Li Lang made its debut on the Hong Kong stock exchange on the 25th. Prior to the listing, Li Lang had successfully completed a six-day public offering. Initially, the company planned to issue a total of 300 million shares, with 270 million shares allocated for international placements and 30 million for public subscription, representing 90% and 10% of the total shares, respectively. The expected offering price ranged from HK$3.20 to HK$4.00. However, after the offering concluded, Li Lang saw an impressive 150-fold oversubscription, with frozen funds exceeding HK$19.1 billion. Due to the significant oversubscription and the activation of the clawback mechanism, the public offering portion increased from 10% to 50%, while the international placement proportion rose from 90% to 50%. Industry insiders predict that the funds raised through this IPO could surpass $200 million. How did investors dominate the capital in Li Lang, and what does the future hold for the company post-listing? These questions have drawn considerable attention.
This year, Li Lang is aiming for a net profit of 280 million yuan, which represents an almost 82% increase over last year’s figures—a target that is confidently expected to be met. Just a few days before the public offering, Hu Chengchu, Executive Director and Vice President of Li Lang (China) Co., Ltd., expressed concerns, given the strong competition from other companies like Sinopharm and MCC. At the time, some Hong Kong media even referred to Li Lang as one of the “battleground†stocks in September. As it turned out, Hu Chengchu's concerns were unfounded. Li Lang's public offering was oversubscribed 150 times, freezing over HK$19.1 billion in funds. The performance not only exceeded Hu Chengchu's expectations but also surprised many, earning it the title of a "dark horse" among September’s new listings in Hong Kong.
Good growth prospects and reasonable pricing are key factors behind the strong investor interest in Li Lang. Even during the financial crisis last year, Li Lang managed to maintain its counter-cyclical growth trajectory, which helped win market recognition. Hu Chengchu was not entirely surprised by the outcome. Reports indicate that Li Lang's earnings in 2007 and 2008 were 9.65 million yuan and 154 million yuan, respectively, and its 2009 net profit reached 280 million yuan, marking an 82% increase over the previous year. Hu Chengchu stated firmly that this year’s profit target is achievable. In fact, Li Lang CEO Wang Liangxing had previously mentioned that after securing 90% of its target sales in the third quarter of 2009, the company was confident in achieving robust profit growth.
Hu Chengchu attributed the company's excellent performance to internal management adjustments and consistent brand strategies over the years. Originally, Li Lang had planned to go public last July but postponed its listing due to the global financial crisis. "In March this year, after analyzing the economic landscape, the company's leadership decided that the economy would recover and restarted the listing process," Hu Chengchu noted. The decision proved to be correct.
Introducing the sub-brand L2, targeting younger consumers, and raising funds for brand operations are part of Li Lang's multi-brand strategy. Before listing, Li Lang introduced its sub-line brand L2, targeting young families. "We will continue to pursue a multi-brand strategy to cater to different consumer age groups," Hu Chengchu emphasized. Currently, Li Lang's primary consumer base consists of businesspeople aged 28 to 45, whereas L2 focuses on individuals aged 20 to 30. Hu Chengchu explained that Li Lang's core philosophy is "simple yet sophisticated," and this philosophy remains unchanged for L2. However, L2 maintains a certain distance from the main brand to create a complementary positioning. L2 employs a European design team to develop models that emphasize youthfulness and fashion, and its operational team is relatively independent. To align with its brand image, L2 selected Hong Kong star Daniel Wu as its brand ambassador. During the public offering, Daniel Wu also participated in Li Lang's roadshows.
Daniel Wu's brand recognition is highly regarded. Hu Chengchu stated that about 15% of the funds raised from the listing will be allocated to L2's operations. Of this amount, 20% will go toward design and development, 10% to production equipment, 30% to advertising and promotion, and around 40% to distributor incentives and innovation allowances. L2 is expected to hit stores in October, with product prices 20% to 30% lower than those of the main brand. Focus will be on developing flagship stores.
For the apparel business, the terminal is crucial. Post-listing, Li Lang will continue to invest in building and improving its terminal systems. Currently, Li Lang operates 1,696 independent stores, of which 473 are directly managed by distributors and 1,223 by their second-tier distributors. There are also 760 department store franchises, with 363 directly managed by distributors and 397 by second-tier distributors. Li Lang opened its first flagship store in Jinjiang in February 2008. Hu Chengchu mentioned that after listing, flagship store construction will become a focal point of channel development. He noted that 15% of the IPO funds will be used for renting and renovating flagship stores in the coming years. While expanding its distribution network, Li Lang plans to collaborate with distributors to open flagship stores in prime locations across major cities nationwide, leasing properties and transforming them into flagship stores run by designated distributors. They are currently scouting strategic locations for flagship stores. "By the end of 2009, we will open our first flagship store of this type and plan to open more in the coming years," Hu Chengchu stated. "This flagship store will significantly expand the retail footprint beyond what distributors currently operate, showcasing the full range of Li Lang products and enhancing the brand's image, driving sales for surrounding distributors and their secondary distributors."
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