Starved for better profits, Fubei chases IPO to fill its funding bowl

Despite lagging its rivals in size, the pet food maker hopes to attract investors to its Hong Kong listing plan, three years after its Shanghai IPO attempt stumbled

Key Takeaways:

• Fubei has filed to list in Hong Kong, reporting its profit fell 40% last year as its own-brand business contracted
• The pet food maker agreed to distribute a 100 million yuan dividend to shareholders prior to filing its listing application

By Cheng Shui Tong

China’s economy may be slowing, but that hasn’t dampened the craze for pets, whose owners are happy to spend lavishly on furry friends that are often treated the same as family members. Riding that sentiment, pet food maker Fubei (Shanghai) Co. Ltd. last week filed to list in Hong Kong, hoping to sell investors on its pet-friendly story. While its business is a relative novelty for Hong Kong investors, several of its peers are already listed across the border on the Shanghai and Shenzhen stock exchanges targeting domestic investors.

This isn’t the first time Fubei has sat up and begged investors for cash. It applied for a Shanghai listing in 2021, but withdrew the application two years later, citing uncertainties over the listing timetable and adjustments to its future development strategy. While its IPO lay dormant, rivals such as Gambol Pet (301498.SZ) made their own IPO leaps with less trouble. They joined a kennel of other rivals like China Pet Foods (002891.SZ) and Petpal Pet Nutrition (300673.SZ) that listed as early as 2017 and used their new funds to aggressively expand, leaving Fubei trailing behind.

Fubei traces its origins back to 2005, when founder Wang Yingchun opened a pet food factory in Shanghai. The company launched its Bi Le brand two years later. China’s pet food market certainly has strong growth potential. It was worth 108.4 billion yuan ($16 billion) last year, and is expected to grow 10.4% annually over the next five years, according to third-party market data in Fubei’s listing document. But competition is also quite intense, with many players chasing the same group of pet owners. Reflecting that, the top 10 pet food brands account for just 22.1% of the market combined. Despite its two decades in business, Fubei’s Bi Le brand only ranks ninth among pet foods nationwide, with a meager 0.9% of the market.

Declining core brand sales

Fubei divides its business into two main categories: original design manufacturing (ODM) and original brand manufacturing (OBM). ODM is an older model with lower margins, making products for other brands; while OBM products bear the producer’s own brand and carry fatter profits. The ODM business has delivered stronger sales for Fubei, which ranks second in the country among pet food manufacturers for third parties. But there’s no question that the OBM business is far more profitable.

In 2025, gross margin for Fubei’s ODM business stood at 23.1%, while OBM was more than twice that at 49.1%. Given that reality, the company naturally hopes to boost the share of business from its own-brand products. But unfortunately for Fubei, developments haven’t run in that direction over the last few years.

The company’s OBM revenue actually dropped from 432 million yuan in 2023 to 404 million yuan in 2024, and fell further to 350 million yuan last year. Notably, revenue from its core Bi Le brand fell by nearly 76 million yuan over that two-year period, showing customers were running to other names in the hotly contested market. As that happened, the OBM business fell from 41.3% of Fubei’s revenue in 2023 to just 34.3% last year. Its ODM segment moved in the opposite direction, rising from 58.6% of revenue to 61.7% over that time.

Distributor caution

Fubei’s OBM business took an especially big hit from its sales to distributors, whose purchases dropped sharply from 227 million yuan in 2024 to 166 million yuan last year. The company blamed the broader OBM decline to adjustments in its product mix, with new products taking longer to find an audience to replace older ones being phased out. Slow progress in that transition led distributors to order more cautiously, contributing to their big drop in OBM orders.

To protect its brand’s market share, Fubei has been ramping up its promotional spending. Over the last three years, its sales and marketing expenses rose from 106 million yuan in 2023 to 133 million yuan in 2025. But even those efforts weren’t enough to stop sales for its proprietary brand from shrinking. Concurrently, the company slashed its R&D spending by more than half, from 24.06 million yuan in 2023 to just 11.51 million yuan last year.

As its OBM business stumbled, the company’s overall gross margin fell from 35.7% in 2023 to 31.6% in 2025.

Dragged down by its growing reliance on the lower-margin ODM business, Fubei’s profits have move steadily downward in the last three years, even as its total revenue remained relatively stable at about 1 billion yuan. Its profit stood at about 162 million yuan in both 2023 and 2024, before skidding by 40% to 96.5 million yuan last year.

Big dividend payout

The falling profits have taken a toll on Fubei’s cash, which has fallen steadily from 626 million yuan in 2023 to 309 million yuan by the end of last year. Despite that draining liquidity, the company nonetheless opted to make a massive dividend payout. Its latest annual general meeting saw the approval of a resolution to distribute 100 million yuan in dividends to shareholders, set to be paid out this month.

Fubei isn’t the only one among its peers suffering lately amid intense competition. Gambol Pet’s stock has been getting hammered, plummeting more than 60% over the past year as it reported its profit grew just 7.7% in 2025. Even after that decline, the stock still trades at a relatively high price-to-earnings (P/E) ratio of about 25 times, giving it a market capitalization of about 17 billion yuan. Similarly, China Pet’s stock price has plunged by over 50% over the past year, while its profit for the year fell by 7.3%. Its current P/E ratio also stands at around 24 times, giving it a market capitalization of about 9.5 billion yuan.

Compared to that pair, which each has annual revenues of 5 billion to 6 billion yuan, Fubei is noticeably smaller in scale and even weaker on its bottom line. That means it may need to seek an IPO valuation substantially below those two industry leaders if it hopes to attract investors.

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