Baoli Foods to Buy Remaining 25% of Airmeter Pasta Parent

This is an English adaptation of a FoodBud historical article originally published on September 19, 2022.

On September 19, 2022, Baoli Foods announced plans to acquire the remaining 25% minority stake in its controlled subsidiary Chufang Afen for RMB 63.75 million. After completion, Baoli Foods’ ownership of Chufang Afen would rise to 100%.

At the same time, Chufang Afen planned to acquire a 10% minority stake in Kongke Network, its controlled sub-subsidiary, for RMB 35 million.

Ownership structure

After the transactions:

• Chufang Afen would become a wholly owned subsidiary of Baoli Foods.
• Chufang Afen’s direct stake in Kongke Network would increase from 70% to 80%.
• Chufang Afen would also indirectly hold 3% of Kongke Network through Hangzhou Kongke Brand Management Partnership (Limited Partnership), referred to as “Kongke Brand.”

Chufang Afen’s main business is selling light-cooking solution products, and its main asset is its equity stake in Kongke Network. Kongke Network also sells light-cooking solution products, with Airmeter pasta as its main product.

Kongke Network sells convenience food through multiple channels, including Tmall, JD.com, Pinduoduo, group-buying channels, and offline experience stores. Its core brands, “Kongke” and “Airmeter,” were described as having strong consumer awareness.

First-half 2022 performance

According to Baoli Foods’ 2022 interim report, the company recorded:

• Revenue of RMB 911 million in the first half of 2022, up 26.07% year on year.
• Net profit attributable to listed-company shareholders of RMB 92.7639 million, down 3.86% year on year.

Chufang Afen, mainly driven by Airmeter pasta, generated RMB 400 million in first-half revenue and RMB 20.84 million in net profit.

Baoli Foods’ top five accounts receivable counterparties in the first half were Yum China, Sunner, Tyson China, Shandong Fengxiang, and Dicos.

Airmeter sales momentum

The announcement said Airmeter pasta exceeded RMB 100 million in all-channel sales during the 2022 “618” shopping festival. It ranked first in the pasta category on Tmall, Douyin, and JD.com, and first in the convenience instant-food category on Tmall and Douyin.

Baoli Foods said that after nearly three years of market development, consumer habits around instant pasta had become more mature. Airmeter pasta had built a large base of repeat customers, while brand awareness and reputation had improved significantly.

Audited figures and forecasts

The acquisition announcement disclosed audited figures for Airmeter pasta:

• 2021 revenue: RMB 458 million.
• 2021 net profit: RMB 28.54 million.
• Q1 2022 revenue: RMB 150 million.
• Q1 2022 net profit: RMB 6.266 million.

The forecast disclosed in the announcement expected Airmeter pasta to exceed RMB 1 billion in revenue in 2024, after which growth was expected to become more stable.

Projected costs for the following five years mainly included raw-material costs, assembly fees, and warehousing expenses. Projected selling expenses were mainly concentrated in platform commissions and platform advertising and promotion. Net profit was expected to continue growing steadily over the five-year period.

After Baoli Foods’ listing, its secondary-market valuation remained relatively high: the article cited a price-to-earnings ratio of 51x and market capitalization of RMB 9.3 billion.

Note: acquisition, valuation, and forward-looking forecast figures above are historical disclosures from 2022.