“Investors Network” Xie Yingjie
In an environment where overall consumption momentum is weak, the domestic beauty brand “Double 11" has performed well in the “Double 11" promotion. Yunnan Bettany Biotechnology Group Co., Ltd. (hereinafter referred to as “Bettany” ,300957.SZ) is one of them. With Winona, the main brand positioned as “sensitive skin care,” the company won Tmall's top 5 beauty and skincare rankings, achieving the best results in history.
Over the past few years, Bettany has taken the lead in the domestic functional skincare circuit. Whether it's brand reputation or business data, performance has been quite active in recent years. In the first three quarters of 2023, the company's revenue was 3.431 billion yuan, up 18.51% year on year; net profit was 579 million yuan, up 11.96% year on year.
However, as the general beauty environment cools down, competition on the raw materials side is getting stronger, and outsiders are questioning the Bethany brand alone. The stock price of Bettany, the parent company, also showed a spiral decline. Compared with its high market value of 120 billion yuan at the beginning of listing, the latest market value has evaporated about 90 billion yuan from its peak period.
Changes in financial data have also attracted the attention of regulators. In the middle of this year, the Shenzhen Stock Exchange asked Bettany about inventory size, contract processing model, changes in contract financial management, high supplier concentration, and a sharp increase in prepaid accounts.
In this special period of product matrix expansion and sales channel transformation, how to solve these problems is still quite a challenge for Bettany.
Stock prices continue to decline, plan to buy back
Bettany also had a great time.
In the early stages of listing in March 2021, the company was highly sought after for capital, and its stock price reached new highs. At its peak, it was close to 300 yuan/share, with a maximum market value of over 120 billion yuan, and was hailed by the outside world as “Pharmaceuticals Maotai”.
What ignites the market is e-commerce dividends. Bettany's online self-employment model accounts for a higher share than most companies. However, the skincare category is thought to be closer to immediate needs, and its profit margin is larger than that of beauty. From 2017 to 2019, the company's gross margin remained above 80%.
However, in recent years, beauty and skincare brands have made every effort to develop online channels and bring goods through social e-commerce. Traffic costs have continued to rise. The company's gross margin has declined continuously, and gross margin has fallen to around 75% in the past three years. The gross margin for the first three quarters of 2023 was 76.42%, down 0.48 percentage points from the previous year.
Judging from previous cases, domestic cosmetics are often popular and overlapping, yet there are not many brands that have continued to succeed. Since the sales growth of a single brand is limited, failure to successfully incubate or acquire new brands may have an impact on profitability.
At the same time, some important shareholders have reduced their holdings several times. By the end of the third quarter of 2023, the shareholding ratios of shareholders Tianjin Sequoia Juye, Zhenli Consulting, and Zhonglou Investment had fallen to 14.58%, 6.54%, and 2.16%, respectively. In 2022, its shareholding ratio was 21.58%, 8.81%, and 5.91%.
The company is taking a series of measures to protect the plate. Bettany recently announced that the company has adjusted the company's share repurchase plan, that is, the total capital for the current share repurchase will be adjusted from 100 million yuan to 200 million yuan to 300 million yuan. The repurchase price of shares will not exceed 130 yuan/share, and the number of shares to be repurchased will be adjusted accordingly according to the upper limit of the repurchase price.
As of November 16, 2023, Bettany has repurchased 663,600 shares of the company through centralized bidding transactions, accounting for 0.16% of the company's current total share capital, and the total amount paid is 507.337 million yuan.
As of the close of trading on December 1, Bettany reported 70.70 yuan. The stock price reached a record low, with a total market value of 40.572 billion yuan.
The growth rate of performance is slowing
Compared to the high growth of technology stocks, the reasonable valuation of consumer stocks mainly depends on their profit growth rate, but the growth rate of the company's performance is not as high as in previous years.
Financial reports show that from 2020 to 2022, Bettany's operating income was 2,636 billion yuan, 4,022 billion yuan, and 5.014 billion yuan, respectively, up 35.64%, 52.57%, and 24.65% year-on-year respectively; deducted non-net profit was 513 million yuan, 813 million yuan and 951 million yuan respectively, up 31.05%, 58.59% and 17% year-on-year respectively. The return on net assets for the same period was 56.57%, 23.33%, and 20.48%, respectively.
In the first three quarters of 2023, Bettany's revenue was $3,431 million, up 18.51% year on year; net profit was $579 million, up 11.96% year on year, and return on net assets fell 3.60% to 10.18% year on year. As can be seen, the growth rate of the company's performance has declined.
According to the three-quarter report, the company's operating costs were 809 million yuan, an increase of 20.39% over the previous year. The increase in the company's operating costs is greater than the increase in revenue. This means that e-commerce traffic dividends are declining, and customer acquisition costs are constantly rising.
Currently, Bettany is still facing the problem of continuing to rise in sales expenses. This is related to the high dependency on online channels. The company's sales expense ratio has remained between 40%-44%. In the first three quarters of this year, sales expenses reached 1,605 billion yuan, and the sales expense ratio rose to 46.8%.
Affected by increasingly fierce online competition in the beauty industry, high customer acquisition costs have led to a sharp increase in sales expenses.
Bethenny said in her earnings report that as internationally renowned makeup brands focus on laying out online channels, they will squeeze the sales share of local makeup brands online channels, and the company may face greater competitive pressure. At the same time, the company also needs to prevent risks such as the relative concentration of sales platforms, seasonal fluctuations in sales, and product quality control.
Correspondingly, its inventory turnover rate has declined. From 2020 to 2022, Bettany's inventory balances were RMB 254 million, RMB 463 million, and RMB 671 million respectively. The number of inventory turnover days at the end of the same period was 130.10 days, 133.72 days, and 164.21 days, respectively, higher than that of comparable peer Polar (603605.SH), whose inventory turnover days were 102.86 days, 106.19 days, and 103.91 days, respectively.
In the first three quarters of this year, Bettany's inventory reached 971 million yuan, an increase of 300 million yuan over the beginning of this year. The number of inventory turnover days increased by 29 days to 274 days over the same period last year.
Exploring the “second curve” is difficult
Currently, the skincare industry is still in a period of rapid growth. The overall scale of the industry is growing rapidly and is expected to be maintained in the next few years. According to Euromonitor's estimates, in 2022, China's sensitive skin skincare accounted for more than 10% of the overall skincare market. In 2027, the local skincare market was about 370 billion yuan. According to a 10% ratio, the market size for sensitive skin was less than 40 billion yuan at that time.
The fact that a multi-product matrix has not yet been formed is still a problem facing Bethany. “Winona” is the core brand in the company's skincare products. According to statistics from third-party platforms, the “Winona” brand Tmall ranked sixth in effective turnover on the first day of the “Double Eleven” pre-sale in 2023.
In addition to this, the company has been expanding a variety of brands, such as the high-end skincare brand AOXMEDRAGES, and the acne brand Bevertine, which uses AI intelligence as a selling point, Winona Baby, Poltis, etc. However, judging from the financial data for the first half of this year, the above brands contributed less.
From 2020 to 2022, the Winona brand accounted for 99%, 98%, and 97.4% of Bettany's revenue, respectively. In the first half of 2023, the Winona brand generated about 2.260 billion yuan in revenue, accounting for 95.85%.
Under the influence of factors such as few results from brand diversification and a slowdown in performance growth, Bettany may be trying to accelerate epitaxial growth through mergers and acquisitions and foreign investment.
Bettany announced at the end of September this year that Hainan Betany, a wholly-owned subsidiary, used 486 million yuan of its own capital to transfer 48.55% of Yuejiang's shares, while subscribing to the target company with 50 million yuan of its own capital increased its registered capital by 124,300 yuan. After the transaction was completed, Bettany indirectly held 51% of Yuejiang Investment's shares, and the target was included in the consolidated statement.
It is worth noting that Yuejiang Investment is the parent company of well-known brands Za Jirui and Bomei. Both Za Ji Rui and Pomei brands have been in the Chinese market for over 20 years. Yuejiang promised that from 2023 to 2025, the net profit of the mother will not be less than 0.5/0.8/105 million yuan, respectively, and the cumulative net profit of the mother over three years will not be less than 235 million yuan.
Whether the addition of a new brand can bring a second growth curve to Bethany still remains a question mark, but the race track for effective skincare products is becoming more and more crowded. Some research institutes are still optimistic about the company's future development prospects, believing that as the main brand channel side continues to be sorted out and clearly, the product is iterative and upgraded, it is expected that the recovery will accelerate quarterly.
According to the latest research report from Changjiang Securities, the brand power and repurchase rate of the company's main brand, Winona, are still strong. The product launch since the third quarter has strengthened the extensibility of the company's product line. At the same time, the recent acquisition of a controlling interest in Yuejiang Investment is expected to strengthen the company's popular price belt brand layout and e-commerce operation capabilities. (Produced by Thinking Finance) ■