New Dairy Ventures to Hong Kong for Fundraising to Achieve "A+H"

(Source: Beijing Business Today)

Following Junlebao, the Hong Kong Stock Exchange may welcome its second dairy company listing this year. On the evening of March 11, Xinruye announced that it has officially initiated an IPO in Hong Kong. If successful, Xinruye will become the first domestic dairy company listed in both the “A+H” markets. On March 12, Xinruye’s plan to list in Hong Kong was met with a cold splash from the capital market. By the close of trading that day, Xinruye’s stock price plummeted 9.21%, with a total market value of 15.535 billion yuan.

Three Considerations

According to Xinruye’s disclosed announcement, the main reasons for listing in Hong Kong involve three strategic considerations: advancing internationalization, building an international capital operation platform, and enhancing the company’s capital strength.

The announcement also indicates that raising funds through the Hong Kong listing is a significant motive. Xinruye plans to issue no more than 15% of its total post-IPO share capital in H-shares, with an over-allotment option. The funds raised will primarily be used for product upgrades, market expansion, supply chain improvements, technological R&D, digitalization, and company operations.

Looking at Xinruye’s debt situation, listing in Hong Kong could broaden financing channels and facilitate attracting more overseas capital. From 2022 to 2024, its total liabilities were 6.825 billion yuan, 6.299 billion yuan, and 5.736 billion yuan, respectively, with current liabilities reaching 4.261 billion yuan, 4.018 billion yuan, and 3.731 billion yuan. Its debt-to-asset ratio stood at 71.91%, 70.47%, and 64.61%, remaining relatively high.

Senior dairy industry analyst Song Liang told Beijing Business Today, “Over the past decade, Chinese dairy companies have accelerated supply chain development, establishing modern breeding and industrial systems. But in recent years, with declining product prices, companies face cash flow shortages. Coupled with industry transformation needs, domestic firms have limited financing options and can only raise funds through listing.”

Shen Meng, Executive Director of Sang Sang Capital, said, “Xinruye’s issuance of H-shares aims to raise capital and improve its debt structure. Currently, there is strong participation in Hong Kong IPOs, which can somewhat meet the company’s financing needs.”

Tapping Overseas Markets

Given the current state of China’s dairy industry, Xinruye’s move to initiate a Hong Kong IPO is also a necessity.

According to Euromonitor data, the scale of China’s liquid milk industry in 2024 is expected to reach 344.2 billion yuan, with a compound annual growth rate (CAGR) of 7.2% from 2011 to 2021, but a projected CAGR of -4.2% from 2022 to 2024. NielsenIQ data shows that by September 2025, the total sales of dairy products across channels in China will have decreased by 16.8% year-on-year.

In recent years, as domestic market competition intensifies, internationalization has become a breakthrough for Chinese dairy companies to solve growth difficulties. Southeast Asia, with nearly 700 million people, has per capita liquid milk consumption generally below 20 kg/year, leaving huge room for growth. Companies like Yili, Mengniu, Feihe, and Junlebao are all expanding into these markets.

Previously, Xinruye had disclosed plans for overseas markets. As early as June 2025, Vice President Zhang Shuai publicly stated that Xinruye would leverage the global resources of the New Hope Group to adopt a “light deployment” strategy, focusing on Southeast Asia and other opportunity markets with a “half-step ahead” approach.

Xinruye’s internationalization plan involves three steps: first, achieving dual-driven international trade, expanding from Chinese supermarkets to mainstream local retail channels, and supporting Chinese-style tea chain brands; second, promoting cross-border operations and localized marketing; third, realizing global management.

Is the Timing Right?

After five years of listing on the A-share market, is now the “best window” for Xinruye to go public in Hong Kong?

Chinese food industry analyst Zhu Danpeng said, “Currently, it is an optimal time and opportunity for Chinese companies to challenge Hong Kong stocks. The ‘A+H’ dual listing benefits from national policy support and consumer market dividends. Xinruye has a certain market share and recognition in the chilled fresh milk segment.”

In the past, Xinruye mainly expanded rapidly through acquisitions of local dairy companies, quickly becoming a leading national dairy enterprise, and successfully listed on the A-share market in 2019. According to its official website, in just over a decade, Xinruye has established a foothold in Southwest China and deepened its presence in East China, Central China, North China, and Northwest China, gradually building a nationwide layout centered on its “Fresh Strategy,” forming a city-based dairy alliance. The company now has 52 subsidiaries, 15 major dairy brands, 16 dairy processing plants, and 12 own farms.

However, this “buy-and-build” growth model has faced bottlenecks in recent years. In 2024, Xinruye’s revenue declined 2.93% year-on-year to 10.665 billion yuan, marking its first revenue negative growth since 2015. In the first three quarters of 2025, revenue grew 3.49% year-on-year to 8.434 billion yuan, showing signs of recovery, but compared to previous rapid growth, the revenue growth rate has significantly slowed. Under this context, Xinruye’s strategy has shifted toward “internal growth primarily, acquisitions second.”

Market reactions cast a shadow over Xinruye’s Hong Kong IPO. On March 12, its stock price fell 9.21% to 18.05 yuan per share. Regarding the lukewarm sentiment in A-shares, Shen Meng said, “Valuations and liquidity in A-shares are better than in H-shares. If a company chooses to leave A-shares for H-shares, it indicates the need to raise funds in Hong Kong, which may dilute earnings per share and is not a positive signal for A-share investors.”

Regarding plans for Southeast Asian markets, Beijing Business Today sent an interview request to Xinruye via email but had not received a reply as of press time.

Beijing Business Today Reporter: Kong Wenxie