Imported Fruits Losing Their Appeal? “Fruit King” Sees Wealth Shrink Dramatically, Company Left with Only 600 Million RMB
Despite Impressive Performance, Why Has the First Fruit Stock Lost Its Luster?
From “Bang Bang” to “Fruit King”: A Legendary Life “Bang Bang” is one of the distinctive features of Chongqing, referring to the local term for dock laborers.
With just a bamboo pole, a bundle of rope, a strong shoulder, and physical strength, the tools of a “Bang Bang” are simple, and the rewards are not substantial.
In 1987, 17-year-old Deng Hongjiu came to Chongqing and joined the ranks of the “Bang Bang Army.”
Soon, he realized that selling fruits by carrying them was more profitable than just manual labor, so he started his fruit business.
Shortly after, Deng’s keen sense for business spotted an opportunity: the price of red mandarins at the Chaotianmen dock was almost double that in his hometown of Changshou. Why not buy the mandarins locally and sell them in Chongqing?
Without hesitation, he returned to Changshou, purchased red mandarins, and brought them to Chongqing for sale. Within a month, he made his first small fortune of 80 RMB.
To put this in perspective, in 1987, the monthly income of an ordinary worker was about 40-50 RMB. Earning 80 RMB in a month gave 17-year-old Deng Hongjiu the confidence to pursue the fruit business.
Riding the tide of the times, Deng Hongjiu’s fruit business grew larger. With improvements in logistics and cold chain technology, Deng led his team to officially establish Hongjiu Fruits in 2002.
Three years later, Deng ventured into high-end imported fruits, which commanded high prices and profits, making a significant profit.
Deng’s quick thinking led him to consider why he shouldn’t directly purchase fruits from Southeast Asia and wholesale them to the domestic market, thus eliminating the middleman.
Hongjiu Fruits transformed again, entering the imported fruit wholesale business.
To reduce losses of tropical fruits during transportation, Deng decided to procure, process, and sell directly from the origin to the domestic market.
This approach ensured the freshness of the fruits and reduced losses, quickly opening up the market.
The new era “Fruit King” thus began his legendary journey to wealth.
Capital Involvement and Listing on the Hong Kong Stock Exchange: The First Fruit Stock As domestic consumption upgraded, the high-end fruit market expanded, attracting capital attention to the booming Hongjiu Fruits.
In 2016, Hongjiu Fruits successfully secured over 50 million RMB in Pre-A round financing.
Subsequently, Hongjiu Fruits received 178 million RMB in A round investment, 540 million RMB in B round investment, and a total of approximately 1.326 billion RMB in C round series financing, amounting to about 2.098 billion RMB in total financing.
Alibaba invested in the final round of financing for Hongjiu Fruits on September 23, 2020.
In addition to Alibaba, investors in Hongjiu Fruits include Tianyi Capital, CMC Capital, Sunshine Insurance, Shenzhen Venture Capital, China Merchants Capital, SF Holdings, and CITIC Securities, among many others.
This reflects the high confidence investors had in Hongjiu Fruits’ business.
According to the prospectus of Hongjiu Fruits:
• In 2019, the company’s revenue was 2 billion RMB.
• In 2020, the revenue reached 5.771 billion RMB.
• In 2021, it grew to 10.28 billion RMB.
• In 2022, it continued to surge to 15.081 billion RMB.
With a sevenfold revenue increase over four years, such impressive performance naturally attracted capital attention.
Following multiple financing rounds, Hongjiu Fruits went public in Hong Kong in September 2022, becoming the first fruit stock. Deng Hongjiu’s net worth soared to 8.5 billion HKD.
It had been 35 years since he made his first small fortune of 80 RMB.
Reasons Behind the Stock Price Plunge A month after listing, Hongjiu Fruits’ stock price skyrocketed, with a 270% increase over just 59 trading days, bringing the market value close to 60 billion HKD.
However, since entering 2023, Hongjiu Fruits’ stock price has been in continuous decline, losing nearly 90% by October this year.
What are the reasons behind the stock price plunge?
First, with declining consumption, the high-end fruit market no longer enjoys its former glory. The plummeting prices of some high-priced fruits have significantly impacted Hongjiu Fruits.
Secondly, the company’s slowed performance growth has affected investor confidence. Although the half-year report shows that Hongjiu Fruits’ revenue increased by 19.4% year-on-year, this growth rate is not poor, but it is a significant slowdown compared to the previous years’ growth rates.
Moreover, the company’s profit in the first half of this year has declined compared to last year. Increased revenue with declining profits raises concerns about the company’s future growth.
Most importantly, Hongjiu Fruits’ accounts receivable exceeding 10 billion RMB poses a significant threat to the company’s operations. As of the end of June this year, the total receivables were as high as 10.15 billion RMB, while cash in hand was less than 600 million RMB.
The company’s long-term model of “goods first, payment later” is gradually eroding its declining profits. The financial report shows that as of the end of June, the impairment of accounts receivable was as high as 716 million RMB.
The difficulty in collecting payments is likely to remain a long-term headache for Deng Hongjiu.
Under such immense pressure, capital has voted with its feet, making the plunge of the first fruit stock unsurprising.
How the Fruit King will regain his former glory and what the future holds for Hongjiu Fruits remains to be seen. We can only wait for time to provide the answers.
Cited from https://www.sohu.com/a/727356535_121686524
Post time: Aug-06-2024