"Perseverance"
Mao Geping, who failed to IPO three times in 8 years, has decided to switch to Hong Kong stocks and then sprint to the market.
On April 8, Mao Geping Cosmetics Co., Ltd. (hereinafter referred to as "Mao Geping") officially submitted a prospectus to the Hong Kong Stock Exchange to be listed on the main board, with CICC as the sole sponsor. According to the prospectus, Mao Geping is the only Chinese company among the top ten high-end beauty groups in the Chinese market, with revenue of 2.885 billion yuan in 2023. Among them, the Mao Geping brand contributed more than 90% of the performance.
So, what are the chances of Mao Geping winning the IPO again?
It was sold for 6.291 billion yuan in 3 years
Ranked 8th among high-end beauty groups in the Chinese market
According to public information, Mao Geping was established in 2000, and the company is mainly engaged in the research and development, production, sales and makeup skills training of makeup and skin care products of the MAOGEPING brand (hereinafter referred to as the "Mao Geping brand") and the two major brands of Zhiai Life.
Before the diversion to Hong Kong stocks, Mao Geping's listing road can be described as twists and turns, with a time span of 8 years.
▍Excerpt from Mao Geping's prospectus
As early as 2016, Mao Geping submitted a prospectus to seek an A-share IPO, but "the issuer voluntarily requested to suspend the review or other reasons, resulting in the review being unable to be carried out normally" In October 2021, although the IPO was held, Mao Geping did not wait for the good news of the listing bell; in September 2023, the Shanghai Stock Exchange suspended the review of Mao Geping's issuance and listing because the financial information recorded in the issuance and listing application documents had expired; until January 4 this year, according to the official website of the Shanghai Stock Exchange, Mao Geping voluntarily withdrew the IPO application.
As for Mao Geping's repeated unsuccessful impact on A-share IPOs, many media reports have previously reported that he was affected by the negative events of the largest external shareholder, Pushen Jiuding, and since 2017, Pushen Jiuding and its investment funds have been repeatedly punished by regulatory authorities. However, according to the latest prospectus, on January 17, January 25 and January 29 this year, Pushen Jiuding transferred 7.55%, 1.47% and 0.99% of the shares to the company controlled by Mao Geping and his wife at a consideration of 551 million, 106 million and 71.9 million respectively.
After many failures in hitting A-shares, Mao Geping moved to the Hong Kong Stock Exchange to restart the IPO. From the perspective of financial data, according to the latest prospectus, from 2021 to 2023, Mao Geping's revenue will be 1.577 billion yuan, 1.829 billion yuan, and 2.885 billion yuan respectively, with a compound annual growth rate of 35.3%. In the same period, the net profit was 331 million yuan, 352 million yuan and 664 million yuan respectively, with a compound annual growth rate of 41.6%. On the whole, Mao Geping's total revenue in the past three years reached 6.291 billion yuan.
▍Excerpt from Mao Geping's prospectus
Among them, Mao Geping brand is the main contributor to Mao Geping's operating income. According to the prospectus, from 2021 to 2023, the sales of Mao Geping brand products accounted for more than 96% of total sales.
The prospectus also shows that according to Frost & Sullivan, Mao Geping is the only Chinese company among the top ten high-end beauty groups in the Chinese market, ranking eighth in terms of retail sales in 2022. Among them, the first and third are both French listed beauty groups, both founded in 1909 and 1987, and the second is a listed beauty group founded in the United States in 1946.
▍Excerpt from Mao Geping's prospectus
From 2021 to 2023, the sales revenue of Mao Geping's makeup products will be 1.026 billion yuan, 1.002 billion yuan and 1.622 billion yuan respectively, accounting for 65.1%, 54.8% and 56.2% respectively, and the sales revenue of skin care products will be 468 million yuan, 771 million yuan and 1.159 billion yuan respectively, accounting for 29.7%, 42.2% and 40.0% respectively. It is not difficult to find that Mao Geping, who started with makeup, has also increased the proportion of skin care products year by year in recent years, and the gap between the two is gradually narrowing.
In addition, as of December 31, 2023, Mao Geping's product portfolio includes 378 products under the Mao Geping brand and Zhiai Life, covering 334 makeup products and 44 skin care products. In terms of pricing, the retail price of makeup products is generally between 200-500 yuan, and the retail price of skin care products is between 400-800 yuan. Among the many products, Mao Geping's two products, the light-sensitive traceless powder series and the luxury caviar mask, have been widely recognized in the market, and in 2023, the retail sales of these two products will exceed 300 million yuan and 600 million yuan respectively.
It is worth mentioning that in addition to generating revenue through the sale of beauty products, Mao Geping also opened a cosmetics training school, which provides comprehensive face-to-face makeup training courses.
According to the prospectus, as of December 31, 2023, Mao Geping has founded 9 makeup art institutions across the country, with more than 170 training personnel and more than 2,500 course participants. During the period from 2021 to 2023, the sales revenue of this sector will be 82.28 million yuan, 54.37 million yuan, and 10.4 million yuan respectively, accounting for 5.2%, 3.0%, and 3.6%.
The proportion of offline and online is decreasing year by year
Department store channel sales accounted for more than 50%
From the perspective of channel division, Mao Geping's offline channels include direct sales through self-operated counters, sales to high-end multinational beauty retailers, and sales to offline distributors, while online channels cover e-commerce platforms such as Tmall, Xiaohongshu, Douyin, JD.com, and Taobao.
According to the prospectus, from 2021 to 2023, Mao Geping's offline revenue will be 965 million yuan, 1.080 billion yuan, and 1.602 billion yuan respectively, accounting for 64.6%, 60.8%, and 57.6% respectively, and online revenue will be 529 million yuan, 694 million yuan, and 1.179 billion yuan respectively, accounting for 35.4%, 39.2%, and 42.4% respectively. On the whole, Mao Geping's online income is increasing year by year, and the proportion of offline and online is shrinking year by year.
▍Excerpt from Mao Geping's prospectus
Offline, Mao Geping mainly sells products through the counters of high-end department stores. In 2003, Mao Geping set up its first counter at Hang Lung Plaza in Shanghai, making it the first domestic cosmetics group to set up counters in high-end department stores. According to Frost & Sullivan, the Mao Geping brand is the largest domestic beauty brand in terms of retail sales of some department stores in China in 2022. According to the prospectus, from 2021 to 2023, the channel sales of Mao Geping's department store will account for more than 50%.
▍Excerpt from Mao Geping's prospectus
In terms of volume, as of December 31, 2023, Mao Geping had 357 self-operated counters nationwide, ranking second among all domestic and international beauty brands in China, while the offline channel has more than 3 million registered members, and the overall repurchase rate in 2023 is 32.8%. In addition, as of April 2, 2024, Mao Geping has more than 2,500 beauty consultants in its counters across the country, making it one of the largest counter service teams among all domestic and international beauty brands in China.
It is worth mentioning that in 2020, Mao Geping also established a strategic partnership with high-end multinational beauty retailers, providing them with exclusive product collections and expanding the scope of product sales. In 2023, the sales proportion of this channel will reach 94.1 million yuan, accounting for 3.4%.
Qingyan noticed that although offline channels are still Mao Geping's home base, the status of his online channels is also becoming increasingly prominent. According to the prospectus, from 2021 to 2023, the compound annual growth rate of revenue generated by Mao Geping's sales through online channels will be 49.3%, which is higher than the compound annual growth rate of 28.8% of revenue from offline channels. In this regard, Mao Geping said, "This is mainly due to the fact that we have strengthened our online marketing efforts and contributed to the change in the sales channel mix. ”
In addition, in view of the possible market risks, Mao Geping admitted in the latest prospectus, "the company will also face many risk factors in its future development, such as the failure to launch new products in a timely manner according to industry changes, resulting in a decline in sales, excess inventory and a decline in market share, as well as competition from existing competitors or new entrants in terms of pricing, and at the same time, any quality problems related to products will cause customer loss and claims." ”
295.7 billion yuan of China's high-end beauty market
The top five international brands account for 31.5% of the market share
As a rare high-end brand in domestic cosmetics, Mao Geping brand can be said to have witnessed the rapid development of China's cosmetics market and carries the vision of domestic beauty products impacting high-end products.
At the same time, the growth of China's high-end beauty market in recent years is obvious to all, and major international beauty giants have focused on high-end beauty products. According to Frost & Sullivan, China's high-end beauty market grew at a CAGR of 9.3% from 2017 to 2022 and is expected to continue to grow at a CAGR of 10.2% to RMB 295.7 billion in 2027.
From the perspective of the competition pattern of China's high-end beauty market, according to Frost & Sullivan, China's high-end beauty industry is relatively concentrated, with the top five brands accounting for 31.5% of the market share in retail sales, and all of them are international beauty brands.
In this regard, Frost & Sullivan also pointed out that some of Mao Geping's competitors may have better financial, technical and marketing resources, higher brand awareness, longer business history, and a larger customer base. For Mao, effective competitiveness depends on a number of factors, including brand reputation, product innovation and functionality, competitive pricing, quality, production efficiency, sales, and marketing strategy.
Behind this, Mao Geping's R&D capabilities have been criticized for a long time. Previously, when Mao Geping was sprinting for A-shares, the regulatory authorities had inquired about his R&D capabilities. However, Mao Geping has also intended to strengthen his own R&D strength in recent years. According to the prospectus, from 2021 to 2023, Mao Geping's R&D investment will be 13.7 million yuan, 14.54 million yuan, and 23.97 million yuan respectively, and in 2023, its R&D investment will increase significantly.
▍Excerpt from Mao Geping's prospectus
Mao Geping has obviously strengthened the investment in the construction of hard power of enterprises. At the beginning of this year, Mao Geping won the Wangjiang commercial land at the subway entrance of Wujiang Road Station in Hangzhou and adjacent to K11 at a transaction price of nearly 600 million yuan. According to the investment and development agreement of the Wangjiang plot, the bidder is required to hold 50% of the land for the construction of the national headquarters (cosmetics R&D and sales) project, with an annual revenue of not less than 2 billion yuan and an annual tax of not less than 400 million yuan, and an evaluation period of 5 years.
Around the same time, Mao Geping also invested in a beauty company, Hangzhou Shangduhui Cosmetics Technology Co., Ltd. (hereinafter referred to as "Shangduhui"). According to the public information of the enterprise, Shangduhui was established on January 2 this year, with a registered capital of 500 million yuan, and is 100% owned by Mao Geping Company. From the perspective of business scope, Shangduhui is mainly engaged in technical services, development, consulting, bio-based material manufacturing, etc., and belongs to the natural science research and experimental development industry.
In addition, Mao Geping said in the prospectus that about 9.0% of the funds will be used to enhance product design and development capabilities, about 10.0% will be used to strengthen production and supply chain capabilities, about 5.0% will be used to digitize operations and information infrastructure, 25.0% will be used to expand sales networks, about 20.0% will be used for brand building activities, and about 15.0% will be used for overseas expansion and acquisitions.
It is worth mentioning that with the tightening of listing policies, A-share IPOs have pressed the "slowdown button" since 2023. An industry insider once told Qingyan, "In the past two years, the listing policy scale of consumer companies, including beauty, has been significantly tightened, and the requirements for the scientific and technological innovation ability of enterprises have become higher and higher. As a result, facing the future, the Beijing Stock Exchange and the Hong Kong Stock Exchange may become an important choice for domestic beauty companies to go public.
It can be expected that if Mao Geping's IPO is successful, it also means that his 8-year-long listing journey will come to fruition, and the capital market will also usher in the "first stock of domestic cosmetics".