Summary of Key Points
Banu Hotpot has submitted its application to the Hong Kong Stock Exchange for the third time (with the previous two applications failing). Its financial performance on paper looks good (revenue of RMB 2.846 billion and net profit of RMB 206 million in 2025, representing year-on-year increases of 23.4% and 67.5%), but the capital market is not convinced. The issue lies not in short-term figures, but in "sustainability": the business is too single, it lacks funds for expansion, and it faces significant pressure from performance-based agreements. Additionally, there are internal problems such as a misleading brand positioning, failed product strategies, and an unreasonable workforce structure. These factors, combined with the current cold market for consumer stocks in the Hong Kong stock market, have made its path to listing extremely difficult.
I. Good Financial Figures, but Why Is Capital Unimpressed?
Banu’s financial report shows impressive numbers: revenue increased by 23% in 2025, and net profit rose by 67%. The customer turnover rate also improved from 3.1 times to 3.6 times, which is not much lower than that of Haidilao (3.9 times). However, upon closer inspection, there are several hidden issues:
- Declining Average Customer Spend: The average customer spend has dropped from RMB 150 in 2023 to RMB 139 in 2025, a decrease of RMB 11 over three years. The prospectus claims the company aims to attract more customers, but in reality, high average spending cannot be sustained in a contracting consumer market.
- Declining Sales at Existing Stores: Sales at existing stores decreased by 9.9% from 2023 to 2024, and although they rebounded by 4.8% in 2025, the average customer spend is still declining, indicating a reduction in repeat customers or a shift towards lower-value consumption.
- Too Single Business Model: Banu only has 200 directly-operated stores and no franchise model. Its sub-brand, Chao Island, was shut down due to food safety issues, putting all its eggs in one basket. In contrast, Haidilao offers delivery services, has more than 20 sub-brands, and uses a franchise model to diversify risks, giving it greater growth potential. Capital looks for companies that can grow in the future, not just those that generate immediate profits.
II. Listing Is Not a Choice but a Necessity: Expansion Drags on Funds, and Performance-Based Agreements Force It
Banu stated in previous years that it was not eager to list, but now it is rushing to submit its application for practical reasons:
- Lack of Funds for Expansion: Cash and cash equivalents decreased from RMB 223 million to RMB 39.32 million in 2025 (a year-on-year decrease of 82%), and operating cash flow also fell by 20%. Yet, the company plans to open 177 new stores between 2026 and 2028, which would require RMB 885 million—well beyond its current cash flow capacity.
- Performance-Based Agreements: Banu has signed agreements with investors that require it to repurchase shares at an annual interest rate of 8% if it does not go public by December 2029. It currently owes RMB 326 million in such repayments. With each failed application, the deadline gets closer, and failing to list could result in significant losses.
In short, without new stores, there is no growth; with new stores, there is a lack of funds. Listing is the only way out.
III. A Host of Internal Problems: Misleading Branding, Failed Products, and Questionable Labor Practices and Dividends
Banu’s issues are not limited to external factors:
- Misleading Branding: Initially, Banu positioned itself as "China's Number One Quality Hotpot," but later redefined "quality hotpot" to mean meals costing over RMB 120 per person, effectively excluding Haidilao from its competition. It only recently admitted that its actual market share is just 0.4% (the top five hotpot companies combined account for 8%, with Haidilao holding 6.5%). This self-proclaimed leadership seems dishonest to investors.
- Failed Product Strategies: Banu boasts a focus on quality, but its sub-brand Chao Island was found to use duck meat in lamb dishes, and its selenium-rich potatoes did not meet standards. For a brand that relies on high-quality ingredients to justify higher prices, food safety issues can be devastating.
- Unreasonable Labor Structure: 83.5% of Banu’s employees are part-time or contracted (compared to about 40% at Haidilao). While this is not illegal, it may affect service quality and raise investor concerns about potential risks.
- Suspicious Dividends: In the five months before submitting its application for the first time in 2025, the company distributed a dividend of RMB 70 million (nearly 60% of its 2024 net profit), with the controlling couple receiving RMB 58 million. While the company claims to need funds for listing, this sudden distribution of profits raises suspicion of cashing out.
IV. The Hong Kong Consumer Stock Market Is Cold, and the Hotpot Sector Is in a Downturn
Banu has chosen the worst timing:
- Focus on AI in the Hong Kong Stock Market: In 2025, AI companies led the list of IPO fundraising in the Hong Kong stock market, with consumer stocks being considered secondary. Investors are not interested in them.
- Dramatic Decline in the Hotpot Sector: Haidilao’s stock price has fallen by more than 80% from its peak, and the market value of Xibabu has dropped from RMB 30 billion to RMB 300 million. Even Green Tea Restaurant’s stock price was hit hard on its debut day, and other consumer stocks have seen significant declines. Investors now require "absolute safety" and high growth from consumer stocks. Banu lacks both the scale advantage (15 times smaller than Haidilao) and compelling new stories (relying solely on store expansion), making it difficult to attract capital.
Conclusion
Banu’s difficulties in going public stem from the contradiction between short-term profit generation and long-term sustainability. Capital is interested in future prospects, not immediate profits. To succeed, Banu must address issues related to brand integrity, product quality, and business diversification. Otherwise, even if it passes the initial review process, its stock price is unlikely to perform well. The lessons of Haidilao and Xibabu are a clear reminder of this.