Second Look at Huiyuan Juice IPO

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I noticed this juice thing is getting popular in China, just like the coffee did in recent years. In summer 2004, when I attended a bunch of formal dinners in Ningbo, juice is an option, as is the wine. Juice is also offered in the airplane. One thing I noticed that the orange juice in China is mostly “from concentrated”, probablly due to cost and taste reasons. So the demand and the growth is there. The problem with the company, from I read from FinanceAsia:

“Among the potential concerns, observers say, is the cost of buying juice concentrates and fruit puree, which increased by more than 50% in the first nine months last year. The company buys about 56% of this raw material from abroad, making it vulnerable to swings in international prices, particularly for oranges.”

This is not a potential problem. As we have seen this winter in the US, the cold weather has already ruined the citrus (oranges) in California. Not sure the recent usual weather effect in Florida. Note Florida and California produce most of the nation’s oranges.

I am not saying absolutely “No” to Huiyuan. Since I am not confident on predicting weather, and the juice’s cost could depend on weather, I say “this is not for me”.


  1. Hi,

    thanks for quoting my tencent article in another blog.

    I’ve just finished reading the Huiyuan prospectus, under the risk section (though it’s written by lawyer sometimes you do find something interesting), it mentioned that the company did not pay the full amount of worker’s social security, though the amount is not too big comparing to hits NP or size of fund it’s going to raise. Still that’s not a sign of a good company….

    anyway, i expect it will go up at least 30% on 1st day of trading. I’ll try my lottery luck.

    However, if it does up 30%, it’s PE will be higher than Mengniu. Why don’t just go for Mengniu then ?

  2. Siwei,

    Your blog is very impressive. You have some deep thoughts there 🙂

    Regarding your concern on the social security, I did not check with
    my Chinese friends. My guess is those sort of things are not
    isolate. It’s a sad reality (not everyone is enjoying the benifit of
    economy growth in the same degree). But I think it will change
    as we move forward. This alone should not put too much weight
    on your investment decision on the company.

    Good luck on your IPO lottery. I assume you do understand your
    risk there, do you?

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