Chinese medical-cosmetics firm gets high on acid

Humedix Co

28/04/2021 03:05

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Yawen Chen
    HONG KONG, April 28 (Reuters Breakingviews) - Companies
peddling acidic elixirs of youth have become China’s next
investor craze. Shenzhen-listed Imeik Technology Development’s
 300896.SZ  near-monopoly on products for smooth neck skin have
pushed its shares up 400% since it floated last September.
Nicknamed "Moutai for women", after the prestigious liquor
maker, the $19 billion company has higher margins than its
alcoholic namesake, and few rivals. 
   Young Chinese women’s enthusiasm for live-streaming video,
combined with their migration toward a Western-style casual
dating culture, has helped the domestic market for surgical and
non-surgical cosmetic treatments blow up to $22 billion in 2019.
Sales are poised to grow 20% annually through 2024, according to
a CICC estimate. 
   The hyaluronic acid-based fillers that Imeik (pronounced Aye
May Kuh) specialises in are one of the most popular treatments
sold to clinics. Previously most Chinese suppliers focused on
producing the raw material, leaving development and marketing of
the end product to foreign brands. Imeik, however, discovered a
narrow niche devoid of foreign rivals: necks. In 2016 it
obtained certification for a neck-wrinkle filler called "Hearty"
which is currently the only government-certified product in the
market. 
    That first-mover advantage has proven durable. Hearty sales
have risen heartily, up seven-fold between 2017 to 2019; the
brand contributed over 60% of Imeik's revenue in 2020. In the
first quarter of 2021, Chairwoman Jian Jun achieved a 300% surge
in adjusted net profit, with overall sales tripling. At a
whopping 61%, its net profit margin is 13 percentage points
higher than Kweichow Moutai’s  600519.SS , another darling of
domestic traders. Jian is now one of China's richest women.
   There are some bubbles in the acid vat. There are few
comparable companies for such a narrowly focused firm, but a
share price equivalent to 164 times forecast annual earnings,
per Refinitiv data, is well above that of Bloomage Biotechnology
 688363.SS , its biggest domestic rival. South Korea’s Humedix
 200670.KQ  trades at 20 times. On the other hand the company’s
plans to grow look smart as it plows money into developing more
dermal fillers and botox. This business model could age
beautifully.
    Follow @ywchen1 https://twitter.com/ywchen1 on Twitter
    
    CONTEXT NEWS
    - Shenzhen-listed Imeik Technology Development on April 27
reported a 228% rise in first quarter revenue to 259 million
yuan ($40 million). Adjusted net profit, excluding non-recurring
items, grew 303% year-on-year to 162 million yuan. 
    - For previous columns by the author, Reuters customers can
click on  CHEN/ 
 

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Imeik’s Q1 report (in Chinese)    http://www.cninfo.com.cn/new/disclosure/detail?stockCode=300896&announcementId=1209811227&orgId=9900035532&announcementTime=2021-04-27
Bloomberg story    https://www.bloomberg.com/news/articles/2021-01-05/how-beauty-boosting-shots-made-two-chinese-women-billionaires
BREAKINGVIEWS-Look past Chinese makeup IPO’s glossy sheen   
 urn:newsml:reuters.com:*:nL4N2HV0AW
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
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 ((yawen.chen@thomsonreuters.com; Reuters Messaging:
yawen.chen.thomsonreuters.com@reuters.net))