Recently, Amhwa Biopharm Co., Ltd. (hereinafter referred to as “Amhwa”) disclosed the prospectus for public transfer, and the materials for listing on the New Third Board were accepted. It is understood that the total number of shares listed by Amhwa this time is 76,305,130 shares, with a face value of 1 yuan per share, and the sponsoring securities firm is Minsheng Securities.
Of note, Amhwa was listed on the New Third Board in 2015, but in July 2021, it voluntarily applied to the National Equities Exchange and Quotations (NEEQ) to delist, leading to a trading halt. The acceptance of this listing application also indicates that Amhwa may once again return to the New Third Board.
In the past two years, the revenue of 170 million yuan ($23.4 million)
Hyaluronic acid ranks fifth globally
According to public information, Amhwa was established in 2010, formerly known as Binzhou Amhwa Engineering Co., Ltd., focusing mainly on the research and production of bioactive substances, APIs, medical beauty terminals, and functional skincare products.
CHAILEEDO noted that Amhwa has not entered the capital market for the first time. As early as July 2015, the company was listed on the New Third Board and successfully raised 42 million yuan ($5.77 million). However, in July 2021, it voluntarily applied to the National Equities Exchange and Quotations (NEEQ) to delist, leading to a trading halt.
“The delisting from the New Third Board is similar to delisting from the A-share market. This application by Amhwa indicates a reapplication for listing,” said Shen Meng, Executive Director of Xiangsong Capital. After listing on the New Third Board, companies typically aim for an A-share listing. However, given the current IPO policy orientation in the A-share market, some companies planning to go public may not find a suitable timing. To continue operating in a regulated manner and prepare for listing, companies may choose to return to the New Third Board for greater flexibility in future listings on the Beijing Stock Exchange or A-share market.
Of note, after 14 years of development, Amhwa has become a leading global producer of hyaluronic acid. According to a Frost & Sullivan research report, in the global hyaluronic acid raw material market in 2018, the top five companies were all Chinese. Among them, the top-ranked company was Hua Xi Biological with a market share of 39%, followed by Freda (13%), Fufeng Group (9%), Dongchen Group (8%), and Amhwa ranking fifth with a 6% market share.
In terms of performance, from 2022 to May 2024, Amhwa’s revenues were 78.80 million yuan ($10.84 million), 98.09 million yuan ($13.5 million), and 37.93 million yuan ($5.2 million), with net profits of 17.02 million yuan ($2.34 million), 12.48 million yuan ($1.72 million), and -1.58 million yuan (-$217,300). Overall, Amhwa’s revenue is showing an upward trend, reaching 170 million yuan ($23.4 million) over the two years of 2022 and 2023, but its profitability is declining year by year.
Regarding gross profit margin, from 2022 to May 2024, Amhwa’s gross profit margins were 55.18%, 51.88%, and 42.74%, showing a downward trend. Amhwa explained that this is mainly due to increased market competition leading to lower selling prices for raw products and an increased proportion of lower-margin medical terminal product revenues.
Based on business type, Amhwa’s income mainly comes from raw products, functional skincare products, medical terminal products, and other businesses. The prospectus shows that from 2022 to May 2024, Amhwa’s income from raw products was 72.92 million yuan ($10 million), 85.59 million yuan ($11.8 million), and 31.25 million yuan ($4.3 million), accounting for 92.54%, 87.26%, and 82.40% respectively; income from functional skincare products was 3.71 million yuan ($510,100), 5.80 million yuan ($797,500), and 2.77 million yuan ($380,900), accounting for 4.71%, 5.91%, and 7.31% respectively; income from medical terminal products was 1.16 million yuan ($159,500), 5.53 million yuan ($760,400), and 3.32 million yuan ($456,500), accounting for 1.48%, 5.64%, and 8.77% respectively.
It is evident that Amhwa’s revenue composition is changing, with a gradual decrease in the proportion of raw products and a continuous increase in the proportion of medical terminal products and functional skincare products. Since 2021, Amhwa has increased its investment in functional skincare products and medical terminal products, establishing several subsidiaries to expand into new business areas. Among them, the operation of functional skincare products is handled by the subsidiary Hangzhou Zikeyan.
As disclosed in the prospectus, Amhwa’s functional skincare products are produced through an outsourced model. Its flagship brand Zikeyan (SHICORE) product line includes essences, creams, lotions, masks, eye masks, sprays, etc., and operates direct stores on platforms such as Tmall, Douyin, and Pinduoduo. CHAILEEDO noted that Zikeyan’s Tmall flagship store has 20,000 followers, with the best-selling product being the Zikeyan amino acid facial cleanser, selling over 1000 units at a price of 120g/61 yuan.
Overseas business accounts for over 20%
Proya and Freda are among the top five customers
From a sales perspective, Amhwa’s raw material products are sold both domestically and internationally, using a model that combines end customers with traders based on the types of downstream customers.
According to the prospectus, Amhwa has an extensive marketing network, with exports covering more than 50 countries and regions including the European Union, the Middle East, the United States, Japan, and South Korea, while domestic sales in China are mainly concentrated in the Yangtze River Delta and the Pearl River Delta regions.
In terms of revenue composition, from January to May 2022 to 2024, Amhwa’s overseas revenue was 15.69 million yuan ($2.16 million), 24.17 million yuan ($3.32 million), and 8.5 million yuan ($1.17 million), accounting for 19.92%, 24.64%, and 22.42% of the operating income, respectively. It is evident that Amhwa’s overseas revenue significantly increased in 2023 compared to 2022. However, Amhwa also pointed out that any future changes in trade policies in relevant countries leading to increased friction or restrictive policies could affect export business and thus have an adverse impact on the company’s performance.
Regarding customer structure, from 2022 to January-May 2024, the top five customers of Amhwa accounted for 47.31%, 44.77%, and 36.17% of the revenue, with a relatively low proportion of revenue from any single customer, indicating no significant dependence on major customers.
Specifically, among the top five customers, Qingdao Bonded Zone Lulian International Trade Co., Ltd. consistently contributed the highest proportion of revenue, with Proya fluctuating between the second and third positions, while Freda, Shanghai Mingliu Hygiene Products Co., Ltd., and Shanghai Boshuo Industry Co., Ltd. also appeared in the top five customers.
In terms of research and development investment, according to the prospectus, from 2022 to January-May 2024, Amhwa’s research and development investment were 7.84 million yuan ($1.1 million), 10.58 million yuan ($1.45 million), and 9.35 million yuan ($1.29 million), accounting for 9.95%, 10.79%, and 24.65% respectively, showing an increasing trend.
It is reported that Amhwa focuses primarily on independent research and development, supplemented by a small amount of collaborative research and development. It has established a process research, product development, and technical support team, building a complete research and development control system around the technical research and development department. As of May 31 of this year, Amhwa had a total of 20 technical and research personnel, accounting for 9.76% of the total employees.
It is evident that Amhwa’s high research and development investment is undoubtedly an important factor in its leading position in the hyaluronic acid market. In addition, its collaboration with well-known beauty companies like Proya and Freda further demonstrates its industry position and strength.
“In the cosmetics industry, upstream enterprises have better potential for going public.
In recent years, with the rapid development of the cosmetics industry in China, domestic cosmetics raw material enterprises have made significant progress in technological development, product quality, and market expansion, actively entering the capital market. Apart from Amhwa hoping to return to the New Third Board, Chuangjian Medical recently successfully listed on the New Third Board, and Jiake Biotechnology has been approved to be listed on the New Third Board.
With the current increase in the listing threshold and continuous tightening of IPO regulations, listing on the New Third Board has undoubtedly become a strategic choice for companies. Shen Meng’s analysis on this points out, ‘The listing application process for the Beijing Stock Exchange has been optimized, allowing companies to apply for listing on the New Third Board and the Beijing Stock Exchange simultaneously. Since the New Third Board has limited appeal in terms of financing and liquidity, companies usually choose the New Third Board with the ultimate goal of listing on the Beijing Stock Exchange.’
It is worth noting that in the relatively scarce situation of cosmetics companies going public in 2024, Anhui Chinaherb Flavors & Fragrances Co., Ltd., a fragrance and flavor supplier for Symrise and Givaudan, successfully listed on the Beijing Stock Exchange in September, becoming the ‘first stock of cosmetics raw materials in 2024.’
An investment manager from a leading domestic skincare company in China pointed out that with consumers’ increasing focus on efficacy selling points, brand enterprises are looking to collaborate deeply with upstream supply chain companies with strong innovation capabilities to jointly develop or customize unique materials, achieving ‘two-way cooperation of business and capital.’ Currently, they are focusing on several targets in areas such as peptides, collagen, ceramides, sunscreens, and planning to intervene through direct investment. Additionally, he also noted that despite challenges facing consumer goods companies in going public, upstream enterprises have better potential for going public.
Undoubtedly, it is currently a golden period for the development of cosmetics raw material enterprises. With the power of capital, these enterprises can not only drive business innovation and technological breakthroughs but also consolidate and enhance their industry-leading positions, achieving exponential growth.”
