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(Original title: Mao Geping: Marketing and promotion expenses have risen to more than 500 million yuan year by year, and dealers have contributed more than 100 million yuan in revenue since the establishment of cooperation)

"Jinzhengyan" Southern Capital Center-Financial Report Interpretation Junmo/Author Shumian/Risk Control

Looking back at history, in 2016, Mao Geping, who had just established the company six years ago,make upMao Geping Co., Ltd. (hereinafter referred to as "Mao Geping") launched its first foray into the domestic capital market. After nearly eight years, during which Mao Geping updated several versions of the prospectus, his domestic listing was terminated in January 2024 due to his "withdrawal of materials".

Two months after the "order withdrawal", Mao Geping may "suddenly" distribute a dividend of 500 million yuan. In the next month, that is, in April 2024, Mao Geping "switched" to the Hong Kong stock market and submitted a prospectus to the Hong Kong Stock Exchange. It is worth noting that Jinzheng Research published a research report on October 22, 2019, "Mao Geping's performance growth is weak, and the fundraising project focuses on offline channels or may be "off target"," which pointed out that its main business income depends on the "MAOGEPING" brand, and the problem of single brand is prominent. However, Mao Geping Co., Ltd., whose labor dispatch personnel accounted for more than 60%, "suddenly" stopped the labor dispatch model, and its sales costs may rise.

Not only that, Jinzhengyan also released a research report on March 16, 2022, "Mao Geping's Information Disclosure Performed a "Sexy Operation": Supplier Exchange Data "Eggs Are Bigger Than Chickens"?" Pointing out that from January to June 2017, the number of exchanges with dealers for its brand "Zhi Ai Zhong Sheng" was higher than the total number of exchanges, and the amount of exchanges with dealers was higher than the total amount of exchanges. There were also anomalies in the disclosure of the purchase amount from the same supplier, and the data in the two versions of the prospectus were contradictory.

The problem is not over yet. In 2022, the top five high-endmakeupsAll brands are international beauty brands and account for 31.5% of the market share. During the same period, Mao Geping's flagship brand "MAOGEPING" ranked 15th with a market share of 1.2%. On the other side of the fierce competition in the industry, in recent years, Mao Geping's marketing and promotion expenses have risen year by year, exceeding 500 million yuan in 2023, while Mao Geping's R&D costs accounted for less than 1% of its revenue during the same period. In terms of cooperative relationships, during the reporting period, one of Mao Geping's distributors started cooperating with it in the year of its establishment, contributing more than 100 million yuan in revenue to Mao Geping; Mao Geping also has overlapping customers and suppliers, and these partners have accumulated transactions with Mao Geping of more than 300 million yuan.

1. Withdraw the domestic listing application two months later and distribute a dividend of 500 million yuan. Submit the listing prospectus to the Hong Kong Stock Exchange the month after the dividend distribution.

It is worth noting that Mao Geping’s “story” of entering the capital market began in 2016.

According to Mao Geping's prospectus with the last practical feasible date of April 2, 2024 (hereinafter referred to as the "April 2, 2024 Prospectus"), in December 2016, Mao Geping submitted an application to the China Securities Regulatory Commission for the listing of his shares on the main board of the Shanghai Stock Exchange. In view of its business prospects, Mao Geping's future development strategy at the time and the market environment, the listing application was withdrawn by Mao Geping in January 2024.

According to Oriental Wealth Choice data, Mao Geping submitted three versions of the prospectus, with signing dates of December 19, 2016, September 10, 2017, and March 1, 2023.

It should be pointed out that Mao Geping withdrewA sharesTwo months after the application for listing, a dividend of 500 million yuan was distributed.

On March 15, the China Securities Regulatory Commission released four policy documents, including "Opinions on Strictly Controlling Access to Issuance and Listing and Improving the Quality of Listed Companies from the Source (Trial)". Among them, it was clearly stated that it would pay close attention to whether the companies to be listed have sudden "clearance-style" dividends before listing, and would strictly prevent and investigate them, and implement negative list management.

According to the prospectus dated April 2, 2024, Mao Geping declared dividends of RMB 40 million and RMB 25 million to all shareholders in March 2021 and May 2023, respectively, and all the dividends were paid in full in January 2024.

In addition, at the shareholders' meeting held in February 2024, Mao Geping declared a dividend of 500 million yuan to all shareholders. In March 2024, Mao Geping paid a dividend of 500 million yuan to all shareholders.

As of the last practicable date of April 2, 2024, Mr. Mao Geping and Ms. Wang Liqun collectively held approximately 57.26% of the total issued share capital of Mao Geping.

After the above dividends, the next month, Mao Geping attempted to list on the Hong Kong stock market.

According to public information from the Hong Kong Stock Exchange, on April 8, 2024, Mao Geping submitted a prospectus to the Hong Kong Stock Exchange.

2. The top five high-end beauty brands account for 31.5% of the domestic market share, while Mao Geping’s market share is less than 2%.

In July 2000, the predecessor of Mao Geping was established, and the flagship brand "MAOGEPING" was launched in the same year, and the "Love for Life" brand was launched in 2008. In 2015, Mao Geping was restructured into a joint-stock company.

According to the prospectus dated April 2, 2024, as a domestic high-end beauty group, Mao Geping provides consumers with beauty experience through beauty products, makeup art training, and experiential and personalized customer service.

Looking at its revenue structure specifically, from 2021 to 2023, Mao Geping's product sales revenue was RMB 1.495 billion, RMB 1.775 billion, and RMB 2.782 billion, respectively, accounting for 94.8%, 97%, and 96.4% of the total revenue in the same years, respectively; the revenue from makeup art training and related sales was RMB 82 million, RMB 54 million, and RMB 104 million, respectively, accounting for 5.2%, 3%, and 3.6% of Mao Geping's total revenue, respectively.

Among them, Mao Geping mainly sells products from two beauty brands, namely "MAOGEPING" and "Love for Life". As of December 31, 2023, Mao Geping's product portfolio includes 378 items from the two brands, of whichMakeupIts products include foundation, highlighter and shadow, eye makeup and lip makeup; its skin care products include creams, eye care, masks, serums and cleansers.

It is worth mentioning that from 2021 to 2023, the sales of MAOGEPING brand products accounted for 96.6%, 98.4% and 99% of Mao Geping’s total product sales revenue respectively.

According to the prospectus on April 2, 2024, China is the world's second largest cosmetics market, with retail sales accounting for 11.8% of the global cosmetics market in 2022. Calculated by retail sales, the market size of the domestic cosmetics industry in 2017-2022 was RMB 640.2 billion, RMB 693.5 billion, RMB 779.4 billion, RMB 860.9 billion, RMB 967.2 billion, and RMB 909.1 billion, respectively.

It can be seen that from 2017 to 2021, due to the increase in consumer expenditure, the domestic cosmetics industry showed a rapid growth trend.

According to the prospectus dated April 2, 2024, calculated by retail sales, the market size of domestic high-end beauty brands in 2017-2022 will be RMB 116.9 billion, RMB 133.4 billion, RMB 155.1 billion, RMB 177.2 billion, RMB 199.3 billion and RMB 182 billion respectively.

During this period, the domestic high-end beauty industry has a high degree of concentration. According to retail sales in 2022, the top five beauty groups accounted for 54.8% of the market share, and all of them are international beauty groups.

It is not difficult to see that in 2022, based on retail sales, Mao Geping ranked eighth among domestic high-end beauty groups.

In addition, according to the prospectus on April 2, 2024, the top five high-end beauty brands are all international beauty brands. Based on the retail sales in 2022, they occupy 31.5% of the market share, forming a relatively concentrated competition pattern. During the same period, Mao Geping's flagship brand "MAOGEPING" ranked 15th with a market share of 1.2%.

In short, Mao Geping's industry is highly competitive, mainly competing with many domestic and foreign beauty brands in the cosmetics industry.

3. Marketing and promotion expenses have increased year by year to more than 500 million yuan, and R&D costs account for less than 1% of revenue

In terms of performance, Mao Ge has achieved average growth in the past two years, with the performance growth rate in 2023 exceeding 50%.

According to the prospectus on April 2, 2024, Mao Geping's operating income in 2021-2023 was 1.577 billion yuan, 1.829 billion yuan, and 2.886 billion yuan, respectively, with year-on-year growth rates of 15.96% and 57.78% in 2022-2023.

From 2021 to 2023, Geping's net profits were 331 million yuan, 352 million yuan and 663 million yuan respectively, with year-on-year growth rates of 6.39% and 88.43% in 2022-2023 respectively.

That is, from 2022 to 2023, Mao Geping's revenue and net profit will grow steadily.

Behind the impressive performance, Mao Geping's sales and distribution expenses accounted for nearly 50%.

According to the prospectus dated April 2, 2024, during the historical record period, Mao Geping invested a lot of resources, mainly used to improve the experiential marketing of high-end department stores, increase online brand penetration and product awareness.

From 2021 to 2023, Mao Geping's sales and distribution expenses were RMB 763 million, RMB 962 million, and RMB 1.412 billion, respectively, accounting for 48.4%, 52.6%, and 48.9% of the total revenue in the same year. Among them, the marketing and promotion expenses in the same period were RMB 223 million, RMB 320 million, and RMB 557 million, respectively, accounting for 29.2%, 33.3%, and 39.4% of the total revenue in the same year.

It should be pointed out that Mao Geping's sales and distribution expenses mainly include employee welfare expenses related to its sales and distribution employees, marketing and promotion expenses, department store and other rental property fees, and depreciation and amortization.

It can be seen that Mao Geping's marketing and promotion expenses have been increasing year by year.

On the other hand, in 2022-2023, Mao Geping's R&D costs were RMB 13.703 million, RMB 14.548 million and RMB 23.975 million respectively.

It has been calculated that during the same period, Mao Geping's R&D costs accounted for 0.87%, 0.8% and 0.83% of the operating income respectively.

It can be seen that during the reporting period, Mao Geping's R&D costs accounted for less than 1% of its revenue and showed a downward trend.

4. The dealer cooperated with us in the year of establishment and contributed over 100 million yuan in revenue

It is worth noting that Mao Geping stated in the prospectus that it has established an extensive sales network, integrating online and offline channels, focusing on self-operated counters in high-end department stores to consolidate its brand image and positioning.

During the reporting period, Mao Geping's offline and online channels expanded rapidly.

According to the prospectus on April 2, 2024, Mao Geping's offline channels include direct sales to self-operated counters, sales to high-end multinational beauty retailers, and sales to offline distributors; online channels include Xiaohongshu,JD.comandTaobaoWe sell on e-commerce platforms such as Alibaba and Alibaba, through directly-operated online stores, and to online dealers.

From 2021 to 2023, the revenue generated by Mao Geping through offline channel sales was 966 million yuan, 1.08 billion yuan and 1.602 billion yuan, respectively, accounting for 64.6%, 60.8% and 57.6% respectively.

During the same period, the revenue generated by Mao Geping through online channel sales was 529 million yuan, 694 million yuan and 1.18 billion yuan, respectively, accounting for 35.4%, 39.2% and 42.4% respectively.

It can be seen that during the reporting period, the proportion of Mao Geping's offline sales showed a downward trend, while the proportion of online sales gradually increased.

As for Mao Geping's online sales model, during the previous listing, Mao Geping was asked during the meeting about the situation in which his dealers started cooperating shortly after their establishment.

According to the announcement on the review results of the 113th meeting of the 18th Issuance and Listing Committee in 2021 issued by the China Securities Regulatory Commission on October 21, 2021, the reasons and rationality for some distributors such as Shenyang Yanfei to become Mao Geping's main distributors shortly after their establishment.

According to the prospectus signed by Mao Geping on March 1, 2023 (hereinafter referred to as the "March 1, 2023 Prospectus"), Mao Geping began to cooperate with Shenyang Yanfei since the second half of 2019. Shenyang Yanfei's downstream customers are mainlyTaobaoAt present, Shenyang Yanfei not only distributes MGOGEPING brand cosmetics, but also distributes cosmetics of brands including ALLJOINTHOME, UHUE, recipe (Korean brand), etc. Mao Geping sells products to Shenyang Yanfei at a certain discount, and Shenyang Yanfei sells to downstream Taobao online stores, etc. The terminal Taobao store realizes the final sales by selling products to online individual consumers.

From 2020 to 2022, Mao Geping's sales to Shenyang Yanfou were RMB 46.6901 million, RMB 62.9521 million, and RMB 36.0974 million, respectively.

It has been estimated that from 2020 to 2022, Mao Geping's sales to Shenyang Yanfou totaled 146 million yuan.

According to data from the Market Supervision Administration and the prospectus for listing on the main board, Shenyang Yanfei was established in April 2019 and is mainly engaged in film and television programs, cultural and artistic exchange activities, corporate image, marketing planning, and cosmetics sales.

It can be seen that Shenyang Yanfei cooperated with Mao Geping in the year it was established, and contributed more than 100 million yuan in revenue to Mao Geping from 2020 to 2022.

5. The top five suppliers accounted for more than 50% of the purchases, and the customers and suppliers overlapped, with cumulative transactions with Mao Geping exceeding 300 million yuan

As a domestic high-end beauty group, Mao Geping's suppliers mainly include suppliers of beauty materials and finished products, ODM/OEM suppliers, and logistics and distribution service providers.

According to the prospectus dated April 2, 2024, Mao Geping relies on a limited number of suppliers and manufacturers to purchase raw materials for cosmetics and skin care products, raw materials for product packaging and purchased finished products.

From 2021 to 2023, Mao Geping's purchases from the top five suppliers were RMB 176 million, RMB 194 million, and RMB 262 million, respectively, accounting for 52.8%, 50.5%, and 53.6% of the total purchases in the same year. During the same period, Mao Geping's purchases from the largest supplier accounted for 18.7%, 20.6%, and 22.7% of the total purchases in the same year, respectively.

In addition, Mao Geping has overlapping distributors and suppliers.

According to the prospectus dated April 2, 2024, one of Mao Geping's top five customers during the historical record period from 2021 to 2023 was also his supplier. The customer is one of Mao Geping's online distributors and also provides e-commerce promotion services to him.

From 2021 to 2023, Mao Geping's purchases from these customers and suppliers were RMB 40.2 million, RMB 83.9 million and RMB 120.7 million, respectively, accounting for 5.3%, 8.7% and 8.5% of sales and distribution expenses in the same period, respectively.

During the same period, Mao Geping's sales to these customers and suppliers were RMB 63 million, RMB 36.1 million and RMB 25.4 million, respectively, accounting for 4%, 2% and 0.9% of the total revenue during the same period.

It has been estimated that from 2021 to 2023, Mao Geping's total purchases from such customers and suppliers will be 245 million yuan, and Mao Geping's total sales to such customers and suppliers will be 125 million yuan, with a cumulative transaction volume of 369 million yuan.