Mainland skincare firms get nod for HK share sales

Giant Biogene and Shanghai Chicmax plan to use proceeds for R&D

Two mainland skincare firms have been given the green light to launch initial public offerings in Hong Kong as they strive to cash in on the country’s booming beauty industry.

Giant Biogene Holding and Shanghai Chicmax Cosmetic said they planned to invest the bulk of the proceeds in research and development (R&D).

The share offers come as consumers in China, the world’s second-largest cosmetics and skincare market, have become increasingly discerning, with domestic players facing competition from established international brands.

Based in Xian, Shaanxi province, Giant Biogene is a skin treatment firm offering products formulated with different types of recombinant collagen, products for skin repair and problematic skin conditions such as sensitive skin, and products for anti-ageing and skin maintenance, according to its prospectus.

Giant Biogene has been the largest collagen-based skin treatment product company by sales on the mainland for three consecutive years since 2019, according to its prospectus. The company posted retail sales of 6 billion yuan (HK$6.6 billion) in 2021, making it the second-largest skincare firm in the country.

Apart from boosting its R&D capability, the company plans to use the listing proceeds to expand its manufacturing capacity and enhance its sales and distribution network.

Shanghai-based Chicmax, which develops, manufactures and sells skincare and maternity and childcare products, plans to invest the funds from the share sale for branding and to enhance its R&D capabilities.

Its Baby Elephant branded products ranked first in the domestic maternity and childcare category, posting sales of more than 1.8 billion yuan in 2021, according to its prospectus.

The mainland’s cosmetics and skincare industry is the world’s second-largest market, with sales of 946.8 billion yuan in 2021, according to Frost & Sullivan.

Mainland consumers in the 25 to 40 age group, who account for more than a quarter of the country’s population, have taken a shine to domestic cosmetic brands, which have matched international ones in sales in recent years.

The market is expected to grow at an annual rate of 9.4 per cent to 1.48 trillion yuan in 2026, faster than the 3.8 per cent rate for the global market in the same period, according to Frost & Sullivan.

With favourable policies aiding the local beauty industry, Chinese players have stood out with their marketing techniques. They have adapted to the fast-changing demand of consumers and built up robust online distribution capabilities.

Giant Biogene, for example, saw its online direct sales surge 43.6 per cent in the first five months of this year, compared with 41.5 per cent in 2021 and 16.5 per cent in 2019.

Giant Biogene’s adjusted net profit rose 2.9 per cent year on year to 851.3 million yuan in 2021, slowing from a 43.8 per cent yearon-year jump to 827.1 million yuan in 2020.

Shanghai Chimax, however, was hit hard by the three-month lockdown in Shanghai this year. Revenue fell 31.1 per cent year on year to 1.26 billion yuan in the six months to June.