According to the documents of the Hong Kong Stock Exchange, last night (November 20th), Mao Geping Cosmetics Co., Ltd. (referred to as Mao Geping) conducted a listing hearing on the main board of the Hong Kong Stock Exchange. This means that the company is expected to be listed on the Hong Kong Stock Exchange.
The 8-year journey to listing encountered twists and turns.
Public information shows that Mao Geping was founded in 2000, owning two major brands, MAOGEPING and LOVE FOR KEEPS. MAOGEPING, launched in 2000, targets the high-end market, while LOVE FOR KEEPS, introduced in 2008, is positioned as a mass-market brand. Additionally, Mao Geping also operates in the field of cosmetic art training.
According to Frost & Sullivan data, Mao Geping is the only Chinese company among China’s top ten high-end beauty conglomerates. Ranked seventh by retail sales in 2023 with a market share of 1.8%, Mao Geping is poised to become the first high-end Chinese beauty brand to enter the capital market with a successful listing on the Hong Kong Stock Exchange.
Looking back on Mao Geping’s path to listing, it has been full of ups and downs.
In December 2016, Mao Geping first submitted its prospectus to enter the A-share market and updated it in September 2017. It wasn’t until 2021, four years later, that Mao Geping finally successfully completed its initial public offering (IPO). However, there were no further updates after that. Speculation arose that Mao Geping’s listing was hindered by issues related to the default of one of its shareholders, Jiuding Group.
In March 2023, amidst comprehensive registration reform, Mao Geping updated its prospectus and restarted the IPO process. However, in September of the same year, the listing process was halted again due to outdated financial information. In January of this year, Mao Geping withdrew its IPO application, and the Shanghai Stock Exchange terminated the review of Mao Geping’s listing on the main board. With this, Mao Geping’s second attempt at an IPO ended in failure.
It wasn’t until April of this year that Mao Geping made a third attempt at an IPO, this time shifting to a listing on the Hong Kong Stock Exchange. During this period, Mao Geping experienced a “failure” in its listing application materials on October 8, but promptly updated its prospectus the next day. On November 8, Mao Geping officially received approval for overseas issuance and domestic non-listed share full circulation from the China Securities Regulatory Commission, and as of yesterday, Mao Geping successfully passed the hearing at the Hong Kong Stock Exchange.
In accordance with regulations, the process for a Hong Kong IPO generally involves submission, hearing, roadshows, prospectus, public offering results, grey market trading, and listing. Mao Geping passing the hearing can be seen as crossing one of the most crucial hurdles in the Hong Kong IPO process.
In its prospectus, Mao Geping stated that 25% of the funds raised in this IPO will be used to expand its sales network and enhance user coverage. Additionally, 15% of the raised funds will be allocated for overseas expansion and acquisitions. This shows that Mao Geping’s future plans extend beyond the domestic market as it actively seeks opportunities in the international market.
In the first half of the year, revenue reached 2 billion yuan, with the potential to enter the top ten list of domestic beauty brands.
Although Mao Geping’s path to IPO has been particularly challenging, the company’s successful passing of the Hong Kong Stock Exchange hearing is not unrelated to its strong performance in recent years.
According to Mao Geping’s prospectus, from 2021 to 2023, the company’s revenues were 1.577 billion yuan, 1.829 billion yuan, and 2.886 billion yuan respectively, with a compound annual growth rate of 35.3%. During the same period, net profits were 331 million yuan, 352 million yuan, and 663 million yuan respectively, with a compound annual growth rate of 41.6%.
In the first half of 2024, Mao Geping’s revenue was 1.972 billion yuan, a year-on-year increase of 41%; net profit was 493 million yuan, with a year-on-year growth rate of 41% as well. According to Frost & Sullivan data, Mao Geping’s revenue growth from 2021 to 2023 and in the first half of this year significantly outperformed the industry average.
Specifically, Mao Geping’s revenue mainly comes from sales of the MAOGEPING brand. In 2021, 2022, 2023, and the first half of this year, the revenue share of this brand was 96.6%, 98.4%, 99%, and 99.3% respectively.
According to Frost & Sullivan data, the MAOGEPING brand is the only domestic brand among the top fifteen high-end beauty brands in the Chinese market. Based on retail sales in 2023, it ranked twelfth with a market share of 1.8%, and its evaluation criteria (including retail price, sales channels, and brand awareness) are in line with industry standards.
As Hong Kong stocks do not require companies to disclose their third-quarter reports, the “Post-hearing Information Pack” recently released by the Hong Kong Stock Exchange also does not disclose Mao Geping’s financial data for the first three quarters of this year. However, based on the data of domestic beauty companies listed in the first half of the year, Mao Geping’s revenue of 1.972 billion yuan is second only to Shuiyang Corporation (2.293 billion yuan), currently ranked sixth. This suggests that Mao Geping is likely to enter the top ten list of domestic beauty companies this year.
At the same time, Mao Geping’s main brand, MAOGEPING, is also expected to reach 4 billion yuan in revenue for the full year. Worth mentioning is that based on performance estimates for the first half of this year, among the Chinese beauty companies already listed, aside from Pechoin, Hanhoo, and Kofumei are also expected to achieve revenue levels exceeding 4 billion yuan in 2024.
Diversified Efforts to Fill in the Gaps
It is worth mentioning that although Mao Geping’s performance is quite impressive, it has not yet shaken off the label of being “light on research and development.” It is reported that compared to the company’s emphasis on a “high-end” positioning, Mao Geping’s investment in research and development is not high.
According to the prospectus, from 2021 to 2023, Mao Geping’s research and development costs were 13.703 million yuan, 14.548 million yuan, and 23.975 million yuan respectively, with research and development expense ratios of 0.87%, 0.8%, and 0.83% respectively. In the first half of this year, Mao Geping’s research and development costs were 15.267 million yuan, accounting for only about 0.77% of revenue. This figure still shows a certain gap compared to the 2%-3% research and development ratio of domestic listed beauty companies.
On the other hand, currently, Mao Geping’s supply chain relies mainly on outsourcing. The prospectus states, “To ensure optimal efficiency and maintain strict quality control standards, throughout the entire historical period, we have always chosen reliable ODM/OEM suppliers to handle our product production.”
However, it can be seen that in the years leading up to the IPO, Mao Geping has been actively working to fill these gaps and has been taking frequent actions to strengthen the supply chain and improve the industrial base.
For example, in April 2023, Mao Geping’s beauty research and development factory broke ground in Hangzhou, with a project area of 44,838 square meters, expected to be completed and operational within two years. Mao Geping publicly stated that the key reason for establishing its own factory is that “the company has reached a new stage of development that needs to match the company’s development plan.” In addition to building its own factory, Mao Geping has also strengthened its industrial chain by acquiring manufacturing plants. In October 2023, Mao Geping’s wholly-owned subsidiary, Hangzhou Xingyi, officially became the third largest shareholder of Huameikangyan (Suzhou) Biotechnology Co., Ltd. through the acquisition of equity.
Furthermore, earlier this year, Mao Geping also invested in a company called Hangzhou Shangduhui Cosmetics Technology Co., Ltd., with a 100% stake. Additionally, Mao Geping also won the bid for the SC0402-B1/B2/S2-15 plot located in the core area of Wangjiang New City for a total price of 593 million yuan. There are speculations in the industry that “this plot may become the headquarters of Mao Geping in Hangzhou.”
Through these series of actions, it is evident that Mao Geping is continuously enhancing its competitiveness by strengthening its supply chain, expanding investments, and more. While Mao Geping is improving its internal strengths, it is also bolstering its confidence in entering the capital market
