LXJ International IPO Preview

• LXJ International Holdings (LXJ HK) (knowns as Lao Xiang Ji or Home Original Chicken) is getting ready to complete its IPO in Hong Kong in 1H 2025.

• Founded in 1982 by Shu Congxuan, LXJ International specializes in traditional Chinese style chicken dishes. The company is one of the major local players in China's fast food industry.

• LXJ's solid growth in sales and profits in the past several years despite weak Chinese economy is a strong reflection of the company's loyal customers in China.

LXJ International Holdings (LXJ HK) (knowns as Lao Xiang Ji or Home Original Chicken) is getting ready to complete its IPO in Hong Kong in 1H 2025. Founded in 1982 by Shu Congxuan, LXJ International specializes in traditional Chinese style chicken dishes.The company is one of the major local players in China's fast food industry.

As of 30 September 2024, the company operated 1,404 restaurants across 53 cities in nine provinces, comprising 949 self-operated and 455 franchised outlets.

In 2024, the company made two unsuccessful attempts to complete its IPO on the Shanghai Stock Exchange, aiming to raise about 1.2 billion yuan (US$164 million). However, the company withdrew its submissions in August 2024. The company submitted an application for an IPO on the Hong Hong Stock Exchange on 3 January 2025. The size of the offering has not been disclosed.

The company plans to use the IPO proceeds in the following areas including supply chain improvement, restaurants expansion, and advanced digitalization and intelligent technology capabilities.

Company Background

The origins of LXJ trace back to 1982 when it was established by Shu Congxuan in Anhui province. Initially operating as a chicken farm, the company gradually transitioned into the restaurant business, focusing on delivering authentic Chinese-style chicken dishes. The company's menu centers around traditional Chinese chicken recipes, appealing to a broad customer base seeking authentic and convenient dining options.

LXJ International states that it is the largest Chinese-style Quick Service Restaurant (QSR) brand in China. According to CIC, the company ranked first in the Chinese-style QSR industry in China by GMV in 2023. With over two decades of refinement and innovation, the company's menu features a range of customer favorites, anchored by its signature chicken soups and chicken dishes. In the nine months ended September 30, 2024, the company served more than 189.4 million customers.

According to the company, its major strengths and achievements are as follows:

• The company is among the first Chinese-style QSR companies in China to implement standardization in every core aspect of operations.

• It is the only major Chinese-style QSR company in China with a full-value-chain layout, covering chicken farming, central kitchens, and restaurant services.

• It is the first Chinese-style QSR company in China to implement a comprehensive traceability system that enables full process control across the supply chain with public disclosure of ingredients, raw materials, and suppliers.

• The company ranked first in terms of average daily sales per restaurant, daily sales per unit area, and seat turnover rates among top five Chinese-style QSR companies by GMV in 2023.

• The company is among the first Chinese-style QSR companies in China in adopting digitalization and intelligent technologies in every core aspect of operations.

Major Competitor Advantages of LXJ include the following:

• Authentic Offerings: Focus on traditional Chinese dishes, such as braised chicken and rice, which resonate deeply with local consumers.

• Affordable Pricing: Meals are priced to appeal to middle- and lower-income customers, making LXJ accessible to a broad audience.

• Regional Strength: LXJ has a robust presence in nine provinces, particularly in second- and third-tier cities, where competition is less intense compared to metropolitan hubs.

In the 1990s, recognizing the growing demand for convenient and high-quality dining options in urban China, LXJ transitioned from being a poultry farm to venturing into the foodservice industry. This marked the beginning of its journey as a fast-food chain, with a unique emphasis on preserving authentic Chinese flavors. The first Lao Xiang Ji restaurant gained popularity for its signature chicken dishes, which combined time-honored recipes with locally sourced ingredients.

By the early 2000s, Lao Xiang Ji had solidified its presence in Anhui province and started expanding to neighboring regions. The brand's commitment to quality, affordability, and cultural authenticity resonated with customers, fueling its rapid growth. Its self-operated restaurant model ensured consistency in food quality and service, while strategic franchising enabled the brand to penetrate more markets.

In the 2010s, LXJ embraced technology to enhance its operations and customer experience. The adoption of digital ordering systems, data analytics for supply chain optimization, and mobile app-based promotions reflected its forward-thinking approach. This period also saw a greater emphasis on environmental sustainability and health-conscious menu options, aligning with evolving consumer preferences.

Entering the 2020s, LXJ has become one of China’s leading fast-food brands, with a significant presence in nine provinces and 53 cities. By 2024, it operated over 1,400 outlets, consisting of both self-operated and franchised stores. The company's focus on scalability, coupled with its robust supply chain and consistent culinary offerings, has cemented its reputation as a household name in China.

As of 30 September, 2024, LXJ operated 949 self-owned outlets, primarily in key cities and regions. It also had 455 franchised outlets as of 30 September 2024. The franchised model provides an avenue for rapid expansion into smaller cities and underserved areas with reduced operational risks and investments.

LXJ International Number of restaurants (Source: Company data)

Source: Company data

Signature Menu Items - The company’s menu features signature items, such as braised chicken and rice, that emphasize traditional flavors and local ingredients. Unlike global fast-food chains that cater to Western palates, LXJ stays rooted in Chinese culinary heritage, offering:

• Affordable Meals: Designed to appeal to a wide demographic, especially middle- and lower-income consumers.

• Customizable Dishes: Options for personalized orders to suit regional tastes.

• Health-Conscious Choices: Inclusion of lighter, less oily menu items to align with evolving dietary preferences.

Source: Company data

Source: Company data

LXJ International Key Operating Data (Source: Company data)

LXJ International Same Store Sales (Source: Company data)