Can Adopt a Cow, which has a lower revenue compared to industry leaders, successfully go public?
Dairy brand Adopt a Cow (Chinese: 认养一头牛) released a prospectus for IPO on the mainboard of the Shanghai Stock Exchange on July 6, with CITIC Securities as the sponsor. The issue will not exceed 40,470,600 shares and will account for not less than 10% of the total share capital of the company post-issuance. Besides, it does not involve a public offering of shares by company shareholders.
The firm intends to raise CNY 1.85 billion through this IPO, of which CNY 977 million yuan will be used for the smart ranch construction project, while another CNY 520 million for brand building and marketing. The rest of the proceed will be used for information system upgrades and others.
Founded in 2014, the firm mainly engages in the research, development, production and sales of dairy products including multi-style pure milk, yogurt, milk powder, cheese and others. As of now, it has established 7 modern large dairy farms in Hebei and Heilongjiang provinces, with a stock of over 60,000 cows.
Examining the firm’s gross profit margin, it has dropped from 40.95% in 2019 to 28.86% in 2021. According to the firm, the decrease can be attributed to the increase in raw material prices and product price adjustments.
In terms of the firm’s revenue, it reached CNY 2.5 billion in 2021, up from CNY 865 million back in 2019. However, it is still low compared to domestic rivals such as Yili, Sunshine Dairy and SANYUAN. For instance, Yili’s revenue is 43 times that of Adopt a Cow.