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Text | Zhang Jiaru

In the two trading days since August, the share price of Marubi Co., Ltd. has fallen continuously.

On August 2, Marubi shares closed at 22.28 yuan, down 0.67%, with a total market value of 8.934 billion yuan. During the session, the company's stock price was as low as 21.96 yuan, a new low since October 2022. On August 1, Marubi shares fell 7.05%.

Before the stock price fell continuously, on July 31, Marubi Co., Ltd. announced the share reduction plan of Sun Huaiqing, the controlling shareholder, actual controller, chairman and CEO, to reduce holdings by no more than 12.03 million shares, which would not exceed 3% of the company's total share capital.

Why did Sun Huaiqing reduce his holdings? The reason given in the announcement was "own funding needs". Is Sun Huaiqing short of money? In the five years since its listing, Marubi has distributed a total of 682 million yuan in cash dividends. Sun Huaiqing and his wife hold a total of 80.8% of the shares, and received about 550 million yuan.

Regarding Sun Huaiqing's plan to reduce holdings, Marubi Co., Ltd. told the media that the actual controlling couple has a high degree of equity concentration. Appropriate reduction of shares can optimize the equity structure and increase liquidity in the secondary market, which is conducive to the long-term stability of the stock price.

The timing when Sun Huaiqing announced his plan to reduce holdings was quite sensitive. Although Marubi's performance has rebounded, its stock price is at a low level and investor confidence has yet to be restored.

Looking back at historical stock price data, in the early days of listing, Marubi's stock price surged, reaching a peak of 91 yuan per share (adjusted forward), and its market value once exceeded 36 billion yuan. After that, the stock price fell with performance fluctuations, and the lowest fell to 18.14 yuan per share.

Recently, after Sun Huaiqing's share reduction plan was released, Marubi's share price fell for two consecutive days. The closing price on August 2 was at a historical low range, and the market value fell below 10 billion. Whether Sun Huaiqing's share reduction is "conducive to the long-term stability of the stock price" remains to be seen.

The father of Marubi, marketing expert

Marubi Co., Ltd. is a beauty company with eye care products as its main products. Its main brands include "Marubi", "Haruki" and "Lianhuo". According to Frost & Sullivan's market research data, Marubi eye care products have ranked first in sales in China for three consecutive years (2021 to 2023).

The founder of Marubi is Sun Huaiqing. As the owner of a cosmetics brand, Sun Huaiqing defines himself as: "I am not a cosmetics expert, I consider myself a marketing expert."

Sun Huaiqing is from Chongqing. His university major was planning statistics. He started his own business in Guangzhou in the late 1990s. In 2002, relying on his years of experience in the cosmetics industry, Sun Huaiqing decided to invest RMB 1 million in a joint venture with a Japanese company to establish Guangzhou Jiahe Cosmetics Manufacturing Co., Ltd., the predecessor of Marubi Co., Ltd.

In the field of cosmetics, there are three countries that are well-known in the world: France, the United States and Japan. Japan ranks first in the research on Asian skin. Sun Huaiqing once marketed the brand on the basis of its "bloodline", which caused controversy.

According to multiple media reports, when Marubi was first established, it always claimed to be a Japanese brand, founded in Japan in 1955, and its founder was named Keiichi Kobayashi. In fact, Keiichi Kobayashi was the Japanese name that Sun Huaiqing gave himself.

In 2008, Marubi apologized through the media, saying that the content such as "founded in 1975" and "Japanese eye care expert" was not standardized and misled consumers. At the same time, it admitted that the Marubi brand had no direct relationship with Japan and was an authentic Chinese brand.

In an exclusive interview in 2020, Sun Huaiqing responded to the doubts about Marubi's "Japanese origin", saying that Marubi was indeed a Sino-Japanese joint venture at first, "Marubi is a domestic brand that has a profound traditional Chinese cultural heritage since its birth and has deeply grasped the essence of Japanese technology."

The Marubi brand became an instant success in 2007. That year, Sun Huaiqing invited Hong Kong beauty queen and Academy Award winner Anita Yuen to be Marubi's first spokesperson. The slogan "Bounce, bounce, bounce away crow's feet" became a household name.

In the following years, first-line stars such as Tony Leung, Zhou Xun, and Eddie Peng successively became spokespeople for Marubi. To this day, Marubi still adheres to the celebrity endorsement strategy. The 2023 annual report shows that Marubi invited celebrities such as Wang Anyu and Qi Wei to endorse its products.

In addition to celebrity spokespersons, Marubi has also embedded itself in popular TV series and variety shows such as Dream of Romance, Joy of Life, and Go Fighting, and conducted word-of-mouth marketing on social media such as Xiaohongshu and Douyin.

Performance has improved, but net profit attributable to the parent company is not as good as the first year of listing

Sun Huaiqing is willing to spend money on advertising. He once said that advertising is a rigid cost of fast-moving consumer goods. "It is too easy for us to save advertising costs and turn them into profits, but it is not good for the long-term development of the brand."

From 2019 to 2023, Marubi's sales expenses, including advertising expenses, continued to grow, from 540 million yuan to 1.199 billion yuan. Driven by huge sales expenses, Marubi's performance did not continue to grow.

Data shows that from 2020 to 2022, Marubi's revenue stagnated and its net profit attributable to the parent company continued to decline. In 2023, Marubi's performance rebounded, with operating income of 2.226 billion yuan, up 28.52% year-on-year, and net profit attributable to the parent company of 259 million yuan, up 48.93% year-on-year.

It is worth noting that in 2023, Marubi’s operating income reached its highest value since its listing, but its net profit attributable to the parent was 259 million yuan, which is still a big gap compared with 515 million yuan in 2019, the first year of listing, and 464 million yuan in 2020.

Among the factors affecting the profits of Marubi Co., Ltd., the growth of sales expenses cannot be ignored.

In 2023, Marubi's operating income was 2.226 billion yuan, and its sales expenses were 1.199 billion yuan, a year-on-year increase of 41.65%. It is not difficult to see that Marubi's sales expenses account for almost 50% of its revenue.

In comparison, Marubi's R&D expenses were lower, with R&D expenses of 62.2876 million yuan in 2023, a year-on-year increase of 17.69%, accounting for 2.8% of operating income.

Marubi Co., Ltd. focuses more on sales and less on R&D? As early as 2020, Sun Huaiqing responded that "the proportion of R&D reaching 2% is already a high level in the industry. Japan's Shiseido's R&D accounts for only 1.6%."

Since 2024, Marubi's performance has continued to improve, with operating income of 661 million yuan in the first quarter, a year-on-year increase of 38.73%; and net profit attributable to shareholders of the parent company of 111 million yuan, a year-on-year increase of more than 40%.

However, during the performance recovery period since 2023, the share price of Marubi has not recovered synchronously. The cumulative decline in the share price in 2023 was about 24%, and the cumulative decline in the share price since 2024 was 9.98%. On August 2, the closing price of Marubi was still in the low range since its listing.

Just when the stock price was sluggish, Sun Huaiqing announced a plan to reduce his holdings, intending to reduce his holdings 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 between August 26 and November 25, 2024.

According to a rough calculation based on the closing price of 22.28 yuan on August 2, the 12.03 million shares that Sun Huaiqing intends to reduce his holdings correspond to a market value of 268 million yuan. This is not the first time that Sun Huaiqing intends to reduce his holdings.

Sun Huaiqing plans to reduce his holdings to the maximum, and the former second largest shareholder has cashed out a large amount

On August 18, 2022, Marubi shares were listed for three years, and 80.71% of the shares held by Sun Huaiqing and his wife were listed and circulated.

More than a month after the lifting of the ban, that is, on September 28, 2022, Sun Huaiqing and his wife proposed a share reduction plan, planning to reduce no more than 24.0867 million shares of the company within 6 months, which would not exceed 6% of the total share capital.

According to the relevant regulations of the Shanghai Stock Exchange, shareholders holding more than 5% of the shares of listed companies may not reduce their holdings by more than 1% of the total number of shares of the company within any consecutive 90 days if they adopt centralized bidding transactions. If they adopt block transactions, they may not reduce their holdings by more than 2% of the total number of shares.

That is to say, Sun Huaiqing and his wife planned to reduce their holdings to the maximum within 6 months. However, in the last round of reduction, until the expiration date of April 2023, they did not reduce their holdings by a single share.

Now, Sun Huaiqing plans to reduce his holdings by no more than 3% of the company's total share capital, which is still the maximum reduction. Compared with Sun Huaiqing, who has not reduced his holdings so far, L Capital Guangzhou Beauty Ltd., the former second largest shareholder of Marubi, has a resolute and rapid attitude in reducing its holdings.

L Capital is a private equity fund under the internationally renowned fashion group LVMH. In 2013, it acquired a 10% stake from Sun Huaiqing and his wife.

After Marubi went public, L Capital held 36 million shares of Marubi, accounting for 8.98% of the total share capital, making it the second largest shareholder of the listed company. In July 2020, the ban on the shares held by L Capital was lifted, and it began to reduce its holdings that year.

After reducing its holdings for several consecutive years, L Capital last appeared on the list of the top ten shareholders of Marubi Co., Ltd. at the end of the second quarter of 2023, and its shareholding ratio had dropped to 1.14%. Since then, L Capital has disappeared from the top ten shareholders.

L Capital's plan to reduce its holdings was planned long before Marubi's listing. Marubi's prospectus shows that L Capital intends to reduce its holdings of 60% to 100% of the company's shares within 24 months after the lock-up period expires.

After the former second largest shareholder of Marubi Co., Ltd. sold off a large amount of shares, Sun Huaiqing and his wife became the first and second largest shareholders. Now, Sun Huaiqing has announced a plan to sell off shares again. Will he sell off shares this time? How will the share price of Marubi Co., Ltd. change? It remains to be seen.