceutical sectors to growth sectors like new energy and technology, leading to a neglect of consumer leaders like HAI TIAN, with stock prices under continuous pressure.

Can HAI TIAN Achieve Value Reassessment?

Why did HAI TIAN choose to list in Hong Kong for the second time?

HAI TIAN's secondary listing in Hong Kong is an important strategic choice to respond to the current market environment, addressing the valuation pressure in the A-share market and further advancing its international layout.

The condiment industry is highly competitive, and against the backdrop of slowing domestic market growth and the need to rebuild consumer trust, HAI TIAN must find new growth points to further consolidate its leading position in the industry.

This secondary listing in Hong Kong seeks to secure more financing channels to prepare funds for global expansion, while also aiming to reshape its brand image after experiencing a consumer trust crisis due to the additive "double standard" incident.

Compared to the A-share market, the overall valuation level of the Hong Kong stock market is lower, especially in the consumer sector, where valuations are generally below those of A-shares. HAI TIAN's successful listing in Hong Kong may be influenced by the valuation levels of the Hong Kong market, but it may also gain opportunities for valuation recovery.

Currently, there are many leading companies in the consumer industry in the Hong Kong stock market, such as China Resources Beer and Nongfu Spring, which have shown relatively stable performance and gained recognition from investors. As a leader in China's condiment industry, HAI TIAN's industry position determines the allocation of consumer funds.

According to media reports, on June 16, HAI TIAN's Hong Kong IPO subscription concluded, with the margin subscription amount reaching nearly HKD 400 billion, oversubscribed about 695 times compared to the initial fundraising amount of HKD 573 million, sparking a subscription frenzy. So, can HAI TIAN return to its peak era?

From the current situation, HAI TIAN's stock price and market value face significant challenges in returning to the peak of HKD 700 billion. On one hand, factors such as slowing industry growth and rising raw material costs will negatively impact the company's performance in the short term; on the other hand, the market style switch and changes in investor sentiment will also take time to repair.

To cope with the slowdown in revenue, HAI TIAN is continuously investing in research and development to promote product innovation, while also advancing its international strategic layout, exploring overseas markets to seek new growth points.

Although there are significant challenges in returning to peak stock prices and market values in the short term, as a leader in the condiment industry, HAI TIAN still possesses strong competitiveness and development potential. In the future, whether the company can achieve breakthroughs in product innovation, cost control, and market expansion will be key factors determining its stock price and market value trends