Its market value dropped from 150 billion to 40 billion, and it was called "one of the three giants of medicine and beauty", completely falling behind

Huaxi Biology (688363. SH) seems to have fallen behind.

In fact, Huaxi Biology was not popular when it was just listed. Until the appearance of beauty lovers, the market then set off a wave of medical beauty. Huaxi followed the trend and loved American customers. It was labeled as "medical beauty". The stock price rose immediately, more than tripled in more than a year, and its market value reached 150 billion yuan.

However, the bubble finally burst one day, and ended abruptly after the valuation rose to 180 times. Huaxi's share price has dropped from a high of 313 yuan to around 90 yuan today, with a cumulative decline of up to 70%, almost becoming the most tragic existence in the sector.

(Data pictures are for reference only)

After all, the performance cannot support the high valuation.

Billed as "one of the three giants of medical and beauty", the proportion of medical and beauty revenue has gone from bad to worse. Not only the hyaluronic acid track is a red sea, but also the botulinum toxin blue sea track is missed.

In fact, it is better to say that Huaxi is a skin care enterprise, and the income from selling skin care products is much higher than that of medical beauty business. However, the four sub brands of skin care products have declined across the board this year, indicating that they are no longer marketable.

To be specific, Huaxi Biotech announced its interim performance recently, and achieved a revenue of 3.076 billion in the first half of the year, up 4.77% year on year; The net profit attributable to the parent company was 425 million, down 10.27% year on year.

It is obviously a bad financial report. In terms of profit, it is the first time that the profit has declined since the listing, while the revenue has already shown signs of single digit growth for three consecutive quarters.

From the perspective of splitting, the problem lies in the decline in revenue of skin care products. The revenue of skin care products in the first half of the year was 1.966 billion yuan, down 7.56% year on year. To make matters worse, the income of Runbaiyan, Quadi, Miebel and BM Skin Care all declined.

Screenshot from: Huaxi Biology 2023 Mid term Report

Among them, BM muscle activity has the most significant decline, and its growth rate will reach 106% in 2022. This strong contrast shows that consumers are rapidly fleeing the brand. The second crisis is Miebel, mainly due to the large number of players in the sensitive muscle track, which also means that the competition pattern is becoming increasingly fierce.

Huaxi Biology is really not marketable.

On the one hand, the inventory in the first half of the year reached 1.175 billion, increasing both month on month and year on year; On the other hand, the sales expense accounts for up to half of the revenue. In 2019, it was only 500 million yuan. In just three years, the sales expense increased six times to 3 billion yuan, and still reached 1.4 billion yuan in the first half of this year. The company spent a large amount of sales expenses on e-commerce platforms such as Tiaoyin, which resulted in increased revenue without increasing profits, but continued to erode profits.

With regard to the "inability to sell", the company explained that "the optional consumer goods market represented by skin care products has been impacted to a certain extent due to the weak consumption and the conservative purchase intention of consumers".

But is that all?

In previous years, the 618 promotion was the peak season for skin care products. This year, the recovery of consumption was less than expected, resulting in a 2.3% year-on-year decline in skin care products. However, the decline of Huaxi exceeded that of its peers, and it became the only declining company among mainstream skin care listed companies, with a decline of about 10%.

In the following months, the growth rate of skin care products began to improve, but Huaxi Biology continued to perform poorly.

Taking the high-frequency data in August as an example, according to the statistics of the business staff, the overall industry growth rate of Tmall+Dither in August was 6%, compared with - 2% in July, showing a significant improvement on a month on month basis.

Among them, Pelaia continued to excel, Marubeni's shares increased by more than 100% year on year, Bettany counterattacked with double-digit year on year growth under the support of white bottle repair and special moisturizing cream, and Freida and Shanghai Jiahua grew by more than 50%.

The embarrassing scene reappeared, and Huaxi Biology was still declining, even the pillar brand Runbaiyan also performed poorly.

So can the decline of Huaxi's performance really be blamed on the macro level? It is not difficult to see that Huaxi is slowly falling behind, and this trend continues to expand. Once, the four major brands bloomed, but now only "Kuadi" can play. How long can Kuadi's life cycle last?

In addition to skin care products, the company's medical beauty business does not have much water.

Huaxi Biotech once had unlimited success in the capital market by relying on the concept of medical beauty, but now it avoids suspicion of medical beauty.

Chairman Huaxi said that "we are not a medical beauty company, but a biotechnology company driven by synthetic biotechnology innovation".

This actually reflects the embarrassment of Huaxi's frustration. As the leader of hyaluronic acid raw materials in the world, Huaxi seems to be just a porter of nature, and its research and development ability needs a big question mark. It can neither sell high-end girls' needles like East China Medicine, nor can it have absolute advantages in neck, eye and other fields like beauty salons and continue to create strong competition. Huaxi's hyaluronic acid injection seems to be more in the low-end market, and the low-end market has already been a red sea.

On the evening of September 4, Huaxi announced that it had terminated the contract with Medyto, a well-known botulinum toxin manufacturer in South Korea, and the 8-year botulinum toxin layout had stopped.

While Huaxi defines itself as a synthetic biotechnology company, synthetic biology is still in the pie stage.

How can backward Huaxi Biology improve its performance in the future?

The company mentioned "cost reduction and efficiency increase" as one of the five specific strategic tasks.

Look at what the company has done. In the first half of this year, the number of R&D personnel increased by 200, but the salary fell by 30%. The employment is getting cheaper and cheaper. Quitting a batch of expensive ones will attract a lot of cheap ones, which may also be the current situation of the general environment.

Content source: Pao Caijing

Author: Bai Lu

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