"Drink Dongpeng Special Drink when you are tired and sleepy." The company behind this slogan is about to go to Hong Kong for IPO.

By revitalizing truck drivers and takeaway guys, Dongpeng Beverage has entered the A-share market in 2021 and has become the "first functional beverage stock". The current stock price is 282.29 yuan per share, with a market value of over 140 billion yuan.

Financial report data shows that in 2024, it achieved operating income of approximately 15.839 billion yuan, a year-on-year increase of 40.63%; net profit attributable to shareholders of listed companies was 3.327 billion yuan, a year-on-year increase of 63.09%.

Dongpeng Beverage was founded in 1994, and Lin Muqin, the helmmaker, is from Chaoshan, Guangdong. When the state-owned enterprise was reorganized in 2003, Lin Muqin led his team to complete the acquisition and successfully developed Dongpeng Beverage from an endangered state-owned enterprise to a functional beverage giant. However, in the capital market, the companies it led has repeatedly sparked heated discussions about are "Love Buy Financial Management", "Frequent cash-out of shareholders", and "huge compensation of executives".

Four years after listing on the A-share market, Dongpeng submitted a prospectus to the Hong Kong Stock Exchange in April 2025. This also brought Dongpeng Beverage back to the public eye. What does Lin Muqin and Dongpeng Special Drink, which seem to be worth noting short of money, go public in Hong Kong?

01 Make a profit by relying on one product

At present, Dongpeng Beverage has brands such as Dongpeng Special Drink, Bumila, VIVI Cocktail, Oolong Tea, Dongpeng Big Cafe, Haidao Coconut and other brands.

As early as 2009, Dongpeng Beverage launched its core product Dongpeng Special Drink, entering the market with a strategy of imitating Red Bull. The early slogan "Drink Dongpeng Special Drink when tired and sleepy" is highly similar to Red Bull's "Drink Red Bull when tired and sleepy".

After Thailand's Tiansi and Huabin Group fought over the Red Bull trademark in 2016, Dongpeng Beverage, which has long been accused of being a "counterfeit Red Bull", overtook the curve, adopting the "big bowl and low price" strategy - 500ml is priced at 3.5 yuan, which is only half of the same capacity price of Red Bull. It focuses on the sinking channels that Red Bull ignores, and accurately enters gas stations, convenience stores and blue-collar groups, successfully causing the market share of Dongpeng Special Drinks to soar from 5.6% in 2015 to 20.2% in 2020, tearing a gap in the hinterland of Red Bull.

According to the prospectus, from 2022 to 2024, Dongpeng Beverage's revenue was approximately RMB 8.5 billion, RMB 11.257 billion and RMB 15.83 billion, respectively, with an annual compound growth rate of 36.5%; net profit was approximately RMB 1.441 billion, RMB 2.04 billion and RMB 3.326 billion, respectively, with an annual compound growth rate of 52%; during the same period, Dongpeng Beverage's net profit margin was 16.9%, 18.1%, and 21% respectively.

According to Nelson IQ data, Dongpeng Special Drink ranked second in China's energy drink market with a sales share of 34.9% in 2024, an increase of 4 percentage points from 30.9% in 2023. Among them, 500ml bottled products have won the sales champion for four consecutive years.

In its performance, Dongpeng Special Drink is a well-deserved "meeting minister". But this also leads to the problem of companies relying on a single product. From 2022 to 2024, Dongpeng Special Drink's revenue was 8.211 billion yuan, 10.354 billion yuan and 13.304 billion yuan, respectively, accounting for 96.6%, 91.9% and 84.0% of the total revenue, respectively. The proportion has dropped slightly, but it is still as high as 80%.

In order to get rid of the dependence on a single product, Dongpeng Beverage has made new attempts.

However, the market for new products such as electrolyte water that it has developed is still small, making it even harder to increase the formation of substantial substitution. "Dongpeng Replenishing Water" performance has increased recently, with revenue soaring 280% year-on-year to 1.495 billion yuan in 2024, but it faces a lot of challenges. Under the suppression of the alien electrolyte water of Yuanqi Forest, the incremental space is limited. In addition, according to the financial report, the gross profit margin of electrolyte beverages was 29.72%, which is also significantly lower than the 48.25% of energy beverages.

Other new products such as sugar-free tea, coffee beverages, etc. have not yet formed differentiated advantages. The investment behind this seems to be insufficient. In 2024, Dongpeng Beverage's R&D investment was only 63 million yuan, accounting for only 0.4% of its revenue.

From the perspective of industry competition, Red Bull restarted its market offensive in 2024, and brands such as Pulse and Alien expanded rapidly in the field of sports drinks, squeezing the survival space of new products, and intensifying industry competition, all of which weakened Dongpeng's cost-effective barriers.

02 The left-handed shareholder cashes out, and the right-handed huge financial management

Relying on a single star product to maintain performance, Dongpeng Beverage has been facing the problem of weak innovation momentum for a long time. Its shareholders and executives have frequently reduced their holdings to cash out. This move that damages investors' confidence is still wary of the capital market today.

In May 2022, Dongpeng Beverage had just been listed for a year, and the ban lifting began. Tianjin Junzheng Venture Capital Partnership (Limited Partnership) (hereinafter referred to as Tianjin Junzheng), an important shareholder who held 9% of the shares at the time of its listing, launched the "crazy reduction of holdings" model.

In the two years from 2023 to 2024, Tianjin Junzheng has carried out at least five rounds of share reduction, cashing out 4.2 billion yuan from Dongpeng Beverage, which exceeds Dongpeng Beverage's annual net profit of 3.327 billion yuan in 2024, and is 66 times the 63 million yuan investment in product research and development of Dongpeng Beverage in 2024.

Source of changes in Tianjin Junzheng's shareholding/wind data

As a strategic investor before listing, according to the prospectus of Dongpeng Beverage, on April 28, 2017, Tianjin Junzheng acquired 8.50% of Dongpeng Beverage's equity for 297 million yuan; then, Junzheng Investment acquired 1.50% of the equity from Lin Muqin, the actual controller of Dongpeng Beverage, for a price of 52.5 million yuan, becoming the second largest shareholder with a 10% stake. In terms of the amount of cashing out of the stock, the investment yield of Junzheng Investment is at least 1,100%.

After multiple share reductions were completed, in the first quarter of 2025, Tianjin Junzheng's shareholdings dropped from 14 million to 7.1 million shares, and the shareholding ratio dropped from the initial 10% to 1.37%, and it has been reduced from the second largest shareholder to the seventh largest shareholder.

Not only that, Dongpeng Beverage's directors, senior executives and others are also frequently reducing their holdings. Dongpeng Beverage has 12 senior executives holding shares, and there are 9 in addition to the founder's family (Lin Muqin, Lin Mugang, Lin Daiqin). Among them, 8 of them reduced their holdings in the company in 2023. Among these eight senior executives who reduced their holdings, at least 6 have left office by the second half of 2024, including many "old-level" figures in the company.

For example, the former chairman of the Supervisory Board, Cai Yunsheng, director Li Dawen, supervisor Chen Yimin and Li Zengyong all joined Dongpeng Beverage before 2000. They worked for more than 20 years. Before leaving in 2023, they reduced their holdings of the company's 130,000 shares, 518,600 shares, 283,000 shares and 301,000 shares respectively.

This aroused the anger of investors at that time. Some investors said, "This is a group of people who know the company's operating conditions best, but now they are going to sell stocks. Doesn't this give people a sense of déjà that even internal personnel are not optimistic about the company's future development, and even want to harvest the capital market?"

In addition to the reduction of shareholders and executives' holdings, what is even more eye-catching is Dongpeng Beverage's dividend.

Dongpeng Beverage has always paid a lot of dividends. Before going public, Dongpeng Beverage made three dividends in April 2019, April 2020 and October 2020, dividing a total of 680 million yuan in the company's profits. The Lin Muqin family, the actual controller at that time, held nearly 70%, which means they could receive a dividend of nearly 500 million yuan. Since its listing in 2021, Dongpeng Beverage has paid a total of 5.3 billion yuan in dividends, and in 2024, it will be 2.3 billion yuan in a single year. Among them, Lin Muqin, the actual controller of the company, can only earn more than 1.1 billion yuan.

Dongpeng Beverage is also "obsessed with" financial management, and the scale of financial management products purchased with idle funds is increasing year by year. From 2023 to 2024, the amount of entrusted financial management in Dongpeng reached 6.32 billion yuan and 13.907 billion yuan respectively, and the investment income during the same period was 142 million yuan and 95.3159 million yuan respectively.

In March this year, the company issued an announcement stating that it will spend no more than 11 billion yuan of idle own funds for financial management this year, mainly investing in investment products with good security and high liquidity, not limited to structured deposits, large-denomination certificates of deposit, wealth management, funds, trusts, and treasury bond reverse repurchase.

But at the other end of the capital, Dongpeng Beverage's short-term loans are still soaring.

As of 2024, Dongpeng Beverage had 5.653 billion yuan in book cash, 4.897 billion yuan in trading financial assets, 377 million yuan in other non-current financial assets (including private equity and bank wealth management), and 3.672 billion yuan in debt investment, totaling 14.599 billion yuan. Short-term loans also reached 6.551 billion yuan, an increase of 119% year-on-year. At present, book monetary funds can no longer fully cover short-term debts.

03 Ask Hong Kong stocks for money to explore overseas?

Regarding the reasons for listing in Hong Kong, Dongpeng Beverage stated that it is to expand overseas markets and enhance international influence. The prospectus mentioned that 25% of the funds raised by Hong Kong stocks are planned to be used for overseas expansion.

In the domestic market where stock competition is intensifying, Dongpeng Beverage pins its growth hopes on globalization. At present, the company has set up subsidiaries in Southeast Asia and is planning to build production bases in Hainan and Kunming as export hubs, trying to replicate the domestic "low-price penetration" strategy. However, in the Southeast Asian market, brands such as Red Bull and Magic Claw have deep foundations and high channel barriers, and face great challenges.

Especially Red Bull, in the Southeast Asian beverage market, always occupies a strategic position as the leader in the industry. Through long-term market cultivation, Red Bull has successfully built a deep consumer mind and has amazing brand penetration in the Thai market where it originated.

In addition, Dongpeng Special Drink also has its own weaknesses, and its sugar content exceeds the standard.

In 2024, Consumer Reports sent inspections to third-party authoritative testing institutions. The sugar content test results show that every 100mL Dongpeng Special Drink contains 13.3g of sugar, which is not only far higher than the "high-sugar" beverage standard defined by the Hong Kong Health Department of Health in China (the sugar content is higher than 7.5g per 100mL), but based on the sales standard specifications of Dongpeng Special Drink (500mL), a bottle contains up to 66.5g sugar (about 14.6 sugar cubes). Among the 12 functional beverages participating in the test with brands such as Red Bull, Dongpeng, Zhanma, Libao, and Mo Claw, the total sugar content is the highest.

Southeast Asian consumers are less sensitive to sweetness, which makes it more difficult to adapt locally.

In 2024, Dongpeng Beverage's overseas revenue was less than 50 million yuan, and its internationalization is still in the trial stage.

Recently, the consumer sector has set off a wave of listing in Hong Kong. The rise of Dongpeng Beverage is closely intertwined with the changes in China's functional beverage market. Its history of making a fortune has always been insurmountable to competition and reference with Red Bull. This time, it will be an IPO in Hong Kong and its move to the Southeast Asian market, and it will be another competition with Red Bull.

The key to success or failure of the overseas market lies in whether Dongpeng Beverage can deeply integrate the "channel blitzkrieg" verified in China with the localization transformation of overseas markets. This not only requires capital ammunition, but also tests strategic determination. In the cycle of "cash-out carnival" and "financial management dependence", how much determination and strength can Dongpeng Beverage put into play, it takes time to give the answer.

References:

The hidden worries are not resolved, but the founder's family is eager to cash out! Dongpeng Beverage "irritated" investors? Southern Metropolis Daily

Dongpeng Beverage Lin Muqin's 100 billion capital game: bank wealth management, shareholder cash out, large dividend aspirations

Dongpeng Beverage has 4 billion dividends in three years after its listing, and more than 2.4 billion flows into Lin Muqin Family International Financial News

"financing + borrowing" on the left hand, "dividend + financial management" on the right hand: Dongpeng Beverage is trapped in the vortex of "double deposit and loan" of Finance and China News Service

Shareholders cash out 4.1 billion yuan and make 500 million yuan in financial management. Why do Dongpeng Beverages seek secondary listing? Yidu Pro

Can Dongpeng Beverage’s IPO in Hong Kong solve the dilemma of relying on large single products? Retail Business Finance

Dongpeng drinks hard against Thailand Red Bull, Lin Muqin drinks 1.1 billion yuan in dividends before going to Hong Kong

A single product accounts for 80% of revenue, and Dongpeng Beverage plans to go to Hong Kong for IPO.