BVLGARI, L'Oréal Package Supplier Goes Public

Chaileedo Press
Dec 14, 2022
3 min read

Abstract: Baixinglong's gross margin declined from 40.18% in 2020 to 34.8% in 2021 and further decreased to 29.56% in the first half of this year. Baixinglong admitted that there is a risk of facing a further decline in the gross margin if pulp prices rise further in the future.

On December 14, cosmetic packager Baixinglong rang the bell on the Beijing Stock Exchange, with a stock code (833075), offering 12,314,850,000 shares (including over-allotments) to the online market at an issue price of 11.8 yuan (about $1.7) per share. As of press time, down 6.78%, now quoted at 11 yuan/share (about $1.58/share).

Shenzhen Baixinglong Creative Packaging Co., Ltd. was established in 2008, with five subsidiaries and three production bases, specializing in the production of creative packaging products and creative design, with complete research and development, planning, design, and production links.

Prospectus data showed that Baixinglong’s operating revenue of 282 million yuan (about $40.6 million), 426 million yuan (about $61.3 million) and 246 million yuan (about $35.4 million), respectively from 2020 to the first half of 2022. The net profit for the same period reached 22.4 million yuan (about $3.2 million), 42.1 million yuan (about $6.06 million) and 23.72 million yuan (about $3.4 million). However, the company's gross profit margin declined from 40.18% in 2020 to 34.8% in 2021, and further reduced to 29.56% in the first half of this year.

Regarding the decline in gross margin, Baixinglong explained it for a number of reasons such as sales model, new revenue guidelines, raw material costs, freight prices, downstream demand, pricing strategy, and the characteristics of the creative design service business. Baixinglong acknowledges that if the pulp price increases further in the future, there is the risk of facing further decline in gross margin.

Nevertheless, the gross profit margin disclosed in the prospectus of Baixinglong is still much higher than that of companies in the same industry.

According to the China Packaging Industry Annual Operation Report (2021) released by the China Packaging Federation, in 2021, China's packaging industry above-scale enterprises completed a cumulative operating income of 1.2 trillion yuan (about $173 billion), a total of 8,831 enterprises above-scale industry, the average income of enterprises of about 130 million yuan (about $18.7 million). According to this, the revenue capacity of Baixinglong is in the middle and upper reaches of the industry.

The main advantage of Baixinglong lies in its four-in-one development strategy of "brand strategy planning, creative design, technology research and development, and product delivery", with creative packaging and scientific research capabilities. From the prospectus, we know that since its establishment in 2008, Baixinglong has won 103 international design awards, 157 patents and 271 copyrights. It has independently developed technologies such as high gloss three-dimensional hot stamping, 3D suspended micro-nano anti-counterfeiting technology, textured hot stamping technology, UV digital embossing three-dimensional texture technology and anti-counterfeiting snap.

This has laid the foundation for the long-term cooperation between Baixinglong and enterprises in consumer goods such as wine, cosmetics, tea and food. Among them, the creative packaging of cosmetics category accounts for about 23.81% of its total revenue, amounting to 58.366 million yuan (about $8.4 million), which is one of its major businesses.

It is understood that its cosmetic, boutique-class business partners include Louis Vuitton, GUCCI, BVLGARI, L'Oreal, Elizabeth Arden and other internationally renowned brands.

Among them, Baixinglong and BVLGARI and L'Oreal established a direct business relationship to public relations, holiday gift boxes as the main sales products. Brands such as Gucci, Disney and Diageo, on the other hand, reach cooperation through traders.

From January to June 2022, Baixinglong's total sales to the top five customers were 99.9 million yuan (about $14.4 million), accounting for 40.54% of total revenue. The fourth-ranked cosmetic and boutique packaging customer, BALANCEINC, accounted for 4.63%.