
Investors bullish on China consumer - AVCJ Forum

China’s consumer sector is poised for one of its most lucrative vintages with investors able to take advantage of falling valuations, the AVCJ Private Equity & Venture Forum China 2023 heard.
“There will be attractive entry points in the next 12-18 months,” said Karen Lai, a managing director at LionRock Capital, a Hong Kong-based investment firm that targets cross-border buyouts of global consumer brands that offer a China growth angle.
Tian Ai, a managing director at consumer-focused private equity firm L Catterton, identified the next 6-12 months as an optimal entry point.
Lai identified several opportunity sets, including companies divesting non-core assets to ease balance sheet pressure and take-privates and PIPEs facilitated by the downward adjustment in public market valuations.
At the same time, the valuation gap between private and public markets has narrowed due to reduced liquidity and shrinking investor appetite. She added that companies previously demanding EBITDA multiples in the high teens are now settling for single digits.
However, investors must be selective. Ai stressed the importance of focusing on companies that are either profitable or have a clear path to profitability.
Gunther Hamm, a partner at Hopu Investments who leads the firm’s mid-cap Hopu Magnolia strategy, suggested that the best opportunities can be found in sub-sectors that are still underpenetrated and underdeveloped, such as cosmetics and skincare.
Others highlighted the potential of direct-to-consumer brands that can leverage China’s manufacturing and supply chain capabilities to address overseas demand. Ai referenced L Catterton portfolio companies BloomChic, a D2C fashion brand for plus-size clothes that mainly targets the US, and Tenways, the electric bicycle business that manufactures in China and primarily distributes in Europe.
Ian Lee, a managing partner at Dewu Capital, an early-stage investor that deploys renminbi-denominated funds, added that investors should be mindful of changing consumer behaviour in China. But at the same time, Ai noted that the sector is among the least impacted by geopolitical tensions and regulatory uncertainties, while Lai emphasized the resilience of consumer.
Despite a broader economic downturn, retailers are still prospering, Lai said, referencing the 61% spike in China sales reported by Canadian activewear label Lululemon in the second quarter.
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.