"Love of beauty, everyone has it", most people want their appearance to be more beautiful, but naturally beautiful people are a minority after all, and not everyone is willing to suffer "flesh and skin" for beauty, at this time cosmetics are undoubtedly the simplest and easiest choice, because compared with traditional surgery, the use of cosmetics neither requires surgery, nor cumbersome preoperative and postoperative preparation, some high-end cosmetics can even be customized according to each person's different circumstances, which are difficult to reach with traditional cosmetic surgery. In this case, it is understandable that consumers represented by women are highly sought after by cosmetics.
In the market, cosmetics companies with high visibility and influence are more likely to take the lead, and Mao Geping Cosmetics, which intends to hit the main board of the Shanghai Stock Exchange, is one of them. However, after carefully reading the prospectus, it can be found that both the company and Mao Geping himself seem to have encountered "growing pains".
"Difficult listing" customers "dragged" out
According to public information, Mao Geping, the founder of Mao Geping Cosmetics, was an actor in Zhejiang Yue Opera Troupe at the beginning, because his position needed to change his career to become a theatrical makeup artist, and later seized the opportunity to study makeup at the Shanghai Theater Academy, and was recommended to the film and television crew for makeup because of his excellent professional ability, and then met actor Liu Xiaoqing, and provided makeup services in two TV series "Wu Zetian" and "Burning Afang Palace". Among them, "Wu Zetian", which "acted from 16 to more than 80 years old", not only became the peak of Liu Xiaoqing's career, but also made Mao Geping popular in one fell swoop.
After that, in 2000, Mao Geping launched a high-end makeup brand named after him, and founded a company and a beauty school until 2016, when he first hit the A-share market. From this point of view, the growth trajectory of Mao Geping Cosmetics is a bit similar to Zhongqiao Sports.
However, the problem is that Mao Geping Cosmetics not only has similarities with Zhongqiao Sports in terms of growth trajectory, but also has a bumpy degree of listing.
Public information shows that since the prospectus was updated twice in 2016 and 2017, and feedback was received on September 11, 2017, the listing process of Mao Geping Cosmetics seems to have pressed the "pause button", and there has been no progress in six years. For companies eager to go public, such a slow pace is somewhat close to dissuading.
(Based on publicly available information)
So, where is the "card" of Mao Geping cosmetics? According to media reports such as Daily Economic News since 2021, the blockage of Mao Geping Cosmetics' listing process may be related to the company's external shareholders, especially the problems of the "Jiuding series".
Specifically, Mao Geping, his wife Wang Liqun and their relatives control more than 80% of the company's shares, while Suzhou Pushen Jiuding, a subsidiary of the "Jiuding Series", is the fourth largest shareholder of the company, with a shareholding ratio of 10%. However, according to the information of the Daily Economic News, several IPO projects in which Jiuding participated were pressed the pause button after Jiuding Group was investigated by the China Securities Regulatory Commission in 2018, and Mao Geping did not successfully debut until October 2021, but the company was delayed in obtaining listing approval after that.
In an interview with Qingyan about Mao Geping's IPO, some investment insiders pointed out that investors like Mao Geping were either not accepted or dissuaded to withdraw when filing for IPOs, or they were "cold treatment" such as suspending and suspending. In order to eliminate the aforementioned lightning impact, those who have not yet declared will generally choose the transfer of old shares, and those who have declared either terminate the listing or eliminate the old shareholders and then re-declare, but the re-declaration cycle will not only lengthen, the cost is relatively high, and the difficulty is not low.
From this point of view, until the dust settles on Jiuding's problems, Mao Geping's IPO is still likely to be affected.
(Source: Mao Geping Prospectus, March 2023 version)
A "handshaker" for making money?
In fact, even without considering the shareholders' aspects, Mao Geping Cosmetics seems to have loopholes in its management.
According to the information in the prospectus, the company's main business income mainly includes two parts: cosmetics sales revenue and makeup training business income, of which the MAOGEPING brand alone contributed more than 80% of the company's revenue in 2020, and this proportion is increasing year by year. Considering that the MAOGEPING brand is positioned in the company as a local high-end brand for urban women, and the gross profit margin of the product has been maintained at around 85%, it seems that it is not wrong to say that it is a pillar of support.
(Source: Mao Geping Prospectus, March 2023 version, the latest data is on the left)
But the problem is that compared with well-known peers at home and abroad, Mao Geping seems to rely too much on a single high-end brand, because L'Oreal, Shiseido, L'Occitane and other companies not only have a lower proportion of high-end brand revenue than Mao Geping, but also hold much more brands than Mao Geping.
Even Mao Geping himself pointed out in the prospectus that the makeup and skin care sub-brands of these companies have formed a multi-level brand system, and have simultaneously developed high-end brands and mass brands in product positioning to meet the needs of different consumer groups.
(Source: Mao Geping Prospectus, March 2023 version)
Of course, the reason why Mao Geping relies on a single high-end brand may be related to gross profit margin. According to the data in the prospectus, Mao Geping's comprehensive gross profit margin is 7~9 percentage points higher than the average value of well-known cosmetics listed companies at home and abroad, and the gross profit margin of MAOGEPING series products alone is more than 84%.
(Source: Mao Geping Prospectus, March 2023 version, the latest data is on the left)
However, Mao Geping's way to achieve such a high gross profit margin may be easier than many investors imagine.
According to the prospectus, at present, the company has not built its own cosmetics production facilities, the production process mainly relies on outsourcing to complete, including outsourcing processing, outsourcing and outsourcing three ways, no matter which one almost does not need the company to "do it", just provide raw materials to downstream manufacturers, sell them after production, as for brushes, eyebrow pencils, sponges and other products are even directly purchased from downstream to sell, even the step of providing raw materials is saved.
It is true that after outsourcing the production process, Mao Geping can focus on product development and sales, but as the company reminded itself in the draft declaration, once the outsourced processor or product supplier has problems in the production process, it will affect the company's reputation and performance, and then affect the company's profitability.
(Source: Mao Geping Prospectus, March 2023 version)
Unbalanced R&D and sales investment
Even if all of the above points are excluded, the imbalance of the company's investment in R&D and sales is one of the problems that may affect future development.
According to the data in the prospectus, including sales, management, research and development, and finance, the proportion of various expenses to operating income has remained around 50% since 2020, of which sales expenses account for more than 40% of revenue. In contrast, the proportion of the company's R&D expenses is getting lower and lower, accounting for less than 0.9% of revenue in 2022, even if the total R&D expenses in 2020~2022 are less than 40 million yuan, less than one-tenth of the operating profit in 2022.
Considering that the sales model mainly relies on marketing, it is not surprising that the proportion of sales expenses in the cosmetics industry to revenue is high, but the proportion of R&D expenses is too low, coupled with fierce competition in the industry, it is inevitable to doubt the future sustainability of Mao Geping's ultra-high gross margin.
(Source: Mao Geping Prospectus, March 2023 version, the latest data is on the left)
To sum up, Mao Geping's "mayor's run" has lasted for several years, and the domestic cosmetics market has changed drastically during this period, and it is still doubtful whether relying on the old business model and product line can adapt to the modern competitive environment. Not only that, Mao Geping Cosmetics can persist to this day, to a large extent related to the personal influence of founder Mao Geping, but deeply binding a single IP is very risky, and the fluctuation of IP will have a relatively large impact on the company's operation.
If Mao Geping can successfully IPO, investors need to consider the above factors before participating in a possible application.