Nongfu Spring (IPO): COVID Impact Not Significant

Nongfu Spring IPO (Valuation): Looks Slightly Pricey, But Worthwhile

Nongfu Spring: Double-Digit Growth Rates and Margin Upside Likely With Cash Generation - So Why IPO?

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

As expected <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a> had a successful IPO. Nongfu's stock opened at HKD 39.8 per share up 85% from its issue price. The stock ended the day at HKD 33.1 per share, 54% above the IPO price. The IPO was oversubscribed 1,148 times. The share price performance shows investor demand for defensive stocks amidst the ongoing COVID-19 crisis.  During the second day of trading, the share price increased another 2.3%, closing at HKD 34.1 per share. At the current share price (HKD 35.9), Nongfu is trading at FY+2 EV/EBIT and PE of 43.6x and 47.6x respectively.  The company’s valuation looks expensive – the question is, should you take profits, keep it in the radar to short, or hold on? We go through the details below.

As expected Nongfu Spring (9633 HK) had a successful IPO. Nongfu's stock opened at HKD 39.8 per share up 85% from its issue price. The stock ended the day at HKD 33.1 per share, 54% above the IPO price. The IPO was oversubscribed 1,148 times. The share price performance shows investor demand for defensive stocks amidst the ongoing COVID-19 crisis.  During the second day of trading, the share price increased another 2.3%, closing at HKD 34.1 per share. At the current share price (HKD 35.9), Nongfu is trading at FY+2 EV/EBIT and PE of 43.6x and 47.6x respectively.  The company’s valuation looks expensive – the question is, should you take profits, keep it in the radar to short, or hold on? We go through the details below.

Nongfu Spring’s Sparkling Debut: Opened 85% Up- Is It Time to Short?