Written by | Dake
Source | Produced by hydrogen consumption
ID | HQingXiaoFei
In the lively beauty market, there are new moves by brands.
Mao Geping, who "changed his head" for the girls, recently submitted a form to apply for an IPO again, which means that Mao Geping, who has been seeking to be listed on A-shares for 8 years since 2016, has switched to Hong Kong stocks.
Founded more than 20 years ago, Mao Geping already owns two major brands, MAOGEPING and Zhiai Life, with products covering makeup and skin care series, and is also engaged in makeup skills training business.
According to Frost & Sullivan, Mao Geping is the only Chinese company among the top 10 high-end beauty groups in the Chinese market, ranking eighth in terms of retail sales in 2022.
At the same time, Mao Geping's beauty training business is also well-known, and his image art school has gained more than 170 trainers and more than 2,500 course participants.
After 8 years of IPO journey, Mao Geping has suffered repeated setbacks, what are the red flags and potential optimization space revealed in his latest prospectus?
Decoding Mao Geping's prospectus:
Stand firm in high-end tonality and make efforts through multiple channels
Just looking at the prospectus handed over by Mao Geping this time, it can be described as infinitely beautiful.
According to the prospectus, Mao Geping Cosmetics Co., Ltd. will show a steady upward trend in operating income from 2021 to 2023, recording 1.577 billion yuan, 1.829 billion yuan and 2.886 billion yuan respectively, with a compound annual growth rate of 35.3% in three years.
At the same time, net profit also increased at the same time, with corresponding values of 331 million yuan, 352 million yuan and 664 million yuan, with a compound annual growth rate of 41.6%, and the net profit margin remained at a high level, with 21.0%, 19.2% and 23.0% respectively in each year.
This data is significantly higher than the industry average, especially the year-on-year growth rates of revenue and net profit in 2023 are 57.8% and 88.6% respectively, which can be described as a strong momentum.
Image source: Prospectus
The good results may be related to the fact that Mao Geping has made further efforts in skin care products while stabilizing the basic plate of makeup. At present, Mao Geping has 378 single products in two categories, basically covering makeup and skin care products, and the sales revenue of makeup and skin care products accounts for 58.3% and 41.7% of the total product sales revenue respectively.
Its best-selling products, such as the Luminous Traceless Powder Series and the Luxury Caviar Mask, have gained wide recognition in the market. These two Mao Geping's "trump card products" will achieve retail sales of more than RMB300 million and RMB600 million respectively in 2023.
It is worth noting that from the pricing point of view, the suggested retail price of Mao Geping's makeup products is generally between 200 yuan and 500 yuan, and the suggested retail price of skin care products is generally between 400 yuan and 800 yuan. It can be said that Mao Geping has gained a firm foothold in the high-end market that is difficult for other beauty brands to break through.
At the same time, Mao Geping's channel layout is also quite interesting. As of December 31, 2023, Mao Geping had 357 self-operated counters nationwide, ranking second among all domestic and international beauty brands in China.
At the same time, as of April 2, 2024, Mao Geping has more than 2,500 beauty consultants in counters across the country, making it one of the largest counter service teams among all domestic and international beauty brands in China.
As of December 31, 2023, Mao Geping's offline channels had more than 3 million registered members, and the overall repurchase rate in 2023 was 32.8%.
Relying on channel construction, Mao Geping has created his own signature service model - salesmen make up and explain makeup skills to customers on the spot. Through this service model, Mao Geping has established a unique customer stickiness, and also attracted enough traffic for Mao Geping in the consumer market - makeup/make-up at Mao Geping's counter has become a "traffic password" on Xiaohongshu.
At the same time, the founder Mao Geping himself has also become a source of traffic for the brand - in 1995, the founder Mao Geping became famous for helping Liu Xiaoqing, who starred in "Wu Zetian" at the age of 45, to create girlish makeup. In 2019, the cooperation between Mao Geping and Mr. Xu made this celebrity makeup artist "popular" again, and even became the "top stream" on major social platforms. Its founder Mao Geping has entered major social platforms one after another, and the brand MAOGEPING has also been "out of the circle" on social platforms on a large scale with makeup tutorials and cooperation with well-known bloggers.
Mao Geping, whose financial data is so strong, why has the IPO repeatedly failed and sunk into the sand?
Three times "folded" A shares,
Just because the shareholders are too pitiful?
Compared with singing all the way in the consumer market, Mao Geping's road in the capital market can be described as extremely bumpy, "getting up early in the morning and catching up with a late set".
In 2016, Mao Geping took his first step into the capital market by submitting his first IPO application to the Shanghai Stock Exchange. However, just a year later, in 2017, the company temporarily put its IPO process on hold due to Mao Geping's initiative to suspend the review, or for other reasons that prevented the review process from proceeding normally.
Five years later, in 2021, Mao Geping's IPO was successfully passed, and the listing was imminent but stalled, and in 2023, Mao Geping's company restarted its IPO, and then ran aground due to the expiration of financial information, and then in January 2024, Mao Geping voluntarily withdrew its listing application on the Shanghai Stock Exchange, officially terminating the road to A-share listing. In the long wait, skin care and beauty companies such as Proya, Marubeni, Bethany, and Fuerjia have already been listed.
Mao Geping's road to listing has been full of twists and turns, and the industry generally believes that it is related to the turmoil of the "Jiuding system" of the past investor.
According to the prospectus, in October 2015, Jiuding Investment (600053. SH) acquired 10% equity of Mao Geping Company at a consideration of 73.3 million, becoming the company's largest external shareholder. However, in 2018, Jiuding Group was investigated by the China Securities Regulatory Commission for suspected violations of securities laws and regulations, and since then, a number of IPO projects in which Jiuding Group has participated have been forced to stop, and the punishment of Jiuding Investment has only come to an end at the end of 2022.
Mao Geping's important preparation for the impact of Hong Kong stocks this time is to "fully de-Jiuding" - Mao Geping will buy back 10% of the equity of Jiuding Investment through the actual control investment company on January 17, January 25, and January 29, 2024, at a consideration of RMB 550 million, 110 million, and 70 million (a total of 730 million yuan), so that Jiuding Investment no longer owns any equity of Mao Geping. As of the Latest Practicable Date, Mr. and Mrs. Mao Geping held approximately 57.26% of the total shares.
With the gradual tightening of IPO review standards in the A-share market, it is a foregone conclusion that Mao Geping's A-share listing is hopeless, but in contrast, the Hong Kong stock market may be more flexible and inclusive, providing more listing opportunities for companies of different types and sizes. Switching to Hong Kong stocks to achieve the goal of listing may not be a mirror flower.
Crisis under the prestige:
Mao Geping still has these difficulties to overcome?
It seems that Mao Geping's "performance is stable", and the IPO failure is only a consequence, but these hidden signals seem to expose that Mao Geping still has difficulties to overcome.
(1) How to improve R&D capabilities to meet the challenges of industry innovation?
Previously, Mao Geping was asked by the Issuance Examination Committee of the China Securities Regulatory Commission in the IPO "the reason and reasonableness of the company's gross profit margin higher than that of the first-line brand when its R&D capabilities and brand awareness are not as good as the first-line brands", and Mao Geping's explanation is that the company's MAOGEPING brand is similar to the main makeup and skin care brand positioning of international brands such as L'Oreal, Shiseido, and L'Occitane, but the company's popular brand product pricing is lower, which lowers the overall gross profit margin.
This problem actually points to the key point of Mao Geping - research and development. According to the financial report, Mao Geping's R&D cost in 2023 will be less than 30 million yuan, and compared with its considerable revenue growth level, related investment will account for only 0.83%. According to the previous prospectus data, from 2020 to 2022, the R&D expense ratio was 1.21%, 0.96% and 0.87% respectively. In contrast, Mao Geping's sales expenses accounted for 42.09%, 42.07% and 46.74% of operating income.
For comparison, Proya's R&D expense rate in 2022 is 4.31%, Bethany's R&D rate is 5.08%, and Bloomage Biotech's R&D expense rate is as high as 6.10%.
Image source: Prospectus
According to the prospectus, Mao Geping is trying to reverse the situation in the near future. In the second half of 2023, Mao Geping will successively complete a series of actions such as the acquisition of beauty and skin care R&D enterprises and the start of the construction of "Mao Geping Beauty R&D Factory". As of the Latest Practicable Date, Mao Geping has a production site under construction in Hangzhou, China, which is expected to be operational in mid-2026.
However, it is worth noting that, according to Mao Geping's prospectus plan, the listing financing funds will be mainly used to expand the sales network, brand influence building, overseas expansion and acquisition, strengthen the supply chain, product design and development, etc. Among them, 25%, 20% and 15% were invested in expanding sales network, brand influence and overseas markets. In terms of R&D, investment is still scarce.
(2) Trapped in the founder's "reputation", the product reputation is polarized and controversial?
At the same time, the influence of the founder Mao Geping on Mao Geping's company also has to face two-sided doubts - trapped in the founder's reputation, Mao Geping may have fallen into a crisis where his personal charm is greater than the brand value.
In fact, previously, Mao Geping's brand mostly used the fan effect to drive the development of the brand through the fame and reputation of Mr. Mao Geping. Although the founder's makeup skills have strongly driven the growth of the brand, it has also sparked a discussion among consumers about the matching of the actual effect of the product with personal skills.
Consumers will link the product to their own makeup skills, which will inevitably lead to a gap between the actual consumer experience and expectations, and the excessively high consumer expectations may have a gap with the actual product experience, resulting in a negative brand reputation.
For a long time, Mao Geping's makeup products have faced doubts such as "need for techniques" and "not routine", which may affect the development of the brand.
(3) The low-end market is weak, and it is difficult for brands to break through market limitations?
In addition, in terms of market layout, Mao Geping's positioning is a high-end market, although the impact of the industry environment is small and profitable, but the reality is that the audience of domestic brands is still small, so it is difficult to expand the market.
At the same time, Mao Geping is still "blank" in the low-end market. At present, Mao Geping only has two major brands, MAOGEPING and Zhiai Lifetime, which focuses on the low-end market, but has not yet started the sales layout and has few performance.
Although Mao Geping has occupied a place in the high-end bureau, there is still a big gap between him and first-line brands such as Dior and Lancôme in terms of brand awareness and products. As international beauty groups increase their efforts to conquer the city, domestic beauty brands are vying to attack the high-end, and it is still unknown whether Mao Geping can hold the front.
(4) The makeup school has been questioned one after another, how can this business be broken?
Mao Geping's makeup school has brought traffic bonuses to the brand, but this bonus has also brought further controversy.
During the reporting period, the makeup training revenue was 25.4843 million yuan, 39.0731 million yuan, 42.0896 million yuan and 26.6195 million yuan respectively, accounting for 9.52%, 12.64%, 12.64% and 13.64% respectively, accounting for about 10%.
Since 2021, Mao Geping Makeup School has been reported many times by the media as "PUA students", "malicious charges", "bundling consumption of inferior cosmetics", etc., and according to the relevant data disclosed before, in 2015, 2016, and the first half of 2017, the ratio of makeup training income to the income from the sale of cosmetics through training channels was 2:1, that is, in addition to paying tuition, students also paid half of the tuition fees for buying cosmetics, which made the makeup school have been controversial.
Mao Geping's official has not replied to relevant reports before. At the same time, relevant information shows that Mao Geping's schools in Sichuan and Zhejiang have been cancelled, and Mao Geping has not officially disclosed the specific reasons for the cancellation.
(5) Can the pre-IPO surprise dividends of Hong Kong stocks escape the CSRC?
One of the controversial points of Mao Geping's company is the surprise dividend before the listing. At the general meeting of shareholders held in February 2024, Mao Geping announced a dividend of 500 million yuan to all shareholders and pay dividends in March 2024.
Previously, at the shareholders' meeting held in March 2021 and May 2023, Mao Geping declared a dividend of 290 million yuan to all shareholders respectively. And this dividend in 2024 far exceeds the total dividend of the past 3 years, which is basically equal to 44% of the last raised funds.
For the behavior of surprise dividends before listing, the China Securities Regulatory Commission issued the "Opinions on Strictly Controlling the Access to Issuance and Listing and Improving the Quality of Listed Companies from the Source (Trial)", which clearly stated that "it is necessary to pay close attention to whether the enterprises to be listed have pre-listing surprise 'clearance' dividends, etc., strictly prevent and strictly investigate, and implement negative list management".
Relevant data show that as of March 27, 4 companies planning to IPO may voluntarily withdraw their IPO applications due to the reasonableness of "clearance" dividends. Can Mao Geping escape the eyes of the Securities Regulatory Commission?
There is no doubt that a company's longevity depends on its "hard power". If you want to go public as scheduled, Mao Geping must solve and respond to the above problems - highly dependent on the founder Mao Geping himself for marketing, how far can Mao Geping go?