According to the latest news from the National SME Share Transfer System, JAKA Biotech Co., Ltd. (hereinafter referred to as “JAKA”) disclosed its public transfer prospectus (declaration draft) on September 25th with the intention to list on the New Third Board basic tier. It is understood that the total number of shares listed by JAKA this time is 41.03 million shares, with a face value of 1 yuan per share, and the lead underwriter is Dongwu Securities.
CHAILEEDO noted that this is not JAKA’s first attempt to enter the capital market, as it has long been preparing for an IPO. According to information from the China Securities Regulatory Commission’s official website, as early as December 22nd last year, JAKA had already started IPO listing guidance, with Dongwu Securities as the guiding institution. Regarding JAKA’s move to list on the New Third Board, CHAILEEDO immediately called JAKA for details, but the relevant person in charge stated that it was currently inconvenient to reply.
“JAKA’s intention to list on the New Third Board this time may be aimed at an IPO on the Beijing Stock Exchange.” Shen Meng, Managing Director of Xiangsong Capital, pointed out, “The listing application process on the Beijing Stock Exchange has been optimized, allowing companies to apply for listing on the Beijing Stock Exchange while applying for listing on the New Third Board. Due to the limited appeal of the New Third Board in terms of financing and liquidity, companies often choose the New Third Board with the ultimate goal of listing on the Beijing Stock Exchange.”
In two years, revenue exceeds 400 million, the equity buyback agreement aims for listing before 2025
Public information shows that JAKA was established in 2010 and is headquartered in Jinshan District, Shanghai. As a leading Chinese company specializing in the research and production of effective cosmetic active ingredients, JAKA focuses on the production of two major categories of products: plant extracts and microbial fermentation, subdivided into nine types based on efficacy, including soothing, moisturizing, whitening, acne suppression, wrinkle removal, antioxidant, and repair.
According to the disclosure in JAKA’s prospectus, in terms of the equity structure, Tian Jun, Wang Jichao, and Su Wencai collectively directly or indirectly hold 55.95% of the company’s shares. Additionally, as the executive partners of Jia Shang, Jia Bei, and Jia Guang in JAKA, the three jointly control 74.14% of the company’s share voting rights, making them the controlling shareholder. Furthermore, JAKA’s shareholders include S’Young and Bloomage Langya. In terms of positions, Tian Jun serves as the Chairman and General Manager of JAKA, Wang Jichao serves as Vice Chairman, Vice General Manager, and Secretary of the Board, while Su Wencai serves as a Director.
In recent years, with the rapid development of the functional skincare market, JAKA, as an upstream supplier of functional raw materials, has also achieved significant growth and attracted much capital attention. Between 2020 and 2023, JAKA completed four rounds of financing, with investors including S’Young and Bloomage Langya.
As disclosed in the prospectus, when bringing in external investors, JAKA signed agreements that include performance compensation, equity repurchase, and other special rights. For example, in the B round of financing, companies like S’Young and Bloomage Langya signed equity repurchase terms with JAKA. According to these terms, if JAKA fails to achieve a qualified IPO listing by December 31, 2024, any investor has the right to demand the company and/or the actual controller repurchase the shares held by the investor.
However, in the C round of financing, the equity repurchase agreement between S’Young and JAKA postponed the IPO listing deadline to December 31, 2025. In the D round of financing, investors like Golden Lake Capital and Jiaxing Jincolor extended this deadline to December 31, 2026. As these dates approach, JAKA undoubtedly needs to achieve an IPO listing to fulfill the relevant agreements.
In terms of performance, from 2022 to the first quarter of 2024, JAKA’s revenues were 183 million yuan, 218 million yuan, and 51 million yuan respectively, with net profits of 55 million yuan, 48 million yuan, and 9 million yuan. Overall, between 2022 and 2023, JAKA’s total revenue exceeded 400 million yuan. Additionally, although there was a slight decrease in net profit in 2023, the company’s revenue and net profit showed an overall upward trend.
Regarding gross profit margin, from 2022 to the first quarter of 2024, JAKA’s comprehensive gross profit margins were 63.16%, 63.69%, and 64.71% respectively. Overall, compared to similar companies, there is not much difference.
In terms of business type, JAKA’s main products are cosmetic functional raw materials. From 2022 to the first quarter of 2024, the revenue from this category of products was 181 million yuan, 217 million yuan, and 50.93 million yuan, accounting for 99.22%, 99.98%, and 100% of the revenue respectively, making it the main source of the company’s income.
Additionally, JAKA’s business also includes a small amount of testing services and packaging material sales, with revenues of 1.421 million yuan, 38,800 yuan, and 11,000 yuan respectively. JAKA stated, “In 2022, with professional equipment and a complete efficacy evaluation system, the company undertook a small amount of cosmetic efficacy testing services externally, such as soothing, anti-wrinkle tightening, acne removal, and oil control. Since 2023, the company has focused mainly on the cosmetic functional raw material business and no longer undertakes external efficacy testing services. Additionally, during the reporting period, the company also sold some packaging materials, but the amounts and proportions were relatively low.”
Proya and Forest Cabin are among the top five customers, with R&D accounting for over 5%.
In terms of sales model, JAKA has adopted a sales model that is primarily driven by end customers, with traders and contracted distributors serving as supplements, based on customer distribution and market conditions. Specifically, end customers are mainly cosmetics manufacturing enterprises, trade customers are primarily traders with downstream customer resources, and developing a distributor network aims to expand overseas markets.
According to the disclosed prospectus, the proportion of revenue from end customers to total revenue for JAKA from 2022 to the first quarter of 2024 were 79.67%, 78.62%, and 84.70% respectively, being the main source of revenue. The proportions for traders and contracted distributors were 13.13%, 12.80%, and 11.79%, as well as 7.20%, 8.58%, and 3.51% respectively.
In addition to establishing a sales model that complements end and non-end channels, JAKA also places great emphasis on the development of its marketing network system. In domestic operations, considering geographical location and business strategies, JAKA has established a sales layout centered around regions where cosmetics manufacturers are concentrated, such as East China, North China, and South China, while also extending sales coverage to regions like Southwest, Central China, Northeast, and Northwest. For overseas operations, an international marketing center has been set up to explore sales business in regions like Europe, Asia-Pacific, and the Americas.
As disclosed in the prospectus, domestic sales revenue for JAKA from 2022 to the first quarter of 2024 were 149 million yuan, 175 million yuan, and 44 million yuan, accounting for 81.56%, 80.60%, and 85.59% of the total revenue respectively, with over 50% of customers in the East China region.
Foreign sales revenue amounted to 33 million yuan, 43 million yuan, and 7 million yuan, representing 18.44%, 19.40%, and 14.41% of the total revenue respectively, with customers mainly concentrated in countries such as India, Russia, Italy, Vietnam, Romania, Thailand, Indonesia, France, and Belgium. JAKA stated, “Overseas sales will become an important future direction for the company.”
It is worth mentioning that from 2022 to the first quarter of 2024, Shandong Freda has consistently been JAKA’s largest customer, with COSMAX also ranking among the top three customers. Additionally, JAKA’s top five customers include Proya, Forest Cabin, Bloomage Biotech, and S’Young.
As a cosmetic raw material company, the importance of research and development is self-evident. During the reporting period, JAKA’s R&D expenses were 10.36 million yuan, 18.38 million yuan, and 4.85 million yuan respectively, accounting for 5.67%, 8.45%, and 9.52% of the total revenue. It is evident that JAKA’s investment in R&D is continuously increasing.
Undeniably, in the course of its development, JAKA also faces some risks. JAKA has pointed out that major risks include intensified market competition, fluctuations in raw material prices, loss of core technical personnel and technology leakage, bad debts in accounts receivable, improper management by the actual controller, among others. Additionally, JAKA also faces relatively single financing channels and a competitive disadvantage due to its smaller scale compared to international industry peers.
Chinese raw material suppliers are vying to go public.
The rapid development of JAKA in recent years is undoubtedly closely related to the rise of the functional skincare market and the increasing attention to Chinese raw material ingredients.
According to the “2024 China Cosmetics Market Research Report on Functional Claims” released by the Development Research Center of the State Market Supervision Administration, an increasing number of consumers endorse the concept of “functional skincare.” 72% of consumers consider the efficacy of cosmetics to be very important, with 65% of consumers emphasizing efficacy data verification when choosing cosmetics.
JAKA focuses on the production of two major functional raw material products: plant extracts and microbial fermentation, which align perfectly with current market trends. In terms of policies, in November 2023, the National Medical Products Administration issued a notice regarding the encouragement of innovation and standardized management of new cosmetics raw materials, promoting the development of new materials combining traditional Chinese advantages and characteristic plant resources, and supporting research and innovation using modern scientific technology.
In fact, plant-based raw materials have become the protagonists of the cosmetics market. According to data from the National Medical Products Administration, as of September 2, 2024, 65 cosmetic raw materials have been filed, with 22 being plant-based, accounting for 33.85%. At the same time, microbial fermentation ingredients have also become a market favorite. Public data shows that in recent years, the number of registered beauty products using fermentation ingredients (except for 2022) has maintained a double-digit annual growth rate, especially in the first 7 months of 2023, with a growth rate of up to 43.4%.
It is evident that by tapping into these two popular tracks of plant extraction and microbial fermentation, JAKA has the strength to make a move towards the capital market. It is worth noting that along with the vigorous development of Chinese functional raw materials, not only JAKA but many cosmetic raw material companies have also initiated the process of going public this year or have already successfully gone public.
On September 13, China Herb Co., Ltd., a supplier of fragrances and flavor raw materials for Symrise and Givaudan, successfully went public on the Beijing Stock Exchange, becoming the “first stock of 2024 for cosmetics raw materials.”
Moreover, several raw material companies are actively striving to enter the capital market and seek listing. For example, in March of this year, Chicheng Biotech Technology Co., Ltd. announced its intention to apply for listing on the Beijing Stock Exchange. Chicheng Biotech focuses on developing, producing, and selling hydrolyzable tannin series products using tannin-rich plants and has launched beauty and daily skincare brands such as Fuya Yan, Xiyou Jiaren, Shizisenlin, and Jiachining.
In June of this year, Trautec, a recombinant collagen raw material supplier, had its materials formally accepted for listing on the New Third Board; and in the same month, seabuckthorn product supplier Inner Mongolia Aerospace Sand Industry Co., Ltd. also submitted a listing application to the Hong Kong Stock Exchange.
Overall, during the rapid growth period of Chinese functional raw materials, many companies hope to further develop and grow by leveraging the power of capital. In the current tightening trend of A-share IPO policies, companies like JAKA choose to pursue the New Third Board as a viable strategy for entering the capital market.
