Under the tide of listing, domestic cosmetics materials should fight back?

An unprecedented wave of listings.

9.883 billion yuan is the total market value of Nanjing Cosi Chemical Co., Ltd. (hereinafter referred to as "Cosi Chemical") 30 days after its listing.

This company, known as the “first share of sunscreen” in A-shares, successfully fired the first shot of this year's beauty upstream company going public.

Since the beginning of this year, Amic Technology Development Co., Ltd. (hereinafter referred to as "Amic"), which produces injectable sodium hyaluronate series products, and Anhui Huaye Perfume Co., Ltd. (hereinafter referred to as "Huaye Perfume"), supplier of P&G We have successfully passed the meeting and will be listed soon; Guangzhou Chuanger Biotechnology Co., Ltd., the pioneer of collagen dressing products (hereinafter referred to as "Chuanger Bio"), and Yunnan Baiyao supplier Jin Sanjiang (Zhaoqing) Silicon Materials Co., Ltd. ( (Hereinafter referred to as "Golden Sanjiang"), Germany's supplier Jiangsu Xinhan New Materials Co., Ltd. (hereinafter referred to as "Xinhan New Materials") and others successively disclosed the prospectus, opening the way to impact IPO.

"This kind of centralized listing has never happened before." An industry source analyzed that in addition to being affected by the epidemic, most companies need to raise funds to expand production capacity or increase R&D investment to build industry competition. barrier.

So, is this unprecedented wave of listings a chance for domestic raw material manufacturers to fight back?


Domestic raw material supplier "Xianshanlushui"

Tear open in the monopoly of international giants

According to a report from China Industry Information Network, from the perspective of global cosmetic raw material manufacturers, European and American companies represented by DSM and Dezhixin occupy the first echelon; while Japanese companies represented by Ajinomoto and Teikoku Ranked in the second echelon; domestic cosmetic raw materials manufacturers are in the third echelon, and can currently achieve basic functions such as moisturizing and moisturizing, but the key raw materials of high-end processes are highly dependent on foreign manufacturers.

It can also be seen from the prospectus of 6 companies including Huaye Perfume that international companies currently occupy an absolute dominant position in the field of cosmetic ingredients.

Taking the fragrance and fragrance industry as an example, the prospectus of Huaye fragrance and fragrance shows that from the sales data of the world's top ten fragrance and fragrance companies, the sales of 10 companies accounted for 77.20% of the total global sales in 2017, including Givaudan and Germany. The four leading international companies, including Zhixin, have maintained a combined market share of more than 50% in recent years.

Coase's prospectus also mentioned that in the international market, traditional fine chemical giants such as DuPont, BASF, and Dow Chemical have experienced years of development and have significant advantages in patent reserves, process technology, production management, and capital reserves.

However, under such circumstances, there are also many domestic raw material suppliers who are "exposed to mountains and dews", such as Ai Mei Ke.

According to Sullivan data, from 2016 to 2018, the market share of Amico products in China's medical beauty hyaluronic acid field was 5.70%, 7.0% and 8.5%, and it has become the domestic brand with the largest market share. Amic's prospectus shows that Amic is an innovative leader in the field of biomedical soft tissue repair materials in China and has a certain first-mover advantage in the domestic market.

It also includes Cosi shares. From 2017 to 2019, the sales of Cosi's sunscreen products accounted for 20.65%, 25.67% and 27.88% of the global market share, ranking among the top in the industry.


The profitability of some companies is comparable to Moutai

For a long time, in the marketing-driven cosmetics industry, upstream raw material companies have received low attention, and their gross profit and net profit levels are not high. Some people even think that they are "in a weak position in the industry chain." In fact, judging from the prospectus disclosed by the six raw material suppliers mentioned above, the gross and net profit margins of many companies are even higher than those of the brand, and their profitability is comparable to Moutai.

First, gaining an advantage in segmented areas can increase gross profit margins.

In 2019, the gross profit margins of Amic and Chuanger Bio were 92.63% and 83.51%, respectively, which is higher than most beauty companies. Take Betteni (Winona's parent company), which has a higher gross profit among skin care products companies, as an example. In 2019, Betteni's gross profit margin was 80.22%, which is lower than the previous two.

Amicco prospectus mentioned that the main reason for the higher gross profit margin is the higher selling price of the company's products and the relatively lower cost. On the one hand, the company’s products have first-mover advantages in various market segments, and continue to obtain high premiums in the market segments; on the other hand, consumers of medical beauty services have certain spending power and are willing to bear higher costs to obtain high-quality and assured product and service.

At the same time, the prospectus of Chuanger Biotech also stated that by virtue of its technical advantages and brand advantages in the collagen field, the gross profit margin of Chuanger Biocollagen products has maintained a relatively high level and is on an upward trend.

This also means that after gaining an advantage in a certain segment, the company's premium ability will be improved, and the gross profit rate will also be raised accordingly.


Second, the greater the R&D investment, the higher the level of net profit.

Judging from the performance of the six companies, companies that invest more in R&D will have a higher net profit margin. Taking Amic and Jinsanjiang as examples, their R&D expense ratios in 2019 were 8.71% and 5.54%, respectively, which were higher than the other four companies. This year, the net interest rates of the two companies were 53.42% and 29.02%, which were also higher than those of other companies, and also higher than the net interest rates of skin care companies such as Marumi and Betteni during the same period.

An obvious phenomenon is that even for Chuanger Bio, which has a gross profit margin of 83.51% in 2019, its R&D expense ratio is lower than that of Jin Sanjiang, and its net profit margin is also lower than the latter under the premise that its gross profit margin is much higher than that of Jin Sanjiang. .

In this regard, an engineer from a well-known domestic ODM/OEM company told Pinguan APP, “R&D investment means innovation, and innovation can help companies build higher barriers to competition. Generally speaking, companies with high R&D investment have more innovative products. The higher the premium, the stronger the premium, which will feed back to the net profit."

Will the market tide be a turning point for domestic raw materials?

An industry veteran who once worked in an international leading raw material company said that there are two main reasons for the collective listing of upstream companies this year.

First, due to the impact of the epidemic, export trade has been blocked, and under the internal circular economy, fast-moving consumer goods, including cosmetics, have performed more steadily. At the moment when the consumption link is getting shorter and shorter, the irreplaceable upstream companies are playing an increasingly important role, which is also favored by capital.

Second, many raw material vendors were preparing to go public two years ago. The epidemic has accelerated the listing process of these companies, and a wave of collective listings has emerged.

So, if these companies can be listed collectively, can domestic beauty ingredients usher in a new starting point?

As mentioned earlier, companies with higher R&D investment have higher product premiums and higher net profit margins. Judging from the fundraising use of these 6 companies preparing to go public/listed, increasing R&D investment is a common goal. They plan to raise a total of 4.33 billion yuan in total, of which 1.081 billion yuan will be used for the construction of R&D center projects.

It can be seen that companies represented by Amic and Chuanger Biotech have invested more in research and development. Among them, of the 1.9 billion raised funds planned by Amec, 754 million will be used for research and development projects, which will undoubtedly further strengthen its leading position in the field of hyaluronic acid.

In addition, expanding production capacity is also their common goal. "Whether it is increasing production capacity or investing in research and development, it will further strengthen the competitiveness of the company." An engineer who did not want to be named head cosmetics raw materials company said that although the listing will drive their development, domestic cosmetics raw materials must be in line with Europe and the United States. It will take some time for enterprises to contend.

He added that in this wave of listings, some companies still do contract processing. Although the market share of these companies' products is already leading in some segments, it does not mean that they have mastered the core technology. On the contrary, some companies do not have technical barriers. "The development of domestic cosmetics materials still has a long way to go."

This may be as mentioned in the prospectus of Huaye Fragrances, the high concentration of the global flavors and fragrances market is difficult to change in the short term.