Chicmax Again to Sprinted the Hong Kong Stock IPO
- Chaileedo Press
- Oct 8, 2022
- 2 min read
The annual expenditure of Chicmax on marketing and promotion is about ten times its R&D investment.
Founded in 2003, Chicmax's main business includes the production and sales of skincare, facial masks, mother & infant, color cosmetics, and personnel cares etc. It has launched several well-known brands in the cosmetic and mother & infant dual sections, including KANS, One Leaf, and Baby Elephant.
According to its financial results for the first half of 2022, the group's total revenue was 1.26 billion yuan ($177 million), of which the revenue from the three brands KANS, One Leaf, and Baby Elephant accounted for 93.0% of the group's total revenue. At the beginning of this year, Chicmax filed a prospectus on the Hong Kong Exchanges and Clearing Limited to prepare for its IPO in Hong Kong. In July, its filing lapsed. on October 5, Chicmax filed the form again for the IPO.
CHAILEEDO learns that KANS has been the core support of Chicmax's revenue and the main driver of revenue growth during the reporting period. In 2019~2021 three full years, KANS' revenue continues to be high. In contrast, its herbal skincare brand One Leaf has experienced sluggish growth, with the highest revenue among the three major brands in 2019, but continued to decline thereafter, ranking at the bottom of them in terms of revenue in FY 2021.
Chicmax explained that the decline in One Leaf's revenue was related to reduced marketing expenses. It is understood that Chicmax's cost expenditures on marketing are perennially high. From 2019 to the first three quarters of 2021, Chicmax's marketing expenses (sales and distribution expenses) will be 1.325 billion yuan ($186 million), 1.536 billion yuan ($216 million), and 1.119 billion yuan ($157 million) respectively, all accounting for more than 40% of the corresponding annual revenue.
According to the prospectus, in 2019-2021 and the first half of 2022, Chicmax generates R&D expenses of 2.9%, 2.3%, 2.9% and 4.1% of revenue respectively. According to this calculation, its annual spending on marketing and promotion is about ten times its R&D investment.
In addition, according to the official website of the National Medical Products Administration, Chicmax has been repeatedly found to have ingredients that do not match the product approval. In August 2015, KANS was ordered by the Shanghai Administration for Market Regulation to stop publishing an advertisement for "deceiving and misleading consumers by using advertisements to make false propaganda about goods or services". The company was also required to make public corrections within the corresponding scope at an equal advertising cost to eliminate the impact. At the same time, it was fined 1.1 million yuan.
However, according to its prospectus, as part of its strategy, the company will continue to invest significant financial and other resources in the future to promote brand awareness and solicit customers. This includes expanding marketing and sales teams, enhancing KOL marketing and acquiring advertising.
The effect of vigorous marketing promotion is obvious. Chicmax said the company hired several KOLs to promote its products. During the reporting period, the revenue generated by the company's top five KOLs accounted for 1.8%, 6.4%, 10.3%, and 5.9% of the corresponding year's total revenue respectively.
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