The Qingdao-based maker of meals for particular medical functions is difficult worldwide companies that also dominate the China market however may face tariff uncertainties
Key Takeaways:
- Sainte Dietary has filed for a Hong Kong IPO, boasting a listing of heavyweight monetary backers and hovering income and income
- As Chinese language birthrates decline, the infant-focused maker of meals for particular medical functions is diversifying into China’s rising marketplace for aged vitamin
When Sainte Dietary Inc. made its first public disclosure for a deliberate Hong Kong IPO final Friday, it listed Citic Securities as its predominant sponsor. However in an indicator of sturdy investor urge for food for this up-and-coming maker of toddler dietary merchandise, it revealed a short while later that CLSA would be a part of the underwriting crew as total coordinator.
Sainte’s metrics are certainly spectacular for such an old-economy firm with greater than twenty years of historical past. Its income has virtually doubled over the past three years, rising from 491 million yuan ($68.3 million) in 2022 to 834 million yuan final 12 months. Income from cross-border e-commerce platforms amounted to 405.1 million yuan in 2024, making up 48.6% of its whole. The corporate’s adjusted internet revenue has additionally grown rapidly, from 120.7 million yuan in 2022 to 199.4 million yuan in 2024. And its gross margin has hovered at an enviable stage of round 71% over the past three years.
Previously often known as Shengtong Dietary Meals, Sainte was one in every of China’s earliest entrants within the home marketplace for meals for particular medical functions (FSMP), specializing primarily in specialty merchandise for infants with allergy symptoms, which accounted for 90% of its revenues in 2024.
The home market that also accounts for greater than half of Sainte’s gross sales is dominated by worldwide giants. Nestlé (NESN.SW) and Danone (BN.PA) are the nation’s largest and second-largest gamers, respectively, adopted by Sainte in third and Abbott Laboratories (ABT.US) in fourth. That makes Sainte first amongst its home friends, in accordance with third-party analysis within the itemizing doc. Just one different home firm is within the high 5, dairy large China Feihe (6186.HK).
Feihe at the moment trades at a price-to-sales (P/S) ratio of two.32, which means Sainte may fetch a valuation of about 2 billion yuan if it will possibly match that stage, based mostly on its 2024 gross sales. That might assist it to lift as a lot as 500 million yuan, if no more, giving it funds to scale up manufacturing at a brand new facility at the moment beneath building in Inside Mongolia.
The IPO marks simply the most recent fundraising for Sainte, which additionally raised 400 million yuan in a Sequence B spherical in February. It boasts an A-list of backers, together with SAIC Motor’s Hengxu Capital funding arm, Hillhouse Capital, Lee Kai-fu’s Sinovation Ventures and CICC.
FSMP merchandise require a doctor’s supervision and are dominated by merchandise for infants with particular wants. In China, the penetration price for all FSMP merchandise is just 3%, properly beneath the 40% price in mature markets. In response to the itemizing doc, the Chinese language market is rising 18% yearly is predicted to achieve 53.1 billion yuan by 2029, with toddler merchandise accounting for 27.4 billion yuan, or about half the full.
The timing could also be good for corporations like Sainte to problem their worldwide friends, who could possibly be hobbled by retaliatory tariffs from China if elements of their provide chains are based mostly within the U.S. Sainte’s solely exterior provider is in South Korea, making it comparatively immune from tariff wars that solely have an effect on items imported to China from the U.S. However that mentioned, it sells almost half its merchandise abroad, largely by way of e-commerce, although the itemizing doc would not specify how a lot, if any, goes to the U.S.
20 years of historical past
Sainte’s historical past goes again to 2005, when it was established because the FSMP division of Shengyuan Dietary, managed by the husband-and-wife crew Zhang Liang and Meng Xiuqing. Zhang based Synutra Worldwide in 1998 as an toddler system maker, and the corporate was listed on the Nasdaq from 2007 and 2017 earlier than Zhang took it non-public.
China had no home FSMP producers within the early 2000s, in accordance with the itemizing doc. As the present home chief within the area, Sainte now has 14 product segments and 7 licensed merchandise.
The sturdy investor curiosity in Sainte appears counterintuitive given China’s quickly declining beginning price. 2024, a Yr of the Dragon on the Chinese language zodiac and favored by potential dad and mom, noticed an uptick in births to 9.5 million from 9 million in 2023, marking the very best variety of annual births of any nation on this planet. Even so, the long-term outlook is bleak as a result of components widespread to mature economies, together with later marriages and the excessive prices of elevating kids. Sainte counters that China’s Gen Z dad and mom are newly dedicated to creating positive their infants have correct vitamin and are fast to purchase specialty merchandise to deal with any perceived problems.
Nonetheless, Sainte realizes the demographic developments are working in opposition to it and is diversifying into merchandise for adults to enrich its present portfolio. Demand for non-infant FSMP merchandise is predicted to growth as China’s inhabitants over the age of 60 rises, already accounting for greater than one-fifth of the inhabitants in 2023, based mostly on official sources. In response to Sainte’s prospectus, the marketplace for non-infant FSMP merchandise ought to develop by a mean annual price of 21.5% between 2024 and 2029, reaching 25.8 billion yuan in gross sales by 2029.
“Guided by our ethos of ‘Exact Vitamin, Skilled Care,’ we care concerning the wants of particular teams, from infants grappling with allergy symptoms, lactose intolerance and preterm vulnerabilities to the silver tsunami of the ageing populace,” the corporate mentioned in its itemizing doc. Sainte’s 300-plus distributors promote by way of hospitals, postnatal care facilities, specialty shops and on-line, with over 17,000 factors of sale.
Sainte’s predominant manufacturing facility within the Northeastern Chinese language metropolis of Qingdao, which it shared with its dad or mum Shengyuan Group till 2023, produced 1.7 tons of FSMP merchandise in 2024. It opened one other manufacturing facility in February this 12 months, and a 3rd is beneath building in Inside Mongolia, as a result of open in 2026.
The corporate wants to maneuver rapidly as a rising area of home opponents nip at its heels. The annual variety of new FSMP registrations in China jumped from 13 in 2022 to 70 in 2023, and one other 42 registrations have been recorded final 12 months. Home companies accounted for 174 out of 206 FSMP registrations in China as of Sept. 20, in accordance with the State Administration of Market Supervision, exhibiting native Chinese language corporations wish to attempt to achieve a bit of this main market.
That mentioned, the worldwide giants nonetheless have an enormous lead. Nestlé dominates with a 57% market share, adopted by Danone at 18.4%. Sainte is undoubtedly hoping to wrestle a few of that away for itself, and may benefit from nationalistic components as Chinese language develop more and more comfy with home manufacturers. That might bode properly for its IPO if traders consider it appears properly positioned to maintain up its sturdy progress.
