The road to the IPO was full of twists and turns, but after various challenges, Mao Geping Cosmetics Co., Ltd. (referred to as Mao Geping) eventually made its way to the Hong Kong Stock Exchange. The listing of Mao Geping can be described as thrilling, but in the end, it was a success.
Today (December 10th), Mao Geping officially rang the bell for its listing on the Hong Kong Stock Exchange, with the stock code 01318.HK. Mao Geping opened at HKD 47.65 per share ($6.13 per share), with a staggering 75.34% increase at the opening, reaching a total market value of HKD 25.02 billion ($3.2 billion). This signifies the birth of the “First Stock of Chinese Cosmetics” in the Hong Kong stock market.
It is worth mentioning that Mao Geping was highly sought after during its IPO. By the end of the subscription period on December 5th, the total subscription amount for Mao Geping reached HKD 173.814 billion ($22.35 billion), surpassing the HKD 132.39 billion ($17 billion) of China Resources Beverage, equivalent to an oversubscription rate of 826 times.
This year’s revenue may exceed 4 billion for the first time.
Public information shows that Mao Geping was established in 2000 and owns two major brands, Mao Geping and LOVE FOR KEEPS. Mao Geping was launched in 2000, targeting the high-end market, while LOVE FOR KEEPS was introduced in 2008 as a mass-market brand. Additionally, Mao Geping also engages in makeup art training-related business.
Looking back on Mao Geping’s journey to its IPO, it was full of ups and downs. Having faced setbacks in the A-share market three times, the company eventually turned to the Hong Kong stock market in April 2024:
In 2016, Mao Geping first submitted its prospectus to the Shanghai Stock Exchange, but by the end of 2019, the IPO was suspended due to the company’s request to halt the review process.
In 2021, Mao Geping’s IPO was approved, but the application did not progress further. The company stated in its Hong Kong prospectus that they were following up with the China Securities Regulatory Commission on the issuance approval, but had not received any formal approval.
In 2023, Mao Geping submitted its prospectus to the Shanghai Stock Exchange again, but the IPO was terminated due to outdated financial information. In January 2024, Mao Geping withdrew its application, putting an end to its A-share IPO journey.
In 2024, Mao Geping shifted to the Hong Kong Stock Exchange, and in April of this year, it disclosed a new prospectus, followed by a second submission of the listing application on October 9th.
Today, the company officially debuted on the Hong Kong Stock Exchange. Despite the challenges faced, Mao Geping’s success as a listed company is largely attributed to its outstanding performance. According to the latest prospectus, from 2021 to 2023, Mao Geping achieved revenues of 15.77 billion yuan ($2 billion), 18.29 billion yuan ($2.35 billion), and 28.86 billion yuan ($3.7 billion) respectively, with a compound annual growth rate of 35.3%. During this period, the net profits were 3.31 billion yuan, 3.52 billion yuan, and 6.64 billion yuan respectively, with a compound annual growth rate of 41.6%.
In the first half of this year, Mao Geping’s revenue continued to grow rapidly, reaching 19.72 billion yuan ($2.5 billion), a 41% year-on-year increase. Industry experts predict that the company’s revenue for this year may exceed 40 billion for the first time.
According to Frost & Sullivan data, Mao Geping’s revenue growth significantly surpasses the industry average. Correspondingly, the Chinese high-end cosmetics market grew at a compound annual growth rate of 7.8% from 2018 to 2023, reaching 194.2 billion yuan ($25 billion) in 2023 and projected to reach 311 billion yuan ($40 billion) by 2028.
As Mao Geping’s revenue rapidly grows, its market share is also increasing. According to Frost & Sullivan data, among the top ten high-end cosmetics conglomerates in the Chinese market, Mao Geping is the only Chinese company, ranking seventh in terms of retail sales of all high-end brands under these conglomerates in 2023, with a market share of 1.8%.
Mao Geping accounts for over 99% of total revenue.
As the only Chinese company among the top ten high-end cosmetics conglomerates in the Chinese market, Mao Geping’s main brands are “Mao Geping” and “LOVE FOR KEEPS.”
From the revenue structure perspective, Mao Geping is undoubtedly the main brand that Mao Geping heavily relies on. Public information shows that Mao Geping is named after the founder of Mao Geping and primarily operates through a direct sales model in mid-to-high-end department stores and e-commerce platforms, targeting urban women as its main consumer base for domestic high-end cosmetics.
According to the prospectus, from 2021 to the first half of 2024, Mao Geping’s revenues were 1.445 billion yuan ($185.8 million), 1.746 billion yuan ($224.5 million), 2.755 billion yuan ($354.3 million), and 1.887 billion yuan ($242.7 million) respectively, accounting for 96.6%, 98.4%, 99.0%, and 99.3% of Mao Geping’s total revenue.
According to Frost & Sullivan data, Mao Geping is the only domestic brand among the top fifteen high-end cosmetic brands in the Chinese market. In terms of retail sales in 2023, it ranked twelfth, holding a market share of 1.8% in the high-end cosmetics industry.
In contrast, the presence of the LOVE FOR KEEPS brand has always been relatively low. Public information indicates that the LOVE FOR KEEPS brand primarily operates through a distribution model, targeting female consumers in second- and third-tier cities, aiming to broaden the company’s product coverage and sales areas.
The prospectus shows that from 2021 to the first half of 2024, LOVE FOR KEEPS recorded sales revenues of 50 million yuan ($6.43 million), 29 million yuan ($3.73 million), 27 million yuan ($3.5 million), and 13 million yuan ($1.67 million), accounting for 3.4%, 1.6%, 0.94%, and 0.66% of Mao Geping’s total product sales revenue, showing a declining revenue share.
Apart from being constrained by the core brand, insufficient research and development (R&D) investment has also become a “Sword of Damocles” hanging over Mao Geping’s head. It is understood that Mao Geping’s products mainly rely on three forms of outsourced processing, external cooperation, and direct procurement. According to the prospectus, from 2021 to the first half of 2024, Mao Geping’s R&D investments were 13.703 million yuan ($1.76 million), 14.548 million yuan ($1.87 million), 23.975 million yuan ($3 million), and 15.267 million yuan ($1.96 million), with R&D expense ratios of 0.87%, 0.8%, 0.83%, and 0.77%, showing a certain gap compared to the average R&D expense ratio of 2% to 3% among listed companies in the Chinese cosmetics industry.
In response to questions about the R&D expense ratio being below 1%, Mao Geping candidly admitted in the prospectus, “The main reason is the difference in R&D models and stages. The issuer’s R&D team focuses on design, presentation, and application, emphasizing the research of popular elements, colors, usage effects, appearance creativity, and display methods; whereas other industry cosmetics companies primarily focus on R&D in cosmetics raw materials, biotechnology, and cosmetics formulation processes. Compared with them, the issuer has the characteristics of less material input and less equipment requirements.”
It is worth mentioning that when faced with queries from the China Securities Regulatory Commission’s Listing Committee regarding the reasons and rationality for Mao Geping’s high gross profit margin compared to top-tier brands despite its weaker R&D capabilities and brand recognition, at that time, Mao Geping explained in the prospectus, “Mao Geping’s main makeup and skincare brands are positioned similarly to international brands such as L’Oreal, Shiseido, and L’Occitane,” but “the company’s mass-market brand products are priced lower, which lowers the overall gross profit margin.”
It is evident that in the fiercely competitive cosmetics industry, Mao Geping, which has successfully gone public, still faces significant challenges such as excessive reliance on the main brand, insufficient R&D investment, and excessive marketing expenses.
The lineup of China’s top ten domestic beauty brands is changing.
In fact, recognizing the importance of research investment, Mao Geping is actively taking measures to try to break the deadlock. In April 2023, Mao Geping’s beauty research and development factory started construction in Hangzhou, with a project area of 44,838 square meters, and is expected to be completed and put into operation within two years.
In October of the same year, a company under Mao Geping acquired a stake in Huamei Kangyan (Suzhou) Biotechnology Co., Ltd., becoming its third largest shareholder.
At the beginning of this year, Mao Geping established Hangzhou Shangduhui Cosmetics Technology Co., Ltd. in Hangzhou with a registered capital of 500 million yuan ($64.3 million), continuing to focus on research and development.
At the same time, Mao Geping is actively exploring opportunities in overseas markets. In the prospectus, Mao Geping stated that 25% of the funds raised in this IPO would be used to expand the sales network, improve user reach coverage, and plan to use 15% of the funds raised for overseas expansion and acquisitions.
It can be seen that for Mao Geping, going public is not the end but a new beginning. It is worth noting that based on the data of domestic beauty and makeup companies listed in the first half of the year, Mao Geping’s revenue of 1.972 billion yuan ($253.6 million) is second only to S’Young Group ($294.9 million) currently ranked sixth, higher than YATSEN ($201.7 million), Bloomage Biotech ($177.6 million), Marubi ($173.9 million), and Freda ($152.5 million).
It is evident that with this successful IPO, Mao Geping is not only expected to reach a revenue of 4 billion yuan ($514.4 million) this year but also has the potential to enter the top ten domestic beauty brands in China.
Objectively speaking, Mao Geping’s successful IPO is partly due to taking advantage of the “fast track” provided by the Hong Kong Stock Exchange’s IPO policy adjustments. It is understood that the China Securities Regulatory Commission announced on April 19 this year five measures for capital market cooperation with Hong Kong, supporting leading mainland industry companies to list in Hong Kong. Mao Geping submitted its prospectus to the Hong Kong Stock Exchange for the first time in April this year.
At the same time, the Hong Kong Stock Exchange has introduced many new measures this year, such as lowering the minimum listing threshold for special technology companies, increasing market inclusiveness, and attracting more innovative companies to list in Hong Kong.
In terms of the amount of funds raised from new stocks, according to Wind data, as of October 24, the Hong Kong Stock Exchange has added 51 new IPO companies this year, with a total initial public offering size of 67.567 billion Hong Kong dollars, far exceeding the total for the previous year.
On the other hand, incorporating strong personal intellectual property (IP) into products is also key to Mao Geping’s ability to capitalize on industry trends. It is understood that at the age of 29, Mao Geping did the makeup for Liu Xiaoqing, who played Wu Zetian in the TV series “Empress Wu,” creating makeup looks for Liu Xiaoqing ranging from 15 to 82 years old, which brought him fame and the title of “magical makeup artist.”
In 2000, Mao Geping officially embarked on the commercialization of personal IP, establishing a cosmetics brand and makeup training school named after himself, “Mao Geping.” This naming approach, the first of its kind in China, not only further amplifies the personal IP effect of Mao Geping but also aligns the high-end Mao Geping brand with international standards.
Looking at the international market, cosmetics brands such as Dior, Guerlain, Helena Rubinstein, Estée Lauder, Chanel, Jo Malone, and Yves Saint Laurent are all named after their founders.
Of course, Mao Geping’s success is also attributed to its consistent strategy of “experiential marketing.” The prospectus candidly states: Each counter is equipped with a dedicated makeup table, where well-trained beauty consultants with expert makeup knowledge provide support, offering consumers professional makeup trials to highlight product effectiveness.
This marketing approach has brought significant returns to Mao Geping. According to the latest prospectus, as of the end of June 2024, Mao Geping has 372 self-operated counters, ranking second among domestic beauty brands, contributing approximately half of the revenue. In 2023, the revenue was 1.438 billion yuan ($184.9 million), accounting for 51.7%; in the first half of 2024, the revenue was 875 million yuan ($122.5 million), accounting for 46.1%.
Overall, Mao Geping’s eight-year journey to going public can be described as a journey from hardship to success. Through public financing, Mao Geping has a broader space for development. However, in the face of the new market environment and competition in the new development stage, for Mao Geping to achieve further growth, relying solely on the reputation of the name “Mao Geping” to endorse products is clearly not enough. Increasing research and development investment, updating marketing concepts, and continuously enhancing core competitiveness should be the new starting point for its development.
