On the 25th, China Li Lang successfully listed in Hong Kong after completing a six-day public offering. Initially, Li Lang planned to issue a total of 300 million shares, with 270 million shares for international placements and 30 million shares for public subscription, representing 90% and 10% of the total shares, respectively. The offering price was expected to be between HK$3.20 and HK$4.00. However, after the public offering concluded, Li Lang received an impressive 150 times oversubscription, with frozen funds exceeding HK$19.1 billion. Due to this overwhelming demand, the clawback mechanism was triggered, increasing the public offering shares from 10% to 50%, while reducing the international placement ratio from 90% to 50%.
Industry insiders predict that Li Lang's fundraising through this listing could exceed $200 million. What strategies did Li Lang employ to attract such significant investor interest? And what are the company’s plans post-listing? These questions are generating much discussion. For this year, Li Lang aims for a net profit target of 280 million yuan, marking an almost 82% increase over last year, a goal that seems well within reach.
Hu Chengchu, Executive Director and Vice President of Li Lang (China) Co., Ltd., expressed confidence in achieving these targets. He mentioned that despite challenges posed by the global financial crisis, which led to a delay in Li Lang's initial July 2009 listing plan, the company’s decision to relaunch its IPO in March was justified as the economy began recovering.
Li Lang has also introduced a sub-brand, L2, targeting younger consumers aged 20-30. Hu Chengchu emphasized that Li Lang will continue its multi-brand strategy to cater to different age groups. While the primary brand remains focused on individuals aged 28-45, L2 will adopt a distinct identity with a more youthful and stylish approach, utilizing an independent European design team and a separate operational structure. The brand ambassador for L2 is Hong Kong star Daniel Wu, whose appointment was seen as a vote of confidence by investors due to his popularity among younger demographics.
Funds raised from the IPO will be allocated as follows: 15% for L2 operations, with 20% going towards design and development, 10% for production equipment, 30% for advertising and promotion, and 40% for distributor incentives. L2 is expected to launch in stores by October, priced at 20%-30% less than the main brand.
For Li Lang, the terminal is crucial. The company currently operates 1,696 independent stores, including 473 directly managed by distributors and 1223 by second-tier distributors. There are also 760 department store franchises, 363 directly managed and 397 managed by second-tier distributors.
Li Lang opened its first flagship store in Jinjiang in February 2008. Post-IPO, Hu Chengchu revealed that 15% of the funds raised will be used for leasing and renovating flagship stores. The company plans to collaborate with distributors to open flagship stores in key urban areas, enhancing the brand’s presence and driving sales for surrounding distributors. By the end of 2009, the company expects to open its first such flagship store and expand its network further in the coming years. This move is anticipated to significantly boost the brand's image and contribute to overall growth.
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