Recently, Mao Geping, a leading domestic beauty company, announced the results of the public offering, reflecting the widespread attention and participation of investors. The Hong Kong public sale was 919.18 times subscribed, and the international sale recorded 30.34 times the subscription; according to the reimbursement mechanism, the public offering had increased to 39.2117 million shares, accounting for 50% of the total sale; the final sale price was 29.8 yuan, up to a limit price, and the net amount raised reached 2.187 billion yuan. Meanwhile, it was officially listed on the Hong Kong Stock Exchange today.

Judging from the market environment, industry trends, and its own development, Mao Geping is facing a better listing opportunity catalyzed by multiple factors. In fact, it is not difficult to understand why it was able to impress investors.

1. Hong Kong stock IPOs are picking up, bringing a favorable timing window

Generally, companies launch IPOs when the overall performance of the market is good, and can benefit significantly in terms of financing, valuation, and brand value enhancement.

Looking at it now, with the recent increase in liquidity in the Hong Kong stock market and the improvement in market sentiment, the Hong Kong stock IPO market has also clearly picked up, providing a favorable timing window for Mao Geping's listing.

Market statistics show that in September and October of this year, the amount raised by the Hong Kong Stock Exchange set the first and second largest monthly financing records since January 2023, respectively, and large-scale IPO projects such as Midea Group, Horizon Robot-W, and China Resources Drinks emerged. In November, the Hong Kong stock IPO market remained active. Seven companies including SF Holdings successfully landed on the main board of the Hong Kong Stock Exchange, and 26 companies submitted their listings to the Hong Kong Stock Exchange, a record high during the year.

A series of data fully shows that investors have increased their confidence and interest in the Hong Kong stock IPO market, and in particular, they have high expectations for high-quality targets.

Mao Geping used this warm wind to welcome better listing opportunities, and was widely recognized and sought after by investors. He became the “frozen capital” of Hong Kong stock IPOs this year, and injected multiple impetus into future high-quality development.

2. Obtain performance verification and continue to grow in the era of rational consumption

In the Hong Kong stock market, value will eventually return to fundamentals and performance. Recently, Mao Geping once again revealed impressive results to enhance investment attractiveness. Moreover, the current consumer era is more rational and selective. This rationality is reflected in the fact that consumers clearly know their consumption goals, place higher demands on brands, make it more difficult for beauty companies to achieve continuous high growth, and can also test the quality of operations.

Since this year, looking at the cosmetics market as a whole, demand-side performance has been weak. Social retail sales of cosmetics increased by only 1% year on year in the first half of the year, and the monthly data for June fell 14.6% year on year, experiencing the biggest decline. The “four consecutive declines” have been rare since June.

This has also caused the performance of listed beauty companies to be clearly divided, and there is no shortage of leading companies experiencing a decline in revenue and profits. Taking the International Beauty Group as an example, L'Oréal's sales in mainland China recorded low single-digit growth in the first half of the year, with negative growth in the second quarter; Shiseido's sales in China grew the slowest in all regions. Excluding exchange rate factors, it fell 7.6% year on year, and core net profit fell 10.1% year on year.

Looking back at Mao Geping, his performance maintained a steady upward trend. In the first half of the year, it achieved operating income of 1.972 billion yuan, an increase of 41.0% year on year, and net profit to mother of 0.493 billion yuan, an increase of 41.0% year on year, all of which hit new highs, and overall gross margin reached 84.9%.

In contrast, such results are enough to show that Mao Geping has stronger market adaptability and competitiveness.

Behind this, it is also worth noting that, firstly, Mao Geping's makeup and skincare business went hand in hand to steadily promote the development of skincare products in the core category of high-end beauty on the basis of consolidating the advantages of makeup. In the first half of the year, the gross margin of the skincare business also reached a historically high level.

Source: Company Financial Report

Second, while stabilizing the basic offline market, Mao Geping is promoting rapid online growth. As of the first half of the year, Mao Geping's revenue from offline channels and online channels accounted for 50.9% and 49.1% of total revenue, respectively, while offline direct sales channels, the largest source of revenue, accounted for 46.1%.

Source: Company Financial Report

It can be seen from this that Mao Geping consolidated his original advantages in multiple directions, cultivating new advantages or growth points, and tending to diversified and balanced development. This is where it differentiates itself from national cosmetics brands. As a result, it enhances development certainty and growth, and its leading edge is expected to expand further.

It is also worth mentioning that the Political Bureau of the CPC Central Committee held a meeting recently and made it clear that it is necessary to vigorously boost consumption, improve investment efficiency, and expand domestic demand in all aspects. Under such expectations, cosmetics consumption potential is expected to be better unleashed, and Mao Geping's leading edge is also expected to transform to drive increased performance flexibility and maintain relatively rapid growth.

3. High-end domestic goods are gradually entering a moment of rise, benefiting from both an increase in market size and share

Whether from the perspective of the country or the industry's own development, the development of high-end brands is imperative.

The rise of great powers requires high-end brands. High-end brands carry important missions such as cultural dissemination and economic development. Especially in recent years, in the context of K-type development in the Chinese consumer market, high-end brands have increasingly highlighted their value, and the policy side and market side have jointly promoted the rise of domestic goods and their expansion into the high-end sector. As can be seen, recently in the new energy vehicle market, high-end domestic brands have collectively ushered in a bright moment.

As an important consumer sector, beauty is only Mao Geping, a leading high-end brand, which is expected to benefit from this logical interpretation. According to Frost & Sullivan, in terms of retail sales in 2023, MAOGEPING is the only domestic brand among the top 15 high-end beauty brands in the Chinese market.

At present, Mao Geping has also entered Hong Kong's Sephora, taking the first step in expanding overseas and building the brand's international influence, and stated in the latest prospectus that it plans to use 15% of the capital raised by the IPO to support overseas expansion and acquisitions, which means it will continue to advance its overseas strategy. Well, in the future, Mao Geping is expected to show more responsibility in cultural dissemination and international competition, and transform it into a unique advantage.

At the same time, from the perspective of market competition, there are many beauty brands in China and competition is fierce. Only by differentiating one's own brand can it have long-term competitiveness. The key breakthrough point is still at both ends of the “smile curve”. One end is R&D and ingredients, and the other end is the brand. On the brand side, building consumer awareness requires a long period of cultivation, making high-end transformation a more difficult and valuable highland, and the competitive pattern is better.

As mentioned above, the International Beauty Group's performance in China has declined, and Maoge's scarce high-end domestic brands may be expected to fill and seize the market share they have relinquished, and more fully share the high-end beauty consumer dividends.

In addition, Mao Geping has stepped up research and development, including the ongoing construction of an R&D center in Hangzhou and the expected establishment of R&D centers overseas to develop proprietary product formulations, promote cooperation with domestic surgical research institutions, and improve product efficacy.

As the relevant layout unfolds, Mao Geping may also be able to achieve a two-sided drive and move to a higher quality stage of development in the future. You might as well keep an eye on it.