“Investor Network” Zhang Wei

In March, Juzi Biotech (02367.HK), the “first recombinant collagen stock”, released financial reports. According to financial reports, Giant Biotech's revenue and net profit in 2023 all increased by more than 40% year on year. Since its listing in Hong Kong in 2022, the company's revenue and net profit have continued to grow for two consecutive years.

The reason behind the sharp performance is that Giants Biotech's sales expenses rate is increasing year by year. According to financial data, from 2019 to 2022, Juzi Biotech's sales expense ratio increased from 9.8% to 29.9%, and in 2023 it was as high as 33%.

On the other hand, Giazi Biotech's current revenue mainly relies on big single products to recover in the US. In 2023, Kefumei's sales revenue accounted for 79.1% of Juzi Biotech's main revenue.

Giant Biotech stated in its prospectus that it is expected to obtain Class III medical device certificates for 4 skin revitalization products from the first quarter of 2024 to the first half of 2025. Whether the new production capacity can get rid of Giazi Biotech's dependence on large single products is yet to be tested over time.

Marketing investment drives performance growth

According to public information, Juzi Biotech was founded in September 2001. It is one of the earliest domestic companies engaged in R&D, production, and sales of recombinant collagen. It is also one of the first companies to add recombinant collagen to skincare products and medical and aesthetic ingredients.

According to reports, collagen is a natural component of the human body found in China, and has anti-aging and other effects. Recombinant collagen is obtained through techniques such as genetic recombination, cell construction, and separation and purification. By simulating the structure and function of human collagen, recombinant collagen combines with human collagen to exert anti-aging effects.

In recent years, various skincare products containing recombinant collagen have been highly sought after by consumers, which has also led to the development of related companies. Recombinant collagen R&D companies represented by Giant Biotech grew rapidly and quickly entered the capital market. In November 2022, Giants Biotech was listed on the Hong Kong Stock Exchange.

Financial reports show that in 2022, Giant Biotech achieved revenue of 2,364 billion yuan, a year-on-year increase of 52.3%; realized net profit to mother of 1,002 billion yuan, an increase of 21% over the previous year. In 2023, Giant Biotech went one step further, achieving revenue of 3,524 billion yuan, an increase of 49% over the previous year, and achieved net profit of 1,452 billion yuan, an increase of 44.6% over the previous year.

In addition, according to the prospectus, from 2019 to 2021, Giant Biotech's main revenue was 957 million yuan, 1.19 billion yuan, and 1,552 billion yuan respectively, and the net profit for each period was 575 million yuan, 826 million yuan, and 828 million yuan respectively. As can be seen, Giant Biotech's revenue and net profit have maintained rapid growth in recent years.

However, Giazi Biotech's performance growth was based on high-investment marketing expenses.

From 2019 to 2022, Juzi Biotech's marketing expenses increased from 94 million yuan to 706 million yuan, and its share of the main revenue for each period increased from 9.8% to 29.9%. In 2023, Juzi Biotech's marketing expenses were 1,165 billion yuan, accounting for 33% of its main revenue. Giant Biotech said in its financial report that due to the rapid expansion of online direct sales channels, online marketing expenses have increased, thereby boosting overall marketing expenses.

Relying on big products to restore the US

According to information, Giant Biotech currently has eight brands, including Kofumei, Creigin, Preventable, Traceable, and Repairable. In fact, Juzi Biotech's revenue mainly comes from the two core brands, Kefumei and Kelijin, especially the big single product Kefumei.

According to financial reports, Kefumei achieved revenue of 2,788 billion yuan in 2023, accounting for 79.1% of Juzi Biotech's total revenue; Kelijin achieved revenue of 617 million yuan, accounting for 17.5% of Gizi Biotech's total revenue.

It is worth noting that in the past five years, the status of Ke Fu Mei and Kelijin among giant creatures has changed significantly. From 2019 to 2023, Kefumei's sales increased from 290 million yuan to 2,788 million yuan, an increase of 861% over five years. In the same period, Clekin's revenue increased from 481 million yuan to 617 million yuan, an increase of only 28% in five years. In terms of revenue share, Clekin has gone from over 50% five years ago to less than 20% now.

The “position exchange” between Kefu Mei and Kelijin's revenue scale and revenue share may have a lot to do with the change in Giazi Biotech's product sales strategy.

According to reports, Crekin is mainly sold through dealer channels. From 2019 to 2022, Colijin's sales revenue mainly came from Giant Biotech's largest customer, Xi'an Chuangke Village E-Commerce Co., Ltd. (hereinafter referred to as “Xi'an Maker Village”). During this period, Xi'an Maker Village's sales contribution rates were 52.2%, 49.3%, 29.3%, and 17.6%, respectively. In an interview with the media earlier, Xi'an Maker Village said that it only sells Clarion Gold, not the US.

According to enterprise research information, Xi'an Maker Village was founded in April 2015 by Yan Jianya, the founder of Juzi Biotech, and a subsidiary of Juzi Biotech. However, on September 12, 2017, Yan Jianya withdrew from Xi'an Maker Village, and Zhang Bing and Ma Xiaoxuan became the only two shareholders of Xi'an Maker Village. The change in the actual controller may have caused the cooperative relationship between Giant Biotech and Xi'an Maker Village to become less close, thus affecting the sales volume of Clarikin.

Starting in 2022, Giant Biotech has invested heavily in direct sales and promotion of Kefumei through online channels such as Tmall, JD, and Xiaohongshu. According to financial reports, Juzi Biotech's revenue in 2023 through direct sales channels was 2.45 billion yuan, accounting for 68.7% of total revenue; dealer channels accounted for 31.3% of total revenue during the same period.

What are the prospects for new products

Juzi Biotech said in its financial report that in 2024, it will continue to increase investment in research and development, promote more breakthroughs in basic technology and updates of raw materials and products, enrich the category matrix, do a good job in clinical and approval of Class III medical device skin revitalization products, and lay a good foundation for the company's multi-level growth curve.

Previously, Giant Biotech is expected to obtain Class III medical device certificates for 4 skin revitalization products from the first quarter of 2024 to the first half of 2025. According to reports, these 4 products are all recombinant collagen injections. According to the latest news, out of the 4 products mentioned above, 2 were approved in the second quarter of this year, and the remaining 2 are expected to be approved in the first half of 2025.

Some industry observers said that at present, the ingredients in the “Clarion Gold Starlight Aquarius” under Clarikin are type I and type III collagen. There are only Class II medical device registration certificates, and water light injections cannot be “broken” according to regulations. If it obtains a Class III medical device certificate, it means Giazi Biotech will expand into a new field.

According to Dongfang Wealth Securities, the skin revitalization category of Juzi Biotech's products under development is progressing steadily, and it is expected to achieve operating income of 4.59 billion yuan, 5.75 billion yuan, and 6.99 billion yuan from 2024 to 2026, up 30.4%, 25.1%, and 21.6% year on year; net profit to the mother is expected to increase 23.8%, 18.9%, and 17.8% year on year, corresponding PE is 21 times, 17 times, and 15 times.

However, there are also opinions that, unlike Kefumei, which sells directly to mass consumers, Class III medical devices are mainly promoted through medical institutions, and the ability of Giant Biotech to advance on the institutional side will determine the ultimate future of these products. According to reports, Giant Biotech is currently cooperating with 1,500 public hospitals and 2,500 private hospitals and clinics across the country.

In the secondary market, as of April 3, Giants Biotech's stock price closed at HK$43 per share, up 77% from the issue price of HK$24.3 at the time of listing in 2022, and the company's market value was HK$42.785 billion. (Produced by Thinking Finance) ■