Good News on Listing | Frost & Sullivan Assists DAS Group Co., Ltd. to Successfully List on the Hong Kong Stock Exchange (1405.HK)

Dazheng Co., Ltd. (hereinafter referred to as 'Dazheng Shares') successfully listed on March 28, 2023. The company plans to issue 12,799,000 H shares, of which 90% will be international offerings and 10% Hong Kong public offerings, with an additional 15% being over-allotment rights. The issue price per share is HK$46.00, and it is expected that the net proceeds from the issuance will be approximately HK$459.9 million.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

The company is a leading pizza company;

The company continues to develop localized menus focusing on pizza;

The company's unique expertise and leadership in outbound delivery;

The company has a close relationship with the global Darden's system;

The company has a management team with rich experience, foresight, and strong execution capabilities.

According to the Frost & Sullivan report, in terms of revenue for 2022, the company:

Ranked third in the Chinese pizza market;

Ranked third in the China pizza delivery market;

Ranked second in both the pizza market and pizza delivery market in first-tier cities in China;

It is the company with the fastest growth rate among China's top five pizza brands.

The Chinese catering industry refers to the commercial activities that provide consumers with pre-prepared food and dining venues. The revenue scale of China's catering industry increased from RMB 3,579 billion in 2016 to RMB 4,6721 billion in 2019, with a compound annual growth rate of 9.3%. Affected by the COVID-19 pandemic, the scale of China's catering industry decreased to RMB 3,9527 billion in 2020 but recovered to RMB 4,3941 billion in 2022. It is expected that China's catering industry will maintain rapid and stable growth, reaching RMB 7,6586 billion by 2027, with a compound annual growth rate of 11.8% from 2022 to 2027. The growth of China's catering industry is mainly driven by increased disposable income, urbanization levels, penetration rates of dining out and takeout, as well as improved food safety and a favorable regulatory environment.

The Chinese pizza market is a segment of the Western food market. Pizza restaurants in China typically offer a range of foods, including (i) pizzas, which can usually be customized by crust type, size, sauce, and toppings; (ii) staple foods such as bread, sandwiches, rice, and pasta; (iii) snacks such as fried chicken, fries, grilled meat, desserts; and (iv) beverages such as soda, bottled drinks, tea, and coffee. With increasing disposable income, continuous product innovation, the growing acceptance of Western food among young consumers, and the growth of the pizza market in lower-tier cities, pizza restaurants have become popular in China over the past few decades and are expected to become even more so in the future.

According to a Frost & Sullivan report, from 2016 to 2019, the revenue scale of the Chinese pizza market increased from RMB 228 billion to RMB 335 billion, with a compound annual growth rate of 13.7%. From 2022 to 2027, the market size of the Chinese pizza market is expected to grow at a compound annual growth rate of 15.5%, reaching RMB 771 billion by 2027. The improvement in China's urbanization level, the increase in disposable income among Chinese consumers, and the growing acceptance of Western cuisine by consumers (especially younger generations), especially among Chinese consumers, have driven the growth of the Chinese pizza market.

According to Frost & Sullivan's data, although pizza is not a new food type in China, given its low penetration rate, the Chinese pizza market still has great potential. For example, in 2022, there were about 25 pizza restaurants per million people in first-tier and new first-tier cities, while in second-tier and third-tier (or lower-tier) cities, there were about 15 and 7 pizza restaurants per million people, respectively. In contrast, Japan and South Korea had about 29.5 and 30.0 restaurants per million people during the same period. In recent years, the Chinese pizza market recorded significant growth before the outbreak of COVID-19 in 2020, with a compound annual growth rate of 13.7% from 2016 to 2019.

Due to the Chinese government's strict quarantine measures to contain the further spread of COVID-19, the revenue of the Chinese pizza restaurant market decreased from RMB 335 billion in 2019 to RMB 305 billion in 2020. Looking ahead, from 2022 to 2027, the total revenue of the Chinese pizza restaurant market is expected to increase, with a compound annual growth rate of 15.5%, which is the same as before the outbreak of the COVID-19 pandemic.

The following figure shows the market size of China's pizza market by revenue from 2016 to 2027, ranked by column:

Source: Frost & Sullivan report

In the Chinese pizza market, delivery sales have grown rapidly and are expected to account for most of the revenue in the next five years. From 2016 to 2019, the revenue scale of the delivery segment in the Chinese pizza market increased from RMB 7.6 billion to RMB 14.1 billion, with a compound annual growth rate of 22.9%.

In 2020, despite the adverse impact of the COVID-19 pandemic, China's pizza market experienced an overall contraction. However, the pizza delivery market showed strong resilience, reaching a scale of RMB 157 billion. From 2022 to 2027, the market size of China's pizza delivery segment is expected to grow at a compound annual rate of 18.7%, reaching RMB 514 billion by 2027. It is anticipated that by then, the delivery segment will account for 66.7% of China's pizza market.

The rapid growth of China's takeout pizza market is mainly due to the highly suitable nature of pizza for takeaway, the development of Chinese takeout platforms, and the increase in the number of mobile internet users in China.

The following figure shows the revenue scale of China's pizza market from 2016 to 2027, divided into takeaway and dine-in services:

Source: Frost & Sullivan report

The Chinese pizza market is highly concentrated, with the top five participants accounting for 49.9% of the market share based on revenue in 2022. In 2022, our company ranked third as the largest pizza restaurant company in China by revenue, with a market share of 5.3%.

As a sub-market within the Chinese pizza market, the pizza delivery market is highly concentrated, with the top five participants accounting for 44.5% of all delivery sales in the Chinese pizza market. In 2022, based on delivery revenue, our company was the third-largest pizza catering company in the Chinese pizza market, with a market share of 6.9% in 2022.

• Brand awareness

• Capable of effectively managing the supply chain

• Capable of providing a seamless delivery experience

• Technology investment

• Maintain standardization and regulatory compliance

• Maintain growth and remarkable economic benefits

Frost & Sullivan has extensive research experience in the food industry, assisting well-known enterprises in successfully listing on capital markets. Recent successful listings include: Bao Guoyuan (2411.HK), Zhengwei (2147.HK), Weilong (9985.HK), Shuangcaizhuang (2321.HK), Youran Animal Husbandry (9858.HK), Jiulongwang (1927.HK), Yumart (9987.HK), Suning China (9987.HK), Nongfu Spring (9633.HK), Fengxiang Food (9977.HK), Simore (6969.HK), China Feihe (6186.HK), China National Tobacco International (6055.HK), Youpin 360 (2360.HK), Wugu Flour Mill (1837.HK), Baby Tree (1761.HK), Haidilao (6862.HK), Yongsheng Agriculture (8609.HK), Longhui Holdings (1007.HK), Xinrong International (1587.HK), Yiyuan Liquor Industry (8146.HK), Jierong International (2119.HK), Bingshi International (1705.HK), Hitachi Foods (1475.HK), Asia Grocery (8413.HK), Chowking Duck (1458.HK), COFCO Meat (1610.HK), Yihai International (1579.HK), Zhongdi Dairy (1492.HK), Dali Foods (3799.HK), Manor Ranch (1533.HK), Wanzhou International (0288.HK), and others.