In recent years, with the "awakening" of domestic consumers to oral health awareness, the oral care market with a user base of 1.4 billion and far undervalued potential is about to explode.
Taking last year as an example, dental brands such as Samsan, BOP Pop, Ice Spring and Qingju Scientific Research have successively obtained financing, and giants such as Baidu Venture Capital and ByteDance have run into the game. Among them, in the middle of July last year, the oral FMCG brand "Mixed" completed nearly 400 million yuan of B round financing, which is also the third round of financing of the brand last year.
Compared with the popularity of the primary market, the secondary market ushered in a small outbreak of the oral care track at the beginning of 2022. Zhitong Finance APP learned that Wei Meizi recently submitted a prospectus to the Hong Kong Stock Exchange and applied for listing on the main board. ABC International and BNP PARIBAS are its joint sponsors for listing. As the parent company of the well-known domestic oral care brand "Shuke", the arrival of Vimax also allows investors to have a closer understanding of the oral care industry and this head company.
Oral care market under consumption upgrade
With the improvement of the national economic level, the demand of consumers to please themselves has gradually increased, and the attention to "appearance" has become higher and higher, and oral care has become a part of consumers' daily life.
From 2005 to 2016, high-end Brand countries such as Yunnan Baiyao and Shuke were successively launched, and with the help of scientific and technological research and development and channel promotion, they quickly formed a great influence, gradually marginalizing international brands, and also bringing the development of the domestic oral care market to the right track.
From the perspective of the demand market, the number of oral patients in the mainland has increased year by year, and it has now become a problem that cannot be ignored. According to data from the Ministry of Health, the number of oral patients in mainland China has reached 700 million in 2019, accounting for half of the total population of the country; The number of patients in 2020 is 703 million. In the above context, oral care has also become an important direction of policy support. For example, in 2019, the National Health Commission issued the "Healthy Oral Action Plan (2019-2025)", which clarified the development goal of maintaining the oral health of the masses.
Driven by the demand side and the policy side, the domestic oral care market has ushered in a period of development dividends.
According to Frost & Sullivan, China's oral care market is characterized by a large consumer base and great growth potential – driven by the increasing awareness of young consumers of the importance of oral care, hygiene and aesthetics, as well as their consumption upgrades and preferences, the retail sales of China's oral care market will be 88.4 billion yuan in 2020, and is expected to grow at a compound annual growth rate of 11.5% from 2020 to 2025, and will further reach 152.2 billion yuan in 2025.
From the perspective of subdivision products, the penetration rate of many oral care products in China has also continued to grow rapidly. The data shows that the market penetration rate of electric toothbrushes in China rose from 1.5% in 2016 to 8.7% in 2020, and is expected to rise further to 35.3% in 2025.
However, it is worth mentioning that even if the domestic oral care market will grow into a huge market of more than 150 billion yuan in the next 5 years, it still has greater room for development and potential. At present, although the domestic market is growing rapidly, its market penetration rate is still low compared with other developed markets such as the United States and Japan. In 2020, the market penetration rate of electric toothbrushes in China was 8.7%, while the penetration rate of the same product in the United States was about 50.0%, and in Japan, it was about 30.0%.
With the continuous improvement of market penetration, the head oral care brand based on SHUKE will also usher in a new round of development.
Seizing the market is the "first priority"
The 100-billion-level market is taking shape, which means that the industry development dividend is coming, and it also means that market competition tends to be white-hot.
From the perspective of track participants, in recent years, major cutting-edge brand companies have cut into the oral care track. The data shows that in the past decade, more than 100 cutting-edge brands in the oral care industry have been born. In addition to Yunnan Baiyao, two-sided needle, black toothpaste, Colgate Three Smiles, Shuke, etc., new cutting-edge enterprises such as Sushi, Roman Intelligence, and JYSCPS have also been born.
In addition to the competition between enterprises, there are also multi-category market segments in the oral care market. In fact, the same rapid growth as the oral care market is the diversified demand of consumers for related products. With the increasing enrichment of the social scene and the emphasis on health, oral care has also shown a diversified trend, and has spawned subdivisions including mouthwash, mouth spray, water floss, electric toothbrush and so on. Therefore, it is not difficult to understand why Vimax has extensively laid out various subdivisions of oral care.
According to the prospectus, in terms of product diversification, shuke's brand product line has covered toothpaste, mouthwash, tooth stickers, mouth sprays, electric toothbrushes, toothbrushes and other categories. Product development and the construction of omni-channel network have also become an important support for Vimax to achieve stable income.
According to the data, in the first three quarters of 2021, Vimax's revenue increased by 14.8% from 1.072 billion yuan in the same period of 2020 to 1.230 billion yuan; Gross profit margin further increased to 62.8% from 53.8% in 2019 and 58.1% in 2020.
It is not difficult to see that in the context of the increasing consumer demand for high-end oral care products, Vimax's gross profit level is constantly improving. However, the company's expense side also reflects the fierce competition in the oral care market from the side.
The data shows that in 2019 and 2020, the company's sales expenses were 734 million yuan and 631 million yuan, accounting for 44.17% and 39.06% of the company's total revenue in the current period, respectively. As of September 2020 and September 2021, the proportion was 41.17% and 41.31%. It can be seen that during the reporting period, the company's marketing expenses as a proportion of revenue remained above 40%.
More active marketing has allowed Vimax to achieve remarkable results in this highly competitive market. Zhitong Finance APP learned that in terms of the retail sales of all oral care products in 2020, Vimax ranked fourth in China's oral care market with a market share of 5.3% ; In terms of retail sales in 2020, in addition, Vimax is the largest provider of children's oral care products in China, with a market share of 20.4%, while occupying the highest market share of whitening toothpaste brands in China, at 11.3%, and ranking fourth in China's electric oral care market with a market share of 4.3%. However, high marketing has also clearly become an important factor limiting the growth of the company's net profit. In addition, driven by market expansion, the company's management expenses are also growing steadily.
From a cash flow perspective, except for 2020, the company's net cash flow from operating activities in 2019 and the first nine months of 2021 was higher than the company's net profit for the current period. Among them, the company's net profit in the first nine months of 2021 was negative, mainly because the company's valuation improvement in the current period brought a fair value change profit and loss of 574 million yuan. In addition, the decline in the company's cash collection ability in 2020 also shows to a certain extent that the company is increasing its market expansion.
Vimax said in the prospectus that the net proceeds from the IPO will be mainly used for online and offline brand building to improve brand and product awareness; Product R&D activities and strengthening R&D capabilities; Strengthen offline sales and distribution network and market penetration; Equity investment in high-quality niche oral care brands to establish close strategic cooperation with them; Enhance the digitization of business and optimize it information technology infrastructure for working capital and general corporate use.
In fact, with the rapid growth of sub-brands such as mouthwash and electric toothbrush in the past few years, the growth rate of traditional toothpaste business has been very limited. Vichy is clearly aware of this, and it can be seen from its fundraising purposes that the company may further exert efforts in the diversification of oral care products while integrating oral care channels. Relying on the synergies of a diversified product portfolio in the future, Vimax is expected to achieve further valuation growth.