The share price of LIULIUMEI (06658.HK) experienced a meteoric rise on its first day of trading, surging 193.71% to close at HK$128. This performance made it one of the most notable capital market events in the Hong Kong consumer sector for 2026. The company's market capitalization surpassed HK$10 billion upon listing.
Disparity Between Market Frenzy and Business Growth
Behind this market frenzy lies a company that has been operating for 27 years, yet has not yet achieved annual revenue of RMB 2 billion. Its journey to an initial public offering was arduous, involving four attempts over seven years. The financial statements reveal declining gross margins and are accompanied by repurchase agreements. The question arises: does the stock surge represent a true discovery of value, or is it merely a capital game driven by a scarcity of available shares?
Retail Mania Versus Institutional Caution
The staggering first-day gain was fueled by unprecedented retail subscription demand. The public offering portion was oversubscribed by 6,586.73 times, setting a new record for consumer IPOs in Hong Kong for the year. The lottery-style allocation resulted in a mere 1.5% success rate for retail applicants. However, the international offering segment saw only a 2.64 times oversubscription from 64 institutional placees. This stark contrast highlights the divergent motivations: retail investors chasing sentiment and scarce supply, while institutional players focus on underlying business value and associated risks.
Scarcity of Shares Driving Price Action
This divergence is rooted in the company's unique shareholding structure. Prior to listing, the controlling shareholder group held approximately 87.77% of the company. The global offering represented only 14.55% of the post-listing share capital. Furthermore, cornerstone investors locked up nearly 30% of the offered shares. After accounting for these locked-up shares, the actual free float available for trading on the first day was only about 8.077 million shares. This extreme scarcity of available stock, facing massive pent-up demand from unsuccessful retail applicants, created a classic liquidity squeeze, where the price surge was disconnected from fundamental business quality.
Examining the Foundation of a Billion-Dollar Valuation
A critical question emerges: can a company with annual revenue of RMB 1.711 billion and net profit below RMB 200 million justify a market cap exceeding HK$10 billion? While LIULIUMEI has shown growth over the past three years, the quality of that growth is concerning. Revenue growth decelerated sharply from 22.2% in 2024 to just 5.9% in 2025, with net profit growth following a similar downward trend.
Pressure on Core Business and Margins
The traditional core business of dried plum snacks is contracting, with its revenue contribution falling below 50% in 2025. Growth is now reliant on newer categories like dried prune and plum jelly. However, the expansion of these new businesses has not translated into improved profitability. The company's overall gross margin has been on a consistent decline, dropping 4.5 percentage points over three years to 35.6% in 2025. This erosion is attributed to rising costs of imported prune raw materials and aggressive pricing strategies to penetrate new retail channels.
The Pressure of Repurchase Agreements
The listing appears to have been a necessity driven by repurchase obligations rather than a strategic choice. Since 2019, the company made four attempts to go public. A previous investor, Sequoia Capital China, was bought out in 2024 for RMB 261 million, including principal and interest, after the company failed to meet an initial listing deadline. Subsequent investors also had similar repurchase clauses embedded in their agreements, with the latest deadline extended to June 30, 2026. The successful listing on June 15 came just 15 days before this deadline, averting potential massive repurchase liabilities.
Valuation Concerns and Market Risks
At the closing price of HK$128, the stock was trading at a price-to-earnings ratio of approximately 51.2 times its 2025 earnings. This valuation significantly exceeds that of established peers in the snack food sector, which trade at much lower multiples. With revenue growth slowing to 5.9% and gross margins under pressure, the valuation appears stretched. Furthermore, the company operates in a niche segment within the broader snack market, facing a clear growth ceiling and intensifying competition from larger players.
Future Challenges and Share Supply Pressure
For investors, significant risks loom on the horizon. The controlling shareholder family holds nearly 90% of the company's shares. The expiration of lock-up periods for these shares and for cornerstone investors in the coming months will introduce substantial potential selling pressure into the market. The existence of the repurchase agreements also implies a strong desire for exit among certain investors, which could further exacerbate selling pressure.
Sustaining the Momentum
The spectacular debut of LIULIUMEI was a perfect storm of share scarcity, retail frenzy, and pressure from repurchase agreements. However, as the liquidity premium from the float squeeze recedes and market sentiment normalizes, the company's ability to sustain a valuation of over 50 times earnings—given its slowing growth, declining margins, and niche market position—remains highly uncertain. The real test for the company, having finally secured its listing after a long struggle, is just beginning.
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