(Yicai Global) Sept. 23 -- Mixue Bingcheng has applied for an initial public offering on the main board of the Shenzhen Stock Exchange which could see the popular Chinese ice cream and tea chain raise as much as CNY6.5 billion (USD920 million) and which would make it the first modern tea chain to go public on Chinese mainland stock market.

The proceeds will be used to fund 12 projects, including five production and construction projects, three warehousing and logistics projects, three supporting projects and the rest will be used to supplement working capital, according to the IPO prospectus submitted to the China Securities Regulatory Commission yesterday.

Due to continuous growing demand, the business is expected to grow rapidly over the next three to five years, the Zhengzhou, central Henan province-based company said. The firm therefore needs a large amount of working capital to finance research and development, procurement, production and sales. It has allocated CNY1.9 billion (USD266.8 million) to go towards working capital.

Hot sales of Mixue’s affordable beverages and ice creams, and in particular its CNY4 (USD0.56) lemonade, have been driving rapid expansion. As of March, it operated 22,276 outlets in China, and was the country’s biggest modern tea chain. Back in June 2020, it only had 10,000 worldwide. The company also runs 317 outlets in Indonesia and 249 in Vietnam.

Mixue is also making money, unlike many of its rivals, despite having a relatively low gross margin. The firm’s profit margin was around 30 percent in the first quarter, half that of trendy beverage rivals Nayuki Holdings and Luckin Coffee.

Unlike Xiamen, southeastern Fujian province-based Luckin Coffee and Shenzhen-headquartered Nayuki, though, most of Mixue’s outlets are franchised and it only has a few directly operated stores. As a result most of its revenue comes from the sale of ingredients, packaging, equipment and facilities to franchisees.

Mixue’s net profit tripled last year from the year before to CNY1.9 billion (USD266.8 million) and revenue more than doubled to CNY10.3 billion (USD1.4 billion). As of the end of March, it has more than CNY3 billion in cash on its books.

Editor: Kim Taylor