China's Second Largest Toothpaste Brand is Ready for Listing

Recently, Chongqing Dencare, the parent company of one of China's traditional toothpaste brands, "Leng Suan Ling", submitted a prospectus and plans to be listed on the main board of the Shenzhen Stock Exchange. According to the prospectus, the company's revenue was $170 million in 2021, a year-on-year increase of 10.97%. Its core brand, Leng Suanling, has become the second largest Chinese toothpaste brand in offline retail.

According to public information, Dencare was established in 2001 and is mainly engaged in the research and development, production and sales of oral care products. It owns brands such as Lengsuanling, Medipair, KechiKechi, and Monyum. Its categories include toothpaste, mouthwash, toothbrush, etc.

As the core brand of Dencare, the prospectus shows that from 2019 to 2021, Leng Suanling accounted for 60.08%, 61.00% and 59.61% of the Chinese offline market in the anti-allergic segment respectively. According to Nielsen's offline retail statistics in 2021, Leng Suanling toothpaste ranks fourth in the industry and second in China's local brands in terms of retail sales in China.

According to the prospectus, from 2019 to 2021, Dencare's revenue and net profit have maintained a steady upward trend, with revenue of $141 million, $154 million and $171 million respectively, and net profit reached $9 million, $14 million and $18 million respectively.

From the perspective of sub-categories, from 2019 to 2021, the sales of adult toothpaste category were $116 million, $126 million and $134 million US dollars, accounting for 82.14%, 81.92% and 78.90% of the main business income respectively.

It is worth noting that although the revenue of adult toothpaste is relatively large, its proportion is declining year by year. Dencare explained in the prospectus that the sales volume of adult toothpaste is increasing year by year, but with the continuous enrichment of the product matrix and the continuous improvement of product structure, the proportion of income contributed by adult toothpaste is decreasing year by year.

On the contrary, the sales revenue of children's toothpaste shows an increasing trend every year. From 2019 to 2021, the sales of children's toothpaste are $6.0858 million, $9.0173 million and $11.1419 million respectively, with a compound growth rate of 35.31%. Toothpaste has become Dencare's fastest growing toothpaste segment.

Dencare explained in the prospectus that there are two reasons: on the one hand, the company is actively deploying the Chinese children's oral care product market, increasing the integrated communication of "KechiKechi" children's toothpaste, the distribution coverage of online and offline channels, and terminal promotion activities; On the other hand, due to the improvement of the company's children's toothpaste product matrix and product upgrades, the sales unit price of high-end new products has increased.

According to Nielsen retail research data, in 2021, the retail sales of "KechiKechi" children's toothpaste increased by 27.54% compared with 2020, leading the industry in growth rate. In 2021, the company's children's toothpaste China offline retail market share was 7.15%, ranking fifth in the industry.

In addition, in terms of product research and development, from 2019 to 2021, Dencare's research and development expenses were $4.527 million, $4.7354 million and $5.3064 million respectively, accounting for 3.21%, 3.08% and 3.11% of the current operating income, respectively. As of 2021, Dencare had obtained 170 authorized patents in China, including 14 invention patents, 35 utility model patents, and 121 design patents.

It is reported that the Dencare IPO raised $99 million, of which $33 million was used for intelligent manufacturing upgrading and construction projects, $55 million was used for omni-channel marketing network upgrades and brand promotion projects, $5.229 million was used for oral health research center construction project, and $5.229 million for digital management platform construction project.