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The slogan "Bounce, bounce, bounce away crow's feet" made the "Marubi" brand under Marubi Co., Ltd. (603983) famous, and Marubi Co., Ltd. has also been crowned as the "No. 1 eye cream stock" since its listing in 2019. With the support of star brands, Marubi Co., Ltd. naturally has a lot of attention in the market. On August 1, the share price of Marubi Co., Ltd. fell sharply, closing down 7.05% that day. Behind the sharp drop in stock prices, Sun Huaiqing, the actual controller of Marubi Co., Ltd., put forward a large-scale reduction plan, intending to reduce no more than 3% of the company's shares, equivalent to a market value of nearly 300 million yuan. In the capital market, it is understandable that shareholders reduce their holdings, but in the context of the current wave of repurchases and increases in holdings by listed companies, the reduction of holdings by the actual controller of Marubi Co., Ltd. is quite eye-catching, while the company's stock price has been falling in recent years. How to improve investor returns in the future is probably an important issue for Marubi Co., Ltd.

Share price hits two-year low

On August 1, the share price of Marubi Co., Ltd. plummeted, hitting a low of 22.22 yuan per share during the trading session, a new low in more than two years. It finally closed down 7.05% on the day at 22.43 yuan per share, with a total market value of 8.994 billion yuan and a transaction volume of 165 million yuan on the day.

On the evening of July 31, Marubi Co., Ltd. disclosed that Sun Huaiqing, the company's controlling shareholder, actual controller, chairman and CEO, plans to reduce the company's shares by no more than 12.03 million shares, or no more than 3% of the company's total share capital, through centralized bidding and block trading from August 26 to November 25, 2024. As for the reason for the reduction, the announcement shows that it is due to the actual controller's own funding needs.

Trading data shows that on July 31, the share price of Marubi Co., Ltd. was 24.13 yuan per share. Based on this closing price, the market value of the shares that Sun Huaiqing plans to reduce his holdings is approximately 290 million yuan.

As of the date of disclosure of the announcement, Sun Huaiqing held approximately 292 million shares of Marubi, accounting for 72.72% of the company's total share capital; Sun Huaiqing's wife Wang Xiaopu held approximately 32.4 million shares of Marubi, accounting for 8.08% of the company's total share capital. The two together held 80.8% of the total share capital of the listed company.

In fact, Sun Huaiqing had the idea of ​​reducing his holdings as early as 2022. In September 2022, Marubi Co., Ltd. disclosed an announcement stating that Sun Huaiqing and his wife Wang Xiaopu planned to use centralized bidding and block trading to reduce their holdings of the company's shares by no more than approximately 24.0867 million shares, which would not exceed 6% of the company's total share capital.

However, the subsequent reduction plan failed to be successfully implemented. In April 2023, Marubi Co., Ltd. stated that the reduction plan period had expired, and during the implementation period of the reduction plan, Sun Huaiqing and Wang Xiaopu did not reduce their holdings in the company's shares.

Regarding the actual controller's plan to reduce holdings, Marubi Co., Ltd. stated in an interview with a Beijing Business Daily reporter that the actual controller and his wife together hold 80% of the shares, and the equity concentration is high. Appropriate reduction of shares can optimize the equity structure and increase secondary market liquidity, which is conducive to the long-term stability of the stock price.

No measures to support the stock market in the five years since its listing

In addition to the actual controller's two attempts to reduce holdings, shareholders holding more than 5% of Marubi's shares have also proposed reduction plans many times. However, since its listing, the company has never issued a plan for shareholders to increase holdings.

According to data, Marubi Co., Ltd. entered the A-share market in July 2019. The company's stock price rose for a period of time in the early stage of listing, reaching a historical high of 92.89 yuan/share in May 2020. However, the stock price then fluctuated downward and reached a historical low of 19.1 yuan/share in April 2022.

In the past year and a half, the share price of Marubi reached a high of 42.13 yuan per share on February 20, 2023, and then fell significantly. Trading data shows that in the 354 trading days from February 20, 2023 to August 1, 2024, the company's share price fell by 43.36%.

As the company's stock price continued to fall, Marubi shares never had any positive news such as repurchases and share purchases to boost the stock price.

Financial commentator Zhang Xuefeng told the Beijing Business Daily that the company has never taken any measures to support the stock market, such as increasing its holdings, since its listing. This may reflect that management believes that the overall market environment is not good and lacks confidence in the company's future performance and stock price. It believes that measures to support the stock market will be difficult to change the market's basic judgment of the company. At the same time, the company may face financial constraints and lack sufficient funds for increasing its holdings or repurchases. This may be because the funds need to be used for other purposes, such as operations and debt repayment.

However, Marubi shares said in an interview with a Beijing Business Daily reporter that the company's actual controller holds a high proportion of shares and the liquidity of the secondary market is weak. In the long run, it is not appropriate to adopt methods such as repurchase and increase holdings. But the company attaches great importance to returns to investors. Since the company went public in 2019, it has paid cash dividends every year. The proportion of cash dividends to the net profit attributable to the year has remained above 30%. In the past three years, the company's cash dividends accounted for 30.77%, 57.55%, and 80.38% of the net profit attributable to the year, respectively, and the dividend ratio has increased year by year.

According to the high proportion of shareholding structure of the actual controller of Marubi Co., Ltd., 80% of the company's dividends went into the pockets of Sun Huaiqing and Wang Xiaopu.

R&D expenses are far less than sales expenses

Marubi Co., Ltd., whose products are for consumers, is also quite generous in marketing.

According to the data, MaruMei Co., Ltd. is mainly engaged in the research and development, design, production, sales and service of various cosmetics based on skin science and biological science research. Its main brands include "MaruMei", "Lianhuo" and "Chunji", which meet different consumer needs with differentiated brand positioning. "MaruMei" is a skin care brand with more than 20 years of history, focusing on the eyes, deeply cultivating anti-aging, and positioning itself in the mid-to-high-end. It has now become a domestically-produced mid-to-high-end brand with a scale.

From 2019 to 2023, the sales expenses of Marubi were approximately 540 million yuan, 564 million yuan, 741 million yuan, 846 million yuan, and 1.199 billion yuan, respectively, rising year by year, and exceeding 1 billion yuan in 2023. After calculation, the sales expense rate of Marubi in 2023 reached about 53.86%.

Unlike the hundreds of millions of sales expenses, Marubi's R&D expenses are only a "fraction" of the sales expenses. From 2019 to 2023, the company's R&D expenses were approximately 44.8686 million yuan, 50.1542 million yuan, 50.4882 million yuan, 52.9257 million yuan, and 62.2876 million yuan, respectively. Marubi said in an interview with a Beijing Business Daily reporter that R&D has always been the cornerstone strategy of the company's development. The company attaches great importance to it and will continue to increase investment. The company has built six major R&D platforms: Basic Research Center, Pilot Experiment Center, Application Development Center, Medical Testing Center, Technical Support Center, and Open Innovation Center, realizing the construction of a seven-in-one full-link collaborative innovation model of "basic research-raw material development-raw material production-formula research-production intelligence-inspection and testing-efficacy evaluation".

Zhang Xuefeng pointed out that in an era of rapid technological development, continuous R&D investment is the key to maintaining market competitiveness. Insufficient R&D investment may limit the company's technological innovation and product development capabilities, making it difficult for the company to maintain its competitive advantage in technology and products. In the long run, it may lead to a lack of innovation in products and services and make it difficult to meet market demand, thus affecting the company's sustainable development and profitability.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told Beijing Business Daily that R&D expenses being significantly lower than sales expenses may indicate that companies are overly focused on short-term sales revenue and neglecting long-term product innovation and brand building, which may affect the company's competitiveness and sustainable development. It is recommended that companies ensure that R&D investment receives sufficient attention and support.

In terms of operating performance, from 2019 to 2022, Marubi Co., Ltd. achieved operating income of approximately RMB 1.801 billion, RMB 1.745 billion, RMB 1.787 billion, and RMB 1.732 billion, respectively; the corresponding attributable net profits were approximately RMB 515 million, RMB 464 million, RMB 248 million, and RMB 174 million, respectively.

It is not difficult to see that from 2019 to 2022, the net profit of Marubi Co., Ltd. continued to decline. However, in 2023, the company's net profit rebounded, and the attributable net profit in that year was approximately 259 million yuan, a year-on-year increase of 48.93%.

Beijing Business Daily reporter Ma Huanhuan and Ran Lili

Image source: Internet screenshot