Nongfu Spring founder reaps stock riches

Nongfu Spring founder Zhong Shanshan became China’s wealthiest man in an instant yesterday after his water bottling company’s spectacular debut on the Hong Kong stock exchange.

Bottled water and beverage maker Nongfu Spring Co opened up 85 percent from the offering price on its Hong Kong debut with investors betting on a strong performance in consumer sectors.

The company sold 388.2 million shares, raising about US$1.1 billion, and closed up 54 percent yesterday.

It opened at HK$39.80 (US$5.14) — compared with its introductory price of HK$21.50 — before finishing its first day of trading at HK$33.10.

Its public offering was oversubscribed over 1,000 times by local investors and nearly 60 times by international buyers, locking up a record amount of HK$677.7 billion capital.

The surge pushed the fortune of founder Zhong to more than US$57.8 billion, overtaking Alibaba’s Jack Ma to become the richest person in China, according to Bloomberg News.

Zhong founded the company in 1996 and now owns 84 percent of it.

His fortune, according to Bloomberg, was boosted in April when Beijing Wantai Biological Pharmacy Enterprise Co — in which he is the biggest shareholder — went public in a Shanghai IPO.

Nongfu Spring is a leading enterprise in packaged drinking water and beverages in China. It reported year-on-year increases of 17.1 percent and 17.3 percent in total revenue in 2018 and 2019, respectively.

The Hangzhou-based firm intends to use the proceeds for brand building, buying equipment and expanding production sites.

Although bottled water still contributes the majority of its income, sales of tea and other drinks are picking up, making up 42.4 percent of total revenue in 2019.

The company diversified beyond drinking water to cater to more diverse tastes with fruit juice and other beverages.

However, beverage sales suffered losses in the wake of the novel coronavirus outbreak after outdoor activities were limited.

A Frost and Sullivan report found the company had maintained the largest share of China’s packaged drinking water market from 2012 to 2019, with that sector and the beverage market enjoying an annual compound growth rate of 11.0 percent and 4.8 percent between 2014 and 2019.

Nongfu Spring’s revenue and net profit in the five months ending May was down by 12.6 percent and 18.2 percent from a year ago, and beverages suffered sharp losses with a 24.5 percent decline after the closure of schools, scenic areas and sports facilities.

Its cornerstone investors include Fidelity, hedge fund Coatue and Singapore sovereign wealth fund GIC.