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China’s Cosmetics OEM Bawei is Set to List on Beijing Stock Exchange

Bawei has made an announcement suggesting that they are considering applying for public issuance of shares and listing on the Beijing Stock Exchange.

Recently, Guangdong Bawei Biotechnology Corporation (hereinafter referred to as “Bawei”) released a suggestive announcement on the board of directors’ deliberation on the public issuance of shares and listing on the Beijing Stock Exchange. The announcement states that the company intends to apply for public issuance of shares and a listing on the Beijing Stock Exchange.

It is reported that Bawei plans to issue no more than 8 million shares (including the principal, without considering the over-allotment option of the company’s issuance this time) to unspecified qualified investors. The company and the lead underwriter will choose the over-allotment option based on the specific issuance situation, and the number of shares issued using the over-allotment option shall not exceed 15% of the number of shares issued without considering the over-allotment option (i.e., no more than 1.2 million shares, including the principal).

That is, when using the over-allotment option, the total number of shares issued by the company this time shall not exceed 9.2 million shares (including the principal). The final issuance quantity will be determined by the board of directors authorized by the shareholders’ general meeting in consultation with the lead underwriter based on the registration results of the China Securities Regulatory Commission (hereinafter referred to as “CSRC”), market conditions, and other factors.

As for the issue floor price that the public is concerned about, Bawei proposes no less than 10.50 yuan ($1.47) per share. After deducting the issuance costs, the funds raised from this issuance will be used entirely for the construction of the main business. Among them, 40 million yuan ($5.58 million)is planned to be invested in the intelligent production workshop construction project from the funds raised; 24 million yuan ($3.35 million) in the R&D center construction project; and 20 million yuan ($2.79 million) in the supplementary working capital project, totaling 84 million yuan ($11.72 million).

In 2022, Bawei achieved operating revenue of 459 million yuan ($64.06 million), a year-on-year increase of 10.54%; and a net profit attributable to the parent company of 38.04 million yuan ($5.31 million), a year-on-year increase of 79%. It is worth noting that the gross profit margin during the reporting period reached 30.47%.

In terms of the business segments, the skincare products (excluding facial masks) achieved revenue of 369 million yuan ($51.50 million), a year-on-year increase of 19.15%, and a gross profit margin of 30.86%. Facial mask business revenue reached 53.02 million yuan ($7.40 million), a year-on-year decrease of 0.86% with a gross profit margin of 38.96%. The personal care business achieved revenue of 14.9853 million yuan ($2.09 million), a year-on-year decrease of 57.27% with a gross profit margin of 17.50%. Cosmetics and other business revenues were 15.59 million yuan ($2.18 million), with an increase of 74.60%, and a gross profit margin of 10.36%. The testing business achieved a revenue of 5.07 million yuan ($0.71 million), a year-on-year decrease of 21.92%, and a gross profit margin of 8.16%.

Bawei pointed out that the gross profit margin of each product has improved, benefiting from the improvement of manufacturing efficiency at the Jianggao plant and the gradual investment in automation equipment. Relatively speaking, the gross profit margin of cosmetics is lower, mainly because the company’s cosmetics production line has started in the past two years, and the order production scale efficiency is insufficient. In the future, as the sales volume of cosmetics grows, the gross profit margin will gradually optimize.

In the testing segment, there was a decline in both revenue and gross profit margin. Bawei attributed this mainly to the increasingly fierce competition in the efficacy testing market, the decline in external efficacy testing revenue, the reduced fixed cost dilution rate, and the increase in internal R&D formula verification efficacy testing costs.

It is worth mentioning that according to Bawei’s first quarter review report, as of March 31, 2023, the company achieved an operating income of 97.14 million yuan ($13.56 million) in the first quarter, a year-on-year increase of 44.89%, and a net profit of 7.1668 million yuan ($1 million).

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