China’s Biggest Facial and Body Care Company Goes Public in Hong Kong

On April 22, 2022, Beijing time, Beauty Farm submitted a prospectus to the Hong Kong Stock Exchange for listing on the main board of Hong Kong. Beauty Farm is the largest daily facial and body care chain enterprise and the second largest body and skincare service provider in China.

On April 22, Beijing time (the following occurrence time in Beijing time), Beauty Farm Medical and Health Industry Co., Ltd. (hereinafter referred to as Beauty Farm) submitted a prospectus to the Hong Kong Stock Exchange for listing on the Main Board of Hong Kong. The co-sponsors are Morgan Stanley, Haitong International Securities Group Limited, and Huatai Securities.

According to the prospectus, Beauty Farm was established in 1993 and currently has four brands: “Beauty Farm”, “PALAISPA”, “Yanyuan” and “CellCare”. As of December 31, 2021, Beauty Farm has 177 stores in China, including 154 Beauty Farm and PALAISPA stores that provide daily facial and body care services, 18 CellCare stores that provide energy instruments and injection services, and 5 Yanyuan stores that provide anti-aging medical services. In addition, it has 160 franchised stores.

In terms of financial data, Beauty Farm reached $216 million, $231 million, and $274 million of sales revenue respectively with the net profit being $23 million, $23 million, and $32 million respectively, and a compound annual growth rate of 18.9% from 2019 to 2021. It is worth noting that the full-year revenue of Beauty Farm in 2021 reached $274 million, an increase of 18.5% year-on-year, and the gross profit margin was 46.8%, an increase of 0.2% over the same period in 2020, and the profit attributable to shareholders increased by 28.2% year-on-year to $0.30 billion.

According to Frost & Sullivan, China reached $76.946 billion in the market size of body and skincare services in 2021 and is expected to increase to $162.520 billion in 2030 at a compound annual growth rate of 8.7%.

From the perspective of market position, according to the prospectus, China’s body and skincare service market is highly fragmented and Beauty Farm ranks second in China in terms of revenue. Beauty Farm ranks first among Chinese competitors in 2021 in terms of daily facial and body care services and revenue from direct stores. According to the revenue of energy instruments and injection services in 2021, Beauty Farm ranks fourth among competitors in the Chinese market.

Due to the beauty industry, there are certain medical risks at the Beauty Farm. Medical disputes in Beauty Farm are mainly related to complications and physical trauma suffered by customers during or after receiving services in the store or related to customer complaints received.

The prospectus mentions that in 2019, a customer underwent eyelid plastic surgery at one of its direct-operated stores and about two months later, the customer sued Beauty Farm for damages due to the blockage of the central retinal artery. The Chinese court ultimately announced the store compensated $16,800 in damages because the customer had not been informed of this particular risk before the operation.

The prospectus also discloses the refunds and compensation, the total refunds and compensation made by Beauty Farm to customers were about $1.5534 million, $2.9683 million, and $3.3682 million respectively from 2019 to 2021, accounting for about 0.7%, 1.3%, and 1.2% of the total revenue for the same period.

It is reported that the funds raised by the IPO will be used to expand and upgrade the service network will be used for the strategic mergers and acquisitions of franchise stores, to further invest in IT systems to develop internal digital capabilities, streamline daily operations and improve operational efficiency as well as in operating funds and other general corporate purposes.




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