Chaoyun Group is only one step away from going public and ringing the bell.

If there are no surprises, after Chaoyun Group's Hong Kong stock market is successfully listed, the Chen family, founder of Libai Group, will once again experience a surge in wealth.

Libai spun off Chaowei Mosquito Incense to test the waters of the IPO

Many entrepreneurs of the first generation are not interested in capital markets. Chen Kaixuan, one of the people at the helm of Libai Group, has also always insisted on not going public. He said, “Going public is good, but it's not 'once you're successful. '” Xu Xiaodong, then vice president of the former Bai Group, once stated, “Generally speaking, there are two purposes of going public. One is to raise awareness, and the other is to raise capital. And we don't need either of these at the moment.”

But times have changed. Chen Danxia has her own views on the company going public. In her opinion, in the future, family businesses will be divided into two major genres: one will not go public, and the other will use capital platforms to develop and grow.

Chen Danxia divided the business of the Libai Group according to this standard. She believes that the modules that Libei needs to go public are Gaozi, Chaowei, and Oshia. At the 2017 (10th) China Cosmetics Conference, Chen Danxia publicly stated that Gao Zi, Chaowei (Chaoyun Group), and Oshia, which she manages, all have future IPO plans.

According to public information, Gao Zi was once the first platform Chen Danxia wanted to enter the capital market. At a new product launch in February 2017, Gao Zi revealed that it plans to complete the IPO layout in 2017. However, up to now, Gaozi's IPO has not made any further progress. Instead, Chaoyun Group, where Chaowei is located, has embarked on the IPO path one step ahead.

Chaoyun Group is inconspicuous in the entire Libai family business. Its predecessor was the Chaowei Division of Libai Group.

In 2006, Chen Kaixuan and Chen Kaichen invested a total of 10 million yuan to establish Chaoyun Group, Anfu Chaowei, the predecessor of Chaoyun Group. Anfu Chaowei aims to expand its daily chemicals business to other household care products such as household cleaning products, mosquito repellent-related products, and air fresheners, and has launched a variety of products under Chaowei and Sealand brands.

Using this as a starting point, in 2010, Libai launched a new mosquito repellent for children with the new brand Beibeijian; in 2011, it continued to launch a new household cleaning product line with the Weiwang brand; in 2019, it launched pet care products under the Stubborn Tail and Deze brand to meet the needs of families with pets.

Chen Danxia officially took over the Chaowei brand in 2016. Two years later, she separated Chaowei's division from Libai Group and formed Chaoyun Group; when preparing for an independent IPO, these brands were transferred to Chaoyun Group together.

The hope for the future development of this part is to “upgrade an already large brand and category to make it even bigger.” According to the prospectus, Chaoyun Group positions itself as China's leading one-stop multi-category smart home, personal and pet care platform.

Currently, Chaoyun Group has two production bases in Panyu in Guangdong Province and Anfu in Jiangxi Province. Its seven core brands include Weiwang, Chaowei, Beibeijian, Xilan, Runzhisu, and Stubborn Tail and De.

According to data from Insight Consulting, in the insecticide and mosquito repellent segment, Chaoyun Group maintained the number one insecticide and mosquito repellent market in China for five consecutive years from 2015 to 2019. In 2019, in terms of retail sales, it ranked first in the market for insecticide and mosquito repellent for children in China, with a market share of 41.4%; in terms of retail sales, the market share reached 22.8%.

According to financial data, from 2017 to 2019 and the first nine months of 2020, Chaoyun Group's revenue was 1,346 billion yuan, 1,350 million yuan, 1,383 billion yuan, and 1,461 million yuan respectively; profit for the period was 170 million yuan, 177 million yuan, 184 million yuan and 215 million yuan, respectively. In the reporting period, the revenue of insecticidal and mosquito repellent products accounted for 68.4%, 69.4%, 63.3%, and 64.9% of Chaoyun Group's total revenue, respectively.

During the reporting period, the company's corresponding gross margins were 35.9%, 37.2%, 43.4%, and 42.9%, respectively. According to this, Chaoyun Group's gross margin is at a medium to high level, but it is lower than Blue Moon's gross profit margin of more than 50% in the same industry. In response, Chaoyun Group stated that during the reporting period, the gross profit of offline distributors fluctuated, mainly due to changes in product mix during the relevant period.

Furthermore, Chaoyun Group is currently closely tied to Libai on the sales side and production side. According to the prospectus, the company sells to 48 major offline customers through the Libai Group. Major customers include national and regional hypermarkets, department stores, and convenience store operators such as Walmart and Carrefour, covering 11,000 sales points. From 2017 to 2019 and the first quarter of 2020, Chaoyun Group's direct sales ratio through Libai's channel reached 17.9%, 23%, 20.7% and 20.5% respectively.

Chaoyun Group also outsourced production of some products to Libai Group. According to the prospectus, from 2017 to 2019 and the first quarter of 2020, Chaoyun accounted for about 40%-50% of purchases from the top five customers. Among them, purchases from Libai Group accounted for 20.8%, 15.8%, 29.1% and 25.3%, respectively.

Chaoyun Group said that up to now, at least 95% of the shares of Libai Group and most of its subsidiaries are held and controlled by its controlling shareholders. The controlling shareholders of both groups include Chen Kaixuan and Chen Kaichen.

Is Chaoyun just the beginning of Libai's IPO?

According to the prospectus, before the IPO, Li Bai founder Chen's two brothers and his spouse held 99% of Chaoyun Group's shares through Cheerwin Global. Among them, Chen Kaixuan held 6.435%, his wife Li Ruohong held 57.915%, Chen Kaichen and his wife Ma Huizhen held 3.465% and 31.185% respectively; individual investor Mao Yu held 1% of Chaoyun Group's shares through Bestart.

This means that Chaoyun Group is a complete family business. However, two people, including Chen Kaixuan and Chen Kaichen, do not hold positions in Chaoyun Group; instead, Chen Kaichen's daughter, Chen Danxia, is in charge. Currently, Chen Danxia is the legal representative of Chaoyun Group and also serves as the executive director, chairman and CEO of Chaoyun Group. In addition, Chen Zexing, son of Chen Kaixuan and cousin of Chen Danxia, served as a non-executive director of Chaoyun Group.

The well-known Libai Group was founded in 1994. That year, Chen Kaixuan founded Guangzhou Libai Laundry Products Co., Ltd. in Guangzhou with his older brother Chen Kaichen and 4 other entrepreneurial partners. In less than 20 years, Libai became a leading domestic washing products company with annual revenue of nearly 20 billion yuan, ranking among the top 500 private enterprises in China. According to the latest list of the rich, Chen Kaixuan's personal wealth is close to 15 billion yuan.

Currently, the second generation of the Chen family of Libai Group has their own development directions: Chen Kaixuan's son, “Shao Shuai” Chen Zebin, took over as president of Libai Group in 2019; Chen Kaixuan's eldest daughter, Chen Danli, became the vice chairman of the Buchang Pharmaceutical Supervisory Board and is also the head of the Libai Maternal and Child Business Line and Real Estate Division; Chen Zebin's younger brother, Chen Zexing, Sulikang Biotechnology, has brands such as Heyi and Jiaozhiyu, and is one of the core companies in Libai's health sector; “Grand Duke” Chen Lizhan is responsible for Libai In the financial sector, Baokai Daorong and Libai Financial Holdings were founded successively.

As the oldest experienced “lady” of Libai Group, in addition to being the chairman of Chaoyun Group, Chen Danxia is now also a director of Libai Group, director of Aoshia, and chairman of Gao Zi Cosmetics.

According to media reports, in 2000, Chen Danxia joined the Libai Group after receiving a bachelor's degree in international economics and trade. In 2002, in order to develop the Australian market, Libai set up a branch in Australia; Chen Danxia followed her family arrangement and abandoned her admission to the University of Oxford in the UK to go to an Australian management company and study for a master's degree at the University of Sydney.

During her time at the Australian Liber branch, Chen Danxia observed that several Australian skincare brands were not doing well, but the brands themselves were very valuable; after advising her father to buy these Australian brands, Chen Danxia founded Oshia in Guangzhou. After 10 years of development, the GranMafran brand, which was acquired at the time, has become the Australian skincare brand No. 1 in the personal care category in the Chinese market. Currently, Grandmafran has nearly 100 shopping center brand stores, more than 300 department stores, and more than 6,000 CS channel sales outlets in China.

After returning home from Australia, Danxia Chen faced more challenges. One of these is the merger and restructuring of Libai and Gao Zi. As a well-known cosmetics brand in Hong Kong that has been established for more than 30 years, Gao Zi entered the mainland market in 1984 and was always “not satisfied”. After several changes of ownership, it was finally acquired by Libai in 2006. However, after changing several managers one after another, Libai was still unable to reverse the high-capital business situation.

In May 2008, Chen Danxia became the general manager of Gaozi Cosmetics Co., Ltd. Since then, Gaozi's sales have quadrupled within two years. Libai became the first domestic cosmetics giant to successfully cross border makeup brands. It is worth mentioning that at a press conference in June 2018, Gao Zi's general manager Chen Zhanxiong revealed that Gaozi's average annual sales growth rate from 2014 to 2018 reached 45%; Chen Danxia said at the time that Gaozi would become a consumer goods group with annual sales of 5 billion yuan in the future.

According to what Chen Danxia said earlier, with Chaoyun Group's successful Hong Kong stock market listing, she may continue to sprint into the capital market with other Libei companies she is responsible for, such as Oshia and Gao Zi.