The 301371.SZ filter, which appears on the market with the halo of "Medical Mask No. 1", shatters a little quickly.

Recently, Fu Erjia released three quarterly reports, with revenue of 1.34 billion yuan during the reporting period, an increase of 1.86% over the same period last year, and a net profit of 536 million yuan, a decrease of 17.33% over the same period last year. Among them, the net profit recorded by Pu'er Jia fell by nearly 40% in the third quarter, which was a serious drag on the performance.

Once upon a time, I mainly relied on the WeChat business model to earn the agency fee for the baby moms. I sold the mask standing up and won twice.

But the ceiling of the WeChat business model is clearly visible. So since 2018, Gu Erjia has vigorously turned to online channels. But the problem also follows. Fu Erjia has to pay not only the communication fee for the e-commerce platform, but also the pit fee for the major anchors.

The performance in the financial report is that its cost of sales rate has increased from less than 10% to more than 20%, eroding Pu er's good profit performance.

But burning money online is not the patent of medical brands such as Fu Erjia, and the studio has long become a "practice field" for cosmetic and skin care brands.

It is an obvious fact that, despite year-on-year increases in sales expenses, revenue growth almost stagnated as early as 2021 and 22.

Reflected in the stock price, Pu Erjia's performance in the secondary market is also "listing is the peak".

It fell below the offering price only on the fifth trading day after listing. As of October 15, compared with the high of 80 yuan / share when it was just listed, the share price of Pu'erjia has halved to 40.61 yuan / share.

Work for online channels

Before Douyin head V Crazy Brother Yang angrily criticized Li Jiaqi for "hijacking" merchants, Fu Erjia had already fully demonstrated his helplessness in being "hijacked" by channels with three quarterly reports.

In the third quarter of this year, the company recorded negative growth for the first time since its listing. Revenue in a single quarter decreased by 5.47% compared with the same period last year, while net profit decreased significantly by 32.76% to 183 million yuan.

Fu Erjia did not give the reasons for the sharp decline in net profit in the three quarterly reports. Liu Jiaren, an analyst at Cinda Securities, said in the research report that "continuous marketing promotion has led to a decline in the company's profitability."

In the first three quarters of this year, the sales expense rate of Pu'erjia reached an all-time high of 26.53%, and the management fee increased sharply by 105.82% compared with the same period last year. Fu'erjia is attributed to the increase in the salary of managers, depreciation fees for housing and equipment in Northern Meigu, and property expenses during the reporting period.

ID:TradeWind01 called Fu Erjia to enquire about the reasons for the sharp increase in management pay, but could not be reached.

It may be accidental to give executives a pay rise, but the sales expenses that are increasing year by year are rigid expenses that Pu Erjia has to spend.

From 2018 to 2022, the proportion of Pu'erjia 's online channels increased year by year, from 11.85% to 40.62%, and the corresponding sales expense rate increased from 5.72% to 22.06%. This has also seriously eroded Bu Erjia's earnings performance, with its net interest rate falling from 53.44% to 47.89%.

Predictably, Pu Erjia's online share will continue to increase. Gong Menghong, an analyst at Southwest Securities, predicted in the research report that Pu Erjia's online channel revenue share will eventually exceed that offline.

But at the same time, it also means that Fu Erjia will eventually "roll" in a homogenized market and in the same online channel.

Although both Pu'erjia 's mask and L'Or é al's mask claim to have various functions such as repair and whitening, they are originally two kinds of things, and the average price of the former is generally 30% higher than that of ordinary cosmetic masks.

The reason is that dressings with mechanical approval can enter medical institutions and even public hospitals and other channels, there are doctors to provide professional endorsement.

For example, Fu Erjia continues to carry out the education of "medical beauty mask" through the private domain of the small B-end beauty salon, the safety of the brand name on social media, and the simplification of the selling point of the formula.

Fu Erjia's core products are mechanical mask "white film" and "black film", which can be used in medical scenes or postoperative care. In 2022, it contributed 624 million yuan and 220 million yuan in revenue respectively, accounting for 47.7% of the total revenue.

According to Frost Sullivan, Fu Erjia and 2367.HK are the top two dressing companies in China, with retail sales of 2.6 billion yuan and 2.3 billion yuan respectively in 2021.

But it is an undeniable fact that the two are becoming more and more convergent.

In 2018, Fu Erjia began to develop from mechanical brand to cosmetic brand with the help of e-commerce channels. Through the professional endorsement of mechanical brand products, the income of Pu'erjia cosmetic products reached 903 million yuan in 2022, accounting for 51.05%.

Make-up products with more than half of the revenue will have to be rolled up online with functional skin care products like those of their peers, such as Winona, which is aimed at sensitive muscles, and Miebel, who is also targeting cosmetic surgery and sensitive muscle repair.

The gradual homogenization of competition in the industry has also led to Fu Erjia having to keep paying taxes to e-commerce studios, with higher and higher sales costs but revenue at a standstill.

The sequelae of insufficient R & D capacity

Another concern is the potential impact of recombinant collagen on hyaluronic acid. It is not easy for Fu Erjia, who is still short in R & D ability, to keep up with this trend.

First of all, in terms of R & D investment, Fu Erjia's much-criticized R & D capability has always been its obvious deficiency.

By the end of 2022, there were only 8 R & D personnel in Pu'erjia, and the R & D expenditure rate was only 0.87%. For comparison, giant creatures are 1.9%, 688383.SH is 6.1%, and 300957.SZ is 5.08%.

Since its inception, Fu Erjia has been deeply bound to Harbin Sanlian (002900.SZ), which provides contract manufacturing.

It was not until 2021 that Pu'erjia acquired a 100% stake in Northstar Pharmaceutical, a subsidiary of Harbin Sanlian, through a share exchange, that it had its own production capacity. As a result, Harbin Sanlian held a 5% stake in Fu Erjia.

However, in the race track of skin care products with diverse needs, a large single mask full of hyaluronic acid is not enough to make Fu Erjia rest easy, and peers have laid out a number of market segments.

For example, Bettany has laid out "AOXMED Koman", which focuses on the high-end market, and "Winona Baby", a sub-brand dedicated to baby children's sensitive muscles. In contrast, only a single brand of Fu Erjia is more difficult to bet on the trend of demand, and the anti-risk industry is even worse.

More importantly, hyaluronic acid does not mean that it is the optimal solution for dressings such as facial masks. The giant creatures listed as the top two in the dressing market and Fu Erjia are betting on the prospect of tissue collagen.
According to Frost Sullivan, collagen market share will surpass hyaluronic acid for the first time in 2025 to become the largest raw material for functional skin care products.

Private equity people in East China told ID:TradeWind01 that recombinant collagen has solved the problem of exclusion compared with animal-derived collagen, and it lasts longer. In terms of injection, although the future recombinant collagen dressing can not be completely replaced, it can also replace most of it.

As far as the channel is concerned, the efficiency of Juzi Bio's new products is also more advantageous than that of Fu Erjia. Because the former can cover public hospitals, private hospitals and so on, while the latter can only rely on dealers to expand B resources. As of the first half of this year, Juzi Bio has covered more than 1400 public hospitals, about 2200 private hospitals and clinics and about 2200 chain pharmacy brands for medical institutions, according to a research report by Xie Xinyi, an analyst at Anxin International.

The differences in channels and products are directly reflected in the terminal price. Giant creatures that can be admitted to public hospitals sell more and earn more than Fu Erjia.

According to a research report by Li Dian, an analyst at Guoyuan Securities, a recombinant collagen dressing under the giant biological brand can sell for 39.6 yuan per piece, while Fu Erjia's high-end medical dressing "black film" can only sell for 33.8 yuan per piece, with a significant gap.