HONG KONG – Shares in China’s largest fresh beverage maker Mixue Group surged on the Hong Kong stock market on Monday, pushing the company’s capitalization to nearly HK$110 billion ($14.14 billion).

The shares opened at HK$262, more than 29 percent higher than the initial offering price of HK$202.5, and closed at HK$290, a gain of over 43 percent.

Kenny Ng, a securities strategist at China Everbright Securities International Co, said, “The group’s first-day performance met with market expectations and could elevate its visibility in the capital markets.” The funds raised will help the company further expand its store network globally, he added.

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During the public offering period from Feb 21 to 26, individual investors borrowed a record HK$1.82 trillion in margin loans to snap up shares, making it the largest IPO in Hong Kong this year.

The strong debut, coupled with more than 5,258 times oversubscription in the Hong Kong public offering and 35 times in the international offering, reflects a robust appetite from investors, said Alvin Ngan, an equity strategist at Zhongtai Financial International Ltd.

Five cornerstone investors, including M&G Investments and Hillhouse’s HHLR Fund, subscribed to about HK$1.56 billion worth of shares. “This strong investor lineup is quite uncommon” and shows institutional confidence in Mixue Group besides retail investors, Ngan said.

Founded in 1997 in Henan province, the company has a deep penetration in lower-tier cities and towns with its focus on fruit drinks, tea and coffee priced around 6 yuan ($0.82). It operates freshly-made tea brand Mixue and coffee label Lucky Cup.

According to its listing documents, the group has developed more than 45,000 stores across China and 11 other countries through a franchise model as of Sep 30 last year, surpassing Starbucks to become the world’s largest freshly-made beverage company.

Hong Kong-based commentator Conita Hung said, unlike many of its peers adopting retail models, the group’s franchise approach allows it to take on the role of a supply chain manager, which can reduce profit risks since many of its earnings come from franchise fees.

Moreover, the company rolled out its own IP Snow King in 2018, which has become Mixue’s ambassador. Ngan said this strategy could help the company incubate IP-related products, thus enabling it to better withstand the fierce competition in the country’s drinks industry.

At the listing ceremony, Snow King, rather than company executives, rang the bell and delivered remarks.

But analysts said that given the difficulties that listed drinks makers are dealing with and the lack of confidence by investors in the sector, Mixue Group’s stock could face challenges in the long run.  

READ MORE: Mainland tea beverage giant MIXUE plans Hong Kong listing

The trend for similar beverage firms from the Chinese mainland to list in Hong Kong was started by Nayuki, which launched at an offering price of HK$19.8 in June 2021 but quickly lost steam, and is now trading at HK$1.71. Following a three-year lull, Sichuan Baicha Baidao went public in April 2024, but its prices have since plummeted around 45 percent. Guming, which debuted in mid-Feb, is trading at HK$1.4 higher than its issue price.

Hong Kong’s benchmark Hang Seng Index increased 0.28 percent or 64.95 points, closing at 23,006.27. The Hang Seng Tech Index, which tracks 30 tech-focused companies, fell by 0.58 percent, while the Hang Seng China Enterprises Index, reflecting the overall performance of mainland firms listed in Hong Kong, edged up 0.03 percent.

Contact the writer at irisli@chinadailyhk.com