“Investor Network” Cai Jun
Huaxi Biotech (688363.SH, hereinafter referred to as the “Company”), which is standing in the midst of ups and downs, may still be in the rain.
In April of this year, the company announced the departure of Ma Shouwei, the former core technician. According to data, Ma Shouwei was previously the functional skincare development director at the Shanghai R&D Center, where he was mainly responsible for basic formulation technology and functional product formulation research and development. Prior to joining the company, he had experience with international brands such as Unilever and L'Oréal.
Ma Shouwei's research and development field is mainly cosmetics. This is in line with the company's efforts over the past few years, which is to transform from hyaluronic acid raw materials to a cosmetics company. However, in 2023, the company bid farewell to a high growth rate, transformation path, or bottlenecks.
In 2023, the company's revenue and net profit attributable to owners of the parent company were 6.08 billion yuan and 587 million yuan respectively, down 4.37% and 39.5% year-on-year respectively. The company said that during the reporting period, it actively got rid of its reliance on past successful paths, but due to differences in the competitive environment, development stages and development models of various businesses, the functional skincare business experienced a phased decline.
There are many factors preventing it. Starting in 2023, Huaxi Biotech will customize another synthetic biology company. It remains to be seen what drugs are sold in the new-concept gourd.
Or the transformation of card shell cosmetics
From hyaluronic acid ingredients to cosmetics, Huaxi Biotech's transformation or failure.
In the first half of 2023, the company's functional skincare business revenue was 1,966 billion yuan, a year-on-year decrease of 7.56%, accounting for 63.92% of revenue. Sales of the four major brands, including Moisturizing, Quadi, Mibel, and BM Skin Active, all declined. In the same period, the revenue of Perea and Marumi Co., Ltd. was 3.627 billion yuan and 1,059 billion yuan respectively, up 38.12% and 29.64% year-on-year respectively.
Here, Quadi, who focuses on precise skincare and anti-aging, stands in the midst of ups and downs. During the reporting period, the brand's sales volume was 540 million yuan, down 10.1% year on year. Moreover, this storm has not stopped.
In March of this year, the official website of the China Non-Prescription Drug Association published a message entitled “Huaxi BioQuadi was complained 38 times in 1 month: the alleged product deteriorated during the shelf life, concealed the risk of allergies, and the mask had many foreign objects and false publicity”.
Screenshot Association website
According to the information, many consumers complained that the Quadi flagship store did not fulfill its obligation to inform during the purchase process, and did not state that the ingredients in the second-hand serum product may cause allergies, leading to strong symptoms of redness and swelling after use. Since then, consumers have requested returns, refunds, and compensation from the company, but they have all been denied.
At almost the same time, the director of Quadi, Zhifan, posted a video on his personal Xiaohongshu account, mentioning “time doesn't talk, there is a period of time, time is not urgent, everyone has their own place” and wants to leave the brand. From high growth to stalling, to difficulties, the ups and downs of Quadi bear the imprint of the Internet era.
As early as 2018, Zhifan participated in Quadi's brand operation, and personal IP was gradually tied to the brand. What really brought the two out of the ring was for the first time in 2020, when they both landed on Li Jiaqi's live broadcast room and participated in the variety show “ALL GIRLS OFFER”. Just as other domestic beauty products have taken the lead, Quadi's sales are also at a high speed.
In 2021, Quadi's sales were 980 million yuan, up 150.19% year over year. Among them, the pre-sale channel of Li Jiaqi's Double Eleven reached 334 million yuan. In 2022, the brand had sales of 1,369 billion yuan, an increase of 39.73% over the previous year.
It should be pointed out that in 2022, Li Jiaqi “retired” from the live broadcast room for 3 months. In the second half of the same year, Quadi opened a branch in Hangzhou and set up a BD team for live streaming by marketing media and celebrities to launch and live stream marketing through a professional team. As a result, Quadi and Zhifan, and who is more successful on the two sides have always been discussed.
Zhi Fanfan once publicly disclosed that in the early stages, one person controlled content production, and only recruited assistants and customer service after the fan base grew. According to Guoji·Feikou data, the GMV for a single game in Zhifan exceeded 25 million yuan in the second half of 2022, which is close to leading delivery anchors. The platform also estimates that in the fourth quarter of the same year, Zhifan account's live streaming sales accounted for 40% of Quadi's Douyin broadcast revenue.
However, mutual achievements between the two sides will begin to reach an inflection point in 2023. In the first half of the year, Quadi launched 2 new products, “Zhenjin Yunhuo Anti-Aging Eye Cream” and “Cleansing Massage Deep Cream,” but the dosage effect was not obvious. In the second half of the year, Quadi and Zhi Fanfan teamed up with Li Jiaqi's Beauty ONE to launch the “Recipe Game - Ingredient China” marketing, but Li Jiaqi also fell into a “where is it expensive” public opinion storm, and domestic cosmetics were questioned.
Perhaps Huaxi Biotech's cosmetics have also transformed into the Internet, but the crackle may also be at the top of personal IPs and channels.
Custom synthetic organisms
The path of transformation was blocked, and the other eggs in Huaxi Biotech's basket took on the heavy responsibility of growth.
In the first half of 2023, the company's medical terminal business revenue was 489 million yuan, an increase of 63.11% over the previous year, accounting for 15.9% of revenue. This segment specializes in various medical and aesthetic injections, which are extended from the company's upstream hyaluronic acid raw materials.
According to Haitong Securities statistics, domestic facial hyaluronic acid is currently divided into three prices: less than 3,000 yuan/needle, 3000-10,000 yuan/needle, and 10,000 yuan/needle or more. The company's Runbaiyan and Runzhi series are in the top two. Similar competitors include Haiwei and Jiaolan from Meike, Haohai Biotech.
According to the disclosure of peers, in 2023, Aimeike's revenue from solution injection products with Hi-Tei as the core was 1.67 billion yuan, an increase of 29.22% over the previous year. Haohai Biotech's revenue was 602 million yuan, and the lower average price reached 372 million yuan. Therefore, the scale of the company's similar products is second in domestic production.
However, Huaxi Biotech's medical and aesthetic ambitions don't stop there.
The company has carried out changes in the medical and aesthetic business for about 2 years, including adjustments to products, channels, and organizational structure. In terms of products, the company integrated the Runzhi series to shift traffic single products into product portfolios. In terms of channels, in order to optimize the ratio of direct sales and distribution, such as increasing the direct sales ratio of leading customers, small and medium-sized customers are covered by distribution. Organizationally, the division turned some front-end sales staff into operational enablement experts.
At the same time, the company coveted recombinant human collagen. In 2023, due to the popularity of its exclusive recombinant type III human collagen, Jinbo Biotech achieved revenue of 780 million yuan, a year-on-year increase of 99.96%, and net profit of 300 million yuan, an increase of 174.61% year-on-year. To expand production capacity and guarantee the supply of raw materials, the company cooperated with L'Oréal, which supplied it with collagen raw materials.
Up to now, the company has developed 7-8 types of collagen and completed trial production to prepare related products and launch raw materials. Among peers, Giant Biotech, Aimeike, etc. are also speeding up the development of the collagen field. If companies want to stand out, competition will definitely increase.
Notably, in 2023, Huaxi Biotech defined itself as a “biotech company driven by synthetic biotechnology innovation” in an attempt to define scarcity using a broader and fresh synthetic concept.
In the capital market, Kaisai Biotech and Twining Biotech all have synthetic biological labels. They specialize in bio-based and antibiotic intermediates respectively, which correspond to about 65 times and 30 times PE. Currently, Huaxi Biotech's PE is about 30 times that. From transforming cosmetics to customizing synthetic organisms, time will tell the answers. (Produced by Thinking Finance) ■