LVMH's Fund Reduces Shares from Chinese No. 1 Eye Skincare Brand

L Capital Guangzhou Beauty Ltd., an equity firm under LVMH, reduced its holdings of 6,908,314 shares of Marubi, a Chinese eye care company, with a reduction ratio of 1.71926%. After this equity change, L Capital is no longer a shareholder holding more than 5% of Marubi. It is reported that Marubi is the only beauty brand invested by L Capital in China.

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On May 23rd, Chinese eye cream brand Marubi released the "Alert Announcement on Changes in Shareholders' Rights and Interests of Guangdong Marubi Biotechnology Co.

Marubi disclosed in the announcement that the company received the "Report on Change of Equity in Simplified Form of Guangdong Marubi Biotechnology Co., Ltd" from L Capital Guangzhou Beauty Ltd, a shareholder holding more than 5% of the company's shares, on May 22, 2022, in which L Capital reduced its holding of 6,908,340,000 shares through bulk trading, representing a reduction of 1.71926%.

After this change in equity, L Capital is no longer a shareholder of Marubi holding more than 5% of the shares.

According to the latest announcement released by Marubi, before this change in equity, L Capital held 26,999,194,000 shares of Marubi, accounting for 6.71923% of the total share capital of the company. After this change in equity, L Capital held 2009,088,000 shares of Marubi, accounting for 4.99998% of the total share capital of the company. In other words, L Capital is no longer a shareholder holding more than 5% of Marubi's shares.

In response to the reason for this shareholder reduction, Marubi said in the announcement, "In view of L Capital's long time holding in Marubi, it has its own capital exit demand as an equity investment company." Some industry insiders believe that "after the decline of Marubi's performance, shareholders no longer have investment patience."

Public information shows that L Capital, an investment fund of LVMH Group, took a stake in Marubi in May 2013 and has been investing for nine years since then, and its main shareholder is L Capital Asia, LLC, a closed-end fund. It is worth mentioning that Marubi is the only beauty brand that L Capital has invested in China.

It is also worth noting that this share change is not the first time L Capital has reduced its stake, as Marubi was listed on the SSE on July 25, 2019. In the same year's financial report, L Capital held 36 million shares of Marubi, accounting for 8.98% of the company's total share capital at the time. In July 2020, just after L Capital's shares had completed a one-year restricted period, it announced a plan to reduce its holdings of Marubi by no more than 24.06 million shares, not exceeding 6% of the company's total share capital.

The latest performance figures announced by Marubi at the end of April this year show that the "No. 1 eye skincare stock" is not having a good time. In the past year, Marubi's revenue was $268 million, up 2.41% year-on-year, and net profit attributable to shareholders of the listed company was $37 million, down 46.61% year-on-year. The 2022 quarterly report shows that Marubi's revenue was $57 million, down 5.31% year-on-year. Its net profit attributable to the parent company was $9.808 million, down 34.61% year-on-year; net profit after deducting $8.6 million yuan, down 40.2% year-on-year. It is easy to see that Marubi's net profit has been declining in recent years.

In this regard, Marubi said in its 2021 earnings announcement that in the face of the pressure on offline business brought about by the outbreak of the COVID-19 in 2020, the accelerated evolution of the online business model, and the increasingly fierce market competition, it underestimated the difficulties and cycles of exploring new media and new channels, and the transformation did not meet expectations, and overall revenue remained stable but profits declined.

According to public information, other Chinese companies such as PROYA and S'Young, both in terms of revenue scale and performance growth rate, are much higher than Marubi shares. Data show that the revenue of PROYA in 2021 was $694 million, an increase of 23.47%, net profit $86 million, an increase of 21.03%. The net profit in the first quarter of 2022 increased by 38.53% and 44.16%, respectively. S'Young's revenue in 2021 was $750 million, an increase of 34.86% year-on-year, and net profit of $35.4 million, an increase of 68.54%.

As in the multi-brand layout, Marubi did not have a significant advantage, the reliance on the main brand is obvious. Public information shows that Marubi has three brands under Marubi, Chunji and PASSIONAL LOVER, but the main revenue still relies on the main brand Marubi support. According to the financial report, Marubi achieved revenue of $239 million in 2021, accounting for 92.36%, the rest of the multi-brand combined revenue contribution rate of less than 8%.

At the same time, channel transformation is also an important part of corporate development, but at present, compared with other beauty companies, Marubi online channel development is slow. Public information shows that in 2021, Marubi online revenue of $154 million, accounting for 59.54%; PROYA online revenue of $588 million, accounting for 84.93% of revenue. Bethenny's online channel revenue was $494 million, accounting for 82.34% of revenue. In this regard, Marubi said in its 2021 annual report, it will continue to promote retail transformation, online to promote the joint pop-up program, improve the effectiveness of live, increase the proportion of self-broadcast, play the dual strategic role of live channel sales and product promotion.

In general, compared with the negative impact of L Capital's reduction, it is more important for Marubi to solve the problem of how to break through its own predicament and explore new growth points.