2024-08-11
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The company’s cumulative revenue in three years exceeded 5.2 billion.
Author | Liu Junqun
Editor: Liu Qinwen
Source | Yema Finance
During the Chinese Valentine's Day, perfume has become the best choice for conveying love. From the exquisite French style of Hermès to the gorgeous Italian style of Versace, each perfume carries a unique fragrance legend. However, behind these legends, they are inseparable from the careful planning and operation of Yingtong Holdings Co., Ltd. (hereinafter referred to as "Yingtong Holdings"), the "behind-the-scenes boss" of the perfume industry.
Recently, Yingtong Holdings submitted a prospectus to the Hong Kong Stock Exchange, planning to go for an IPO.If successfully listed, it will become "China's No. 1 perfume stock."According to the prospectus,In terms of retail sales in 2023, Yingtong Holdings has become the largest perfume brand management company in the combined markets of Mainland China, Hong Kong and Macau.
It not only hasHermès, Versace, Van Cleef & Arpels, Chopard and many other luxury brandsThe perfume business rights, through its agent sales network,Achieved annual revenue of more than 1.8 billion yuanperformance.
As a perfume distributor, Yingtong Holdings mainly relies on the middleman trading model. However, while this model brings revenue growth, it also exposes the company to some risks.These include risks such as over-reliance on brand licensing and uncertainty over the termination of distribution agreements.
Faced with such challenges, can the 78-year-old founder of Yingtong Holdings, Liu Jurong, successfully achieve his first IPO in his life?
In front of the perfume counter, you may notice a common detail: many big-name perfumes have Chinese labels with the word "Yingtong". This is not accidental, but a "witness" of the close cooperation between Yingtong Holdings and many brands. For example, on Xiaohongshu, a user shared his experience of buying Bulgari's Golden Young series of perfumes and curiously asked about the origin of "Yingtong".
Image source: screenshot from Xiaohongshu
In fact, Yingtong Holdings not only cooperates with Bulgari, but also with Hermès, Van Cleef & Arpels, Chopard, Albion and Laura Mercier.63 well-known brands have established cooperative relationships.This perfume brand management company,The business scope covers perfume, skin care products, makeup, personal care products, glasses and home fragranceAnd other fields.
It should be made clear that Yingtong Holdings, as a brand management company, is not the owner of these perfume brands;With the authorization of the brand owner, we are responsible for the procurement and distribution of related products.
in,Perfume is the main source of income for Yingtong Holdings.The prospectus shows that in the fiscal years 2022-2024 (ending at the end of March each year, hereinafter referred to as the "reporting period"), the revenue brought to Yingtong Holdings by perfume alone reached 1.496 billion yuan, 1.504 billion yuan and 1.524 billion yuan respectively.The proportion of total revenue is more than 80%.
Image source: Prospectus
Yingtong Holdings’ relationship with perfume can be traced back to 1987, when the company introduced a Parisian brand of perfume to the mainland market through its subsidiary. Then in 1992, Yingtong Holdings established a partnership with Inter Parfums, a European perfume listed company, further expanding its influence in the perfume field.2005,companyStarted to manage and operate Hermès perfume products in the mainland market.
According to the contents of the prospectus, Yingtong HoldingsThe perfume product line is rich and diverse.From entry-level high-end perfumes to luxury perfumes, the price range ranges from 599 yuan to more than 1,200 yuan per 50 ml. The company also provides perfumes of various scents, including floral, oriental, woody and fresh, to meet the personalized needs of different consumers.
Image source: Prospectus
In addition to perfumes, skin care products and cosmetics are also important sources of income for Yingtong Holdings.In recent years, the proportion of the company's skin care products and cosmetics revenue has increased year by year, especially cosmetics. Thanks to the Laura Mercier brand, which began to be managed in 2023, its revenue share increased from 3.9% at the end of March 2022 to 10.4% at the end of March 2024.
Overall, during the reporting period,Yingtong Holdings' revenue and net profit continued to grow.Specifically, the company's revenue was RMB 1.675 billion, RMB 1.699 billion and RMB 1.864 billion, totaling RMB 5.238 billion. During the same period, the net profit was RMB 171 million, RMB 173 million and RMB 206 million, totaling RMB 550 million.
Although it has achieved remarkable results as an agent, Yingtong Holdings is not satisfied with this. The company also hasPrivate LabelSanta Monica, covering fragrances and eyewear products. Since the launch of Santa Monica eyewear in 1999, Yingtong Holdings has launched five more Santa Monica fragrances in 2022.
However, the revenue generated by the Santa Monica brand accounts for no more than 1%.During the reporting period, Santa Monica contributed approximately RMB 1 million, RMB 5.3 million and RMB 17 million in revenue, respectively, accounting for only 0.1%, 0.3% and 0.9%.
In this IPO, Yingtong Holdings plans to raise funds to develop its own brands, invest in or acquire external brands, develop and expand self-operated retail channels, etc.
In terms of supplier share,As a brand management company, Yingtong Holdings' business model relies heavily on cooperation with major suppliers.Purchases from the company’s top five suppliers account for more than 80% of the total purchases.
The prospectus shows that during the reporting period,EuroItalia, an Italian cosmetics company, and Inter Parfums, a French perfume manufacturer, have always been the top two suppliers of Yingtong Holdings.As of the end of March 2024, the transaction amounts of the two were 373 million yuan and 225 million yuan respectively, accounting for 39.5% and 23.8% of the total purchase amount.Hermès perfume is the third largest supplier,It accounts for 8.6% of the total purchase amount.
Image source: Prospectus
In this regard, iMedia Consulting CEOZhang Yiexpress,Yingtong Holdings' high proportion of purchases from the top five suppliers is relatively normal in the agency industry.Usually the business of agents is concentrated on a few brands.Five brands account for 80% of the purchase amount, which is a relatively even distribution.
The prospectus shows that the initial term of most agreements signed between Yingtong Holdings and brand licensors is usually three to five years, and the brand licensors can terminate the agreements by giving prior written notice.
This kind of distribution agreement expires or the brand owner can terminate the agreement at any time, which brings risks to Yingtong Holdings' business to a certain extent.
According to the startup and investment information platform "Investment World", in 2015, cosmetics giantsCotyAcquired for $12 billionProcter & GambleCoty acquired the beauty business of Gucci, Hugo Boss, Max Factor and other brands, and eventually became the world's number one perfume manufacturer and ended the partnership between these brands and Yingtong Holdings.
In 2017, Burberry's perfume and beauty business, which Yingtong Holdings had represented for 25 years, was also licensed to Coty by the brand for US$160 million.
Yingtong Holdings pointed out in its prospectus thatThe company's business development depends on brand licensors.Any inability to maintain or renew relationships with licensors or to work with existing or new licensors on reasonable terms could have a significant negative impact on the Company’s business and prospects.
Image source: Prospectus
at the same time,Leading luxury groups are increasingly inclined to operate beauty and fragrance categories themselves rather than running mainland business through agents.
The prospectus mentioned that in December 2022, the company's agreement with a major brand licensor expired, and the brand licensor decided to operate on its own. The distribution of the brand brought Yingtong Holdings a revenue of 425 million yuan, accounting for 25.5% of the total revenue. So far, the two parties have failed to cooperate again.
In recent years, it seems to be becoming a trend for brands to "get involved personally".
In 2018, Coach also took back its retail business in China from its agent, Juns Group; in 2009, Hugo Boss took back its agency rights in China and switched to direct sales; in 2015, Jack Wolfskin announced on its official website that as part of its overseas expansion plan, the company will begin to directly control its distribution business in China...
In 2023, Kering Group (Gucci's parent company) first announced that it would no longer renew the licensing rights of its brand's beauty business to other beauty groups, and then created a new beauty department, Kering Beauté, and acquired the high-end perfume brand Creed.
Image source: Prospectus
Industrial SecuritiesThe research report pointed out that in the early days, the luxury goods agency industry was mainly dominated by experienced Hong Kong companies such as Junsi, Huadun, and Jinbang. Over time, mainland companies such as Oulan andRainbow GroupWe also started to represent international brands.However, agents face risks. Once the market matures, brand owners may take back the agency rights and switch to a direct sales model to strengthen brand control.
Zhou Ting, director of the Fortune Quality Research Institute, said:The agency model will gradually be eliminated because they are just "wholesalers" used by brands to ship goods quickly and have no real market value.
Behind Yingtong Holdings is a78-year-old founder Liu Jurong.His story began 36 years ago, when Liu Jurong served as Cathay Pacific's Chief Purser, responsible for overseeing the service quality and operations in the cabin.
After that, he realized that there was a lack of companies that introduced international perfumes to China, so he decided to quit his job and start his own business. In 1988, he seized the opportunity and successfully introduced international perfume brands to the Chinese market by opening a perfume counter in a department store in Beijing.
Today, Yingtong Holdings' shareholding structure shows the characteristics of a family business:Liu Jurong and his wife Chen Huizhen indirectly hold 90% and 10% of the shares respectively through Yingtong International Co., Ltd., achieving 100% control of the company.
In 2004, Liu Jurong's daughter Liu Yingxian joined the company, focusing on business in Hong Kong. She currently serves as executive director, responsible for the company's overall business development.
Image source: Canned Image Library
It is worth mentioning that Yingtong HoldingsBeing very "generous" in distributing dividends to controlling shareholdersThe prospectus disclosed that during the reporting period, the company distributed dividends of 128 million yuan, 189 million yuan and 314 million yuan to its controlling shareholder, with a total dividend of 631 million yuan.This figure even exceeds the company's cumulative net profit of 550 million yuan during the same period.
Financial CommentatorPi HaizhouHe said that Yingtong Holdings' sudden dividend and "clearance-style" dividend are currently prohibited in the A-share market. He mentioned that the "New Nine Articles" include "clearance-style" dividends before listing in the negative list of issuance and listing.If the company does not seek an IPO, this dividend behavior is beyond reproach, but once it seeks to go public, this dividend behavior may be regarded as Liu Jurong and his wife converting the company's interests into personal interests, which is essentially a cash-out behavior.
Image source: Screenshot from Pi Haizhou’s official account
Vice Chairman of China Enterprise Capital AllianceBai WenxiIt said that Yingtong Holdings' high dividend ratio may have an impact on the company's cash flow and reinvestment capacity. As of the end of March 2024, the company's cash and cash equivalents balance dropped sharply from 321 million yuan at the end of the previous fiscal year to 151 million yuan, a decrease of 53%.
However, Yingtong Holdings stated in its prospectus that the company's cash and cash equivalents were maintained at a prudent level and met the requirements of daily business operations.
On the one hand, luxury brands are "abandoning" their agents, and on the other hand, they are paying large dividends before listing.Can 78-year-old Liu Jurong lead Yingtong Holdings to a successful IPO?
If you have ever purchased a perfume represented by Yingtong Holdings, please share your experience in the comments section!
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