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at the end of august, aimeikang and huaxi bio released their financial reports one after another. the financial reports of the two leading medical beauty stocks verified the saying that what really trapped you might be the distant place you never forgot:

huaxizi biology, which started out as a 2b company and is struggling to transform, is burdened by its 2c functional skin care products business; aimeikang, which monopolizes the neck wrinkle removal (hi-body) market segment, is burdened by the economic cycle and the launch of competing products.

the day after the announcement was released, the two leading medical beauty companies experienced share price declines of 12.31% and 7.17% respectively. it is obvious that the market is dissatisfied with the performance of the two companies.

to some extent, huaxi bio and aimei can almost represent most companies in the medical beauty industry due to their different business focus and resource allocation. now the two leading companies are both in a dilemma, and behind them is the increasingly fierce price war, product matrix offensive and defensive battles and other industry ecology.

01 bloomage bio: stronger than 2b, weaker than 2c

huaxi bio's revenue and profit both fell: in the first half of 2024, huaxi bio's operating income was 2.811 billion yuan, a year-on-year decrease of 8.61%; the net profit attributable to the parent was 341 million yuan in the same period, a year-on-year decrease of 19.51%.

importantly, the functional skin care products business, which is the core of huaxizi bio's 2b to 2 strategy, achieved revenue of 1.381 billion yuan in the first half of the year, a year-on-year decrease of 29.71%. nearly half of the weight (49.29%) flattened the company's overall growth.

① raw materials business (accounting for 22.47% of revenue)

whether it is the leading iteration of technology paths or the scale effect brought by the implementation of technology in the industry,bloomage biotechnology has incomparable advantages in hyaluronic acid raw materials and the synthetic biology platform behind them. within a certain time window, bloomage biotechnology's raw material export logic is almost a dimensionality reduction attack on overseas competitors.。

in the first half of 2024, the raw material business revenue recorded 630 million yuan, an increase of 11.02% year-on-year. among them, driven by the rapid growth of sales revenue in the americas, the sales revenue of exported raw materials was 328 million yuan, an increase of 19.30% year-on-year, which had a pulling effect on the business segment.

② medical terminals (accounting for 26.51% of revenue)

it seems to be 2c but it is actually 2b. the medical beauty industry has always transmitted information from segment b to segment c, especially during the market expansion period when consumers get advice on medical beauty projects from the sales department of medical beauty institutions.

therefore, the sales efforts of traditional upstream medical beauty manufacturers are usually focused on the institutional side, as well as academic promotion and training for doctors. aimei's early market development was to continue this idea and lay out medical institutions.

the same logic,in the first half of 2024, huaxi bio is also committed to covering a wider range of medical beauty institutions.according to financial report information, in the first half of the year, the coverage rate of medical beauty institutions of huaxizi biotechnology increased by 50% year-on-year, corresponding to the largest revenue item, skin medical products, which achieved revenue of 555 million yuan, a year-on-year increase of 70.14%, and medical terminal business revenue further recorded 743 million yuan, a year-on-year increase of 51.92%.

constrained by the price pressure of raw material business on the 2b side in the past, huaxi seems to have a deep yearning for 2c business. for a long time in the past, resources have been leaning towards the 2c business of functional skin care products and functional foods.the growth logic of 2b and 2c businesses is extremely split：

on the one hand, huaxizi has always been known for its hyaluronic acid raw materials. the functional skin care brands under huaxizi biology, such as runbaiyan, quadi, jihuo and mibei'er, did not have outstanding memory points in the marketing in the past, which changed the c-end users' perception that they only have basic moisturizing effects like hyaluronic acid.

on the other hand, as an overflow business of deep raw materials, huaxizi launched functional foods with edible hyaluronic acid as the touchpoint and targeting the market space of health foods in developed countries.

however, it is not easy to educate the market during the economic adjustment period. since the launch of its first hyaluronic acid drinking water in 2021, huaxizi bio has not been able to get out of the "early stage of consumer education."

③ functional skin care products (accounting for 49.29% of revenue) : in the first half of 2024, the revenue of functional skin care products business was 1.381 billion yuan, a year-on-year decrease of 29.74%;

④ functional food business (accounting for 1.75% of revenue) : in the first half of 2024, functional food revenue was 29.22 million yuan, a year-on-year decrease of 11.23%.

it is worth noting that huaxi biopharma did not have a peaceful first half of this year. in addition to the employee resignation incident that caused a lot of controversy in the market in the first half of the year, a deputy general manager and two core technical personnel also resigned, which has to cause concerns among investors.

02 aimei: the sword of damocles finally falls

the growth rate of aimei's revenue and profit narrowed: in the first half of 2024, aimei's operating income was 1.657 billion yuan, a year-on-year increase of 13.53%; the net profit attributable to the parent was 1.121 billion yuan in the same period, a year-on-year increase of 16.35%.

looking further into the breakdown, in the second quarter of 2024, aimei's revenue and net profit attributable to shareholders increased by 2.35% and 8.03% respectively, breaking the past high-growth trend and falling short of market expectations.

we have discussed this in detail in the article "re-evaluating aimeikang". aimeikang has two core advantages: one is its exclusive and first-mover advantage in the neck wrinkle removal market segment (hi-body); the other is its early comprehensive binding with non-public institutions, achieving a win-win situation in a sense.

the above logic is facing an unprecedented impact, which is even more obvious after the release of the financial report:

first,under the adjustment of economic cycle, non-surgical medical beauty projects belong to improvement servicesconsumers have flexibility in their budgets, and the price of hi-body on the market is about 400-500 yuan/1.5ml (according to soyoung). if you use about 5ml each time, it will cost about 1,300-1,700 yuan each time.it is difficult to release the lipstick effect；

① solution (mainly hi-body) injection products (accounting for 58.92% of revenue)

even if it monopolizes the market, aimei's solution injection products have to bow to the cycle. from 2021 to 2023, the price per unit of this business will drop from 384.11 yuan to 374.44 yuan, and then to 352.02 yuan. in the first half of 2024, perhaps due to the decreasing marginal effect of price-for-volume, business revenue was 976 million yuan, a year-on-year increase of 11.65%, a huge gap from the compound growth rate of 55.2% since its listing.

importantly, in july this year, huaxizi bio's product for neck wrinkle removal was approved, directly targeting hi-body's heartland and causing a huge subversion to aimei's valuation logic.

because medical beauty is a typical product-driven model, the launch of the first new product means discovering huge consumer potential (premium space + number of repeat purchases), and the impact of subsequent product launches on the first mover is also cumulative.

secondly,in the second half of the competition in medical beauty, it is difficult for aimeikang to reproduce its initial glory when it was listed。

on the one hand, its subsequent products will hardly replicate the success of hi-body. the regenerative material (rubai angel) that has already been launched was followed by competing products such as lanluma® of huadong medicine. in the recombinant collagen field, juzi bio and jinbo bio have sunk into niche areas. the botulinum toxin and semaglutide that are about to be launched have been pre-positioned by sihuan pharmaceutical, lanzhou bio, huadong medicine and others.

on the other hand,when consumer education enters the second halfconsumers tend to learn about the differences between different competing medical beauty products from the internet and make their own choices.the weight of institutions or doctors in consumer decision-making is decreasing。

② gel injection products (accounting for 39.17% of revenue) : revenue in the first half of 2024 was 649 million yuan, a year-on-year increase of 14.57%, ending the high growth trend of 109.84% since its listing.

recognized as the "mao of medical beauty", aimeikang, as the investment target with the highest market value in the a-share cosmetic beauty care sector, has already been valued by the market with expectations for high performance growth. now the release of the h1 2024 financial report is almost equivalent to pouring cold water on investors. it is no wonder that the latter voted with their feet.

03 cautious expansion, suffering in 2024

whether it is the price reduction of hi-body by aimeikang or the obstruction of huaxizi bio's skin care business, they all reflect the current situation of the industry where internal competition is fierce and the expansion of external businesses is hindered.

at present, the reference answer given by the two giants is to expand cautiously. there are two specific solutions:

one is cost control. the two companies are particularly low-key in their marketing activities and more cautious in their investments. in the first half of this year, aimei and huaxizi biopharma both chose to control their marketing expenses.

the second is the extension of extension.

aimeikang's expansion lies in expanding its product categories. as of h1 2024, aimeikang has a number of pipelines under development, including weight management products, botulinum toxin type a products, facial thread embedding products, injectable filler products, and radio frequency instruments, etc.

huaxi bio's expansion lies in going overseas (expanding production capacity). its hyaluronic acid, as well as bioactive substances such as ectoine and ergothioneine derived from synthetic biology platforms are sold overseas. the physical expansion of its business scope has partially reversed the decline of other businesses.

product category expansion and production capacity expansion are important rules for medical beauty companies to maintain long-term growth in performance. a precedent that can be used as a reference is the korean medical beauty company medytox.

the above chart captures the stock price trend of medytox from 2009 to 2019. the background is that the korean medical beauty market entered a period of fierce competition around 2010. during this period, medytox's stock price fluctuated several times. its market value boost almost always followed the main rhythm of launching new products and expanding production capacity. this may provide inspiration and comfort to chinese medical beauty companies.