Blue Moon Is About To Land In Hong Kong Stock Market, With 20 Times Of Floating Profit And 70 Times Of PE Over The Past 10 Years, Causing Controversy

Blue moon Group Holding Co., Ltd. (hereinafter referred to as "blue moon"), known as "the first brother of laundry liquid", went public on December 4 and will complete its pricing on December 9. It is expected to land on the Hong Kong stock exchange for listing on December 16.

Blue moon plans to sell about 747 million shares worldwide, with an offering price of HK $10.20-13.16 per share. If the price is priced according to the upper limit of the offering range, the IPO will raise at most HK $9.83 billion, which is expected to exceed the HK $8.15 billion raised by Nongfu Shanquan.

Blue moon's products cover three categories: clothing cleaning care (washing liquid, etc.), personal cleaning care (hand washing liquid, etc.) and home cleaning care (disinfectant, etc.).

According to frost Sullivan report, blue moon ranked first in China's detergent market for 11 consecutive years (2009-2019), and the first in China's hand sanitizer market for eight consecutive years (2012-2019). In 2019, blue moon ranked first in China's detergent market, concentrated detergent market and hand sanitizer market in terms of retail sales value.

The so-called "create a new era of laundry" blue moon, in addition to the favor of consumers, can win the favor of the capital market?

The rapid growth of the blue moon

From "no idea of listing" to being listed twice, blue moon submitted an application for listing on the main board of the Hong Kong Stock Exchange on June 29 this year.

On November 18, documents from the Hong Kong Stock Exchange showed that blue moon had passed the listing hearing of the Hong Kong stock exchange, and the IPO was launched on December 4. At this point, blue moon IPO finally landed.

According to the data, from 2017 to 2019, the operating revenue of blue moon was HK $5.632 billion, HK $6.768 billion and HK $7.050 billion, respectively, with a compound annual growth rate of 11.9%; in the same period, its net profit was HK $86.16 million, HK $554 million and HK $1.079 billion, with a CAGR of 254.0%.

In the first half of 2020, blue moon achieved a revenue of HK $2436 million, a year-on-year decrease of about 10%, and a net profit of HK $302 million, a year-on-year increase of 38.5%.

In the three categories of clothing cleaning care, personal cleaning care and home cleaning care, 87.4%, 87.4%, 87.6% and 69.0% of blue moon's revenue in 2017, 2018, 2019 and the first half of 2020 came from clothing cleaning and care products, mainly including detergent with different effects and clothing additives, such as fabric softener and collar cleaner. Another indicator reflecting its performance is the gross profit margin, which rose from 53.2% in 2017 to 64.2% in 2019. Blue moon explained that the rise in gross profit rate in recent years "was mainly driven by the downward trend of raw material prices and other factors such as improved inventory management and production efficiency."

In terms of channels, in addition to offline channels such as hypermarkets, supermarkets, convenience stores, grocery stores, gas stations and small community stores, blue moon has been selling products on e-commerce platforms since July 2012.

According to the prospectus, in the past three years, the proportion of blue moon's online sales has been increasing, and the income generated has increased from HK $1867 million in 2017 to HK $27182 million in 2018, and further increased to HK $3328 million in 2019, accounting for 33.1%, 40.2% and 47.2% of the company's total revenue respectively.

In the first half of 2020, the proportion of online sales of blue moon will further increase to 58.8%.

In this process, the number of e-commerce platforms cooperated by blue moon has increased from 55 on December 31, 2018 to 82 on December 31, 2019.

"When the bulk powdery washing products are the mainstream, it will open up a liquid market; when the offline market is the mainstream sales channel, it has to carry out a channel revolution to shift the focus of sales to the online market..." Many years ago, Zhuang Qichuan, another boss in the daily chemical industry, once commented on the blue moon under the leadership of Luo Qiuping, the founder.

Hillhouse's 10-year return

With the coming of listing, blue moon and the 10-year "Bole" high-level story is gradually known.

According to the prospectus, pan Dong, chairman of blue moon's board of directors, and Luo Qiuping, the company's chief executive officer, are husband and wife. At present, Luo Qiuping is the chief executive officer and executive director of blue moon, and his wife pan Dong is the chairman of the board and chief technical officer. According to the ownership structure, the two hold 88.92% shares of blue moon through zed and van Group Limited, which are the actual controllers of blue moon.

In addition, Hillhouse capital's HCM fund holds 10% of blue moon's shares.

As early as November 30, 2010, Hillard capital invested US $45 million in blue moon, and HCM issued and allotted 4500 shares of Aswan series a preferred shares with a par value of US $1.00 per share, and made an additional investment of US $1.03 million in the following year.

Zhang Lei, founder of Hillhouse capital, has publicly expressed his optimism for blue moon. "In 2008, Hillhouse capital, which studied the consumption upgrading, saw that the multinational companies P & G and Unilever occupied the household washing market. However, the historical burden of these multinational companies made them unable to grasp the trend of consumption upgrading, which brought opportunities to the local blue moon.".

According to media analysis, according to the upper limit of the offering price, after blue moon's listing, the shareholding ratio of Hillard capital will be diluted to 9.3%, and the stock market value will be about 7 billion Hong Kong dollars. Only from the perspective of stock floating profit, Hillard capital's investment in blue moon has a floating profit of nearly 20 times.

In this public offering, six institutions, including BOCHK asset management, Volkswagen (Hong Kong) International, Fullerton fund, Changjia group, Dawan fund and associated investment management group, intend to subscribe for blue moon's shares with a total amount of HK $1.821 billion. Among them, BOCHK asset management is a wholly-owned subsidiary of BOCHK, and Volkswagen international is a subsidiary of Shanghai Volkswagen.

Valuation in dispute

However, once the prospectus was released, blue moon's IPO valuation also attracted market attention. According to the above price range, the static price earnings ratio of blue moon's IPO is about 54-70 times. Some investors think that the valuation of blue moon is "too high".

However, Xu Yibin, executive director and chief executive of yaocai securities, believes that blue moon is the "first brother" of household cleaning products and personal care products in the mainland, known as "P & G" in China, with a gross profit rate of 64%. In the past three years, the company has continued to make profits, and has steadily increased every year. It is quite unique in the industry, so this IPO is very attractive.

However, the reality that can not be ignored is that blue moon is facing severe competition challenges.

In 2019, 81.4% of the domestic detergent market share is divided by the top five enterprises, among which blue moon takes the first place with 24.4% market share, followed by nees 23.5%, Liby 12.3%, willay 11.2% and P & G 9.9%.

It can be seen that the gap between blue moon and the second place is only 0.9%. In addition, the number of players such as LiBai, AoMiao, Bilang, willus and tide is increasing. How to continuously expand the advantage is a difficult problem for blue moon.

In the prospectus, blue moon also mentioned that "the revenue for the nine months ended September 30, 2020 was slightly lower than that for the nine months ended September 30, 2019", which was mainly due to the decline in income of clothing cleaning and care products. Due to the implementation of social distance restriction during the outbreak of the new coronavirus (mainly in the first half of 2020), consumers have reduced outdoor activities, reducing the demand for clothing cleaning and care products.

As a result of the above effects, as of June 30, 2020, blue moon had generated sales returns of about HK $149.8 million in respect of the relevant products, the amount of which was equivalent to 6.1% of the company's revenue for the six months ended June 30, 2020.