上市捷报丨沙利文助力乐华娱乐集团成功赴港上市(02306.HK)

Lehua Entertainment Group (Stock Code: 02306.HK) successfully listed on the Hong Kong Capital Market Main Board on January 19, 2023. The company is a well-known artist management firm in China, ranking first among Chinese artist management companies based on revenue generated from artist management services in 2021, with a market share of 1.9%. Frost & Sullivan (hereinafter referred to as "Frost & Sullivan") provides exclusive industry advisory services for Lehua Entertainment Group's listing and hereby warmly congratulates them on their successful listing.

Lehua Entertainment Group (hereinafter referred to as "Lehua Entertainment") successfully listed on January 19, 2023, planning to issue 120 million H shares, of which 90% will be international offerings and 10% public offerings, with an additional 15% in excess rights. The issue price per share is HK$4.08, raising a net amount of approximately HK$391.3 million.

During the listing process in Hong Kong, 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 writing of relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important sections), helping the issuer communicate 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.

Investment Highlights

The company is a well-known artist management firm in China;

Systematic training of trainees and professional artist operations have created the Lehua model;

The company has extensive, diverse, and long-term cooperative business partners;

The company has established a Lehua brand image based on corporate social responsibility;

The company has a visionary and experienced management team and capable investors;

According to a Frost & Sullivan report, based on the company's revenue generated from artist management services in 2021, it ranks first among all Chinese artist management companies, with a market share of approximately 1.9%.

Overview of the Chinese Pan-Entertainment Market

The Chinese pan-entertainment market has grown rapidly in recent years, mainly driven by the increase in per capita cultural and entertainment expenditure among urban residents. According to a Frost & Sullivan report, the market size increased from approximately RMB 299.2 billion in 2017 to approximately RMB 700.3 billion in 2021, with a compound annual growth rate of 23.7% from 2017 to 2021. The total market size is expected to reach approximately RMB 1,345.6 billion by 2026, with a compound annual growth rate of 4.0% from 2021 to 2026.

Source: Frost & Sullivan Report

Overview of the Chinese Artist Management Market

The market size growth of the Chinese artist management industry has moderated, increasing from approximately RMB 63 billion in 2017 to approximately RMB 68.5 billion in 2018, with a growth rate of 8.8%. The market size decreased to approximately RMB 58.3 billion in 2019 mainly due to regulatory requirements at the end of 2018 for the proportion of artist salaries in total film and television investment. However, in the long run, such regulatory requirements are conducive to market balanced development.

In addition, the outbreak of the pandemic in 2020 briefly affected artists' work arrangements, such as filming of movies, TV dramas, and other programs, as well as offline promotional activities. Therefore, the market size of the Chinese artist management industry decreased to approximately RMB 52.3 billion in 2020. In 2021, the artist management industry gradually recovered from the pandemic. At the same time, driven by the continuous development of professional artist management systems, content production companies have an increasing demand for talented artists and diverse monetization channels, expanding the market size of the Chinese artist management industry to approximately RMB 612 billion in 2021.

According to a Frost & Sullivan report, the scale of the Chinese artist management market is expected to reach approximately RMB 111.7 billion by 2026, with a compound annual growth rate of 12.8% from 2021 to 2026, thanks to the development of professional artist management systems, the surge in digital channels competing for audiences, and diversified monetization channels.

Source: Frost & Sullivan Report

Competitive Landscape of the Chinese Artist Management Market

According to a Frost & Sullivan report, based on revenue generated from artist management services in 2021, the overall market share of the top five participants in the Chinese artist management market was approximately 5.5%, among which Lehua Entertainment ranked first, with a market share of approximately 1.9%.

Source: Frost & Sullivan Report

Overview of the Chinese Music Market

The total scale of the Chinese music market increased from approximately RMB 21 billion in 2017 to approximately RMB 666 billion in 2021, with a compound annual growth rate of 33.5% from 2017 to 2021. The significant growth was mainly driven by the rapid expansion of the digital music and music IP markets in China during the same period. According to a Frost & Sullivan report, the total scale of the Chinese music market is expected to reach approximately RMB 1164 billion by 2026, with a compound annual growth rate of 11.8% from 2021 to 2026.

Due to the improvement in the copyright protection environment, the scale of the Chinese music IP licensing market has grown exponentially, increasing from approximately RMB 6.2 billion in 2017 to approximately RMB 223 billion in 2021, with a compound annual growth rate of 37.5% from 2017 to 2021. As China continues to regulate music content licensing and sublicensing, users will further be required to pay for authorized music content, thereby increasing royalties. According to a Frost & Sullivan report, the music IP licensing market is expected to reach approximately RMB 439 billion by 2026, with a compound annual growth rate of 14.5% from 2021 to 2026.

Driven by the increasing willingness of listeners to purchase digital music content, the scale of the digital music market has experienced an astonishing growth, increasing from approximately RMB 142 billion in 2017 to approximately RMB 440 billion in 2021, with a compound annual growth rate of 32.6% from 2017 to 2021. According to a Frost & Sullivan report, the scale of the digital music market may reach approximately RMB 721 billion by 2026, with a compound annual growth rate of 10.4% from 2021 to 2026. In contrast, according to a Frost & Sullivan report, due to the rapid development of the Internet and mobile technology, the scale of the physical music market decreased from approximately RMB 500 million to approximately RMB 400 million between 2017 and 2021, and may decrease to approximately RMB 300 million by 2026.

Source: Frost & Sullivan Report

Frost & Sullivan has rich research experience in the culture and entertainment industry, assisting well-known enterprises in successfully listing on the capital market. Successful listing cases include: Wangchen Technology (2458.HK), Starlink Huawen (6698.HK), Grindr Inc. (GRND.NYSE), Ning Meng Film & Television (9857.HK), Boyi Intelligence (1204.HK), Deying Holdings (2250.HK), Qingci Games (6633.HK), Pop Culture (CPOP.NASDAQ), Thatched Cottage (2125.HK), Kuake Music (KUKE.NYSE), Changxin Media (XJB.SGX), Brilliance Tomorrow (1351.HK), Yala Technology (YALA.NYSE), Le Xiang Interactive (6988.HK), Zu Long Entertainment (9990.HK), Blue City Brothers (BLCT.NASDAQ), Liantian Film & Television (9958.HK), Nine Spirits Digital Entertainment (1961.HK), Yusheng Culture (1859.HK), Lujing Technology (1745.HK), Xinshi Culture (1740.HK), Tonic Company (2400.HK), Travel Orange Culture (8627.HK), Friend Times (6820.HK), Wanda Sports (WSG.NASDAQ), Tu Yi Holdings (1701.HK), Hometown Interactive (3798.HK), Flying Group (1901.HK), Huoyan Holdings (1909.HK), Lingbang Group (2230.HK), Haitian Tianyu Travel (1832.HK), Zen You Technology (2660.HK), Ruhun Holdings (RUHN.NASDAQ), Fosun Tourism Culture (1992.HK), Dream World (1119.HK), iQiyi Entertainment (3700.HK), Huya (HUYA.NYSE), Snake (1337.HK), Read Group (0772.HK), Meitu (1357.HK), China Digital Video (8280.HK), Yashiv (1993.HK), Wald Animation (1566.HK).

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