IPO Details:

The subscription period for the IPO ran from December 2 to December 5, 2024, with shares allocated in lots of 100. The indicative price range was set between HKD 26.30 and HKD 29.80 per share.

Premium Beauty Brand MAO GEPING Subscription Amt $60B+, Ranking 4th in 2024 IPO Subscriptions

The cosmetics company in Mainland China, MAO GEPING (01318.HK), intends to raise US$270 million at the upper limit of the offer price range, Reuters reported, citing people with the knowledge of the matter.

MAO GEPING plans to issue more than 70.58 million H shares, of which 10% will be offered in Hong Kong, with an offer price ranging from $26.3 to $29.

The entry fee of each board lot (100 shares) is about $3,010. The public offering will close at noon today (5th), and the company plans to have its shares listed and traded starting next Tuesday (10th).

Futu Securities International (Hong Kong) said that the IPO of MAO GEPING (01318.HK) in Hong Kong has been overwhelmingly received, with a total subscription amount of $90.5 billion recorded on Futu’s platform, which was the highest in the history of IPO on the platform.

Futu Securities said that the record high subscription amount for MAO GEPING reflected the renewed enthusiasm of investors for popular IPOs.

According to market news, brokers lent margin of $147.7 billion, representing an oversubscription of more than 702 times, surpassing CR BEVERAGE (02460.HK) -0.360 (-2.871%) to become this year’s “King of Frozen Capital”.

MAO GEPING (01318.HK) launched its IPO on December 2, and its subscription amount reached $63.168 billion as of noon today. The company currently ranks fourth in this year’s IPO subscriptions, trailing behind CR BEVERAGE (02460.HK) -0.360 (-2.871%) with $99.229 billion, CAROTE LTD (02549.HK) -0.040 (-0.735%) with $79.891 billion, and APT ELECTRONICS (02551.HK) -0.070 (-1.877%) with $63.896 billion.

Background
Mao Geping Cosmetics Co., Ltd., founded in 2000 by renowned Chinese makeup artist Mr. Mao Geping, is a leading premium beauty group in China. The company is set to list on the Hong Kong Stock Exchange under the ticker 01318.HK, with trading expected to commence on December 10, 2024.

Business Model and Industry: Mao Geping operates primarily through two beauty brands: its flagship MAOGEPING and Love Keeps, offering a portfolio of color cosmetics and skincare products. In 2023, the company held a 1.8% market share in China’s premium beauty segment, ranking seventh among the top ten premium beauty groups.

Financial Health:
In the first half of 2024, Mao Geping reported revenues of approximately 1.97 billion yuan (USD 272 million), a 41% increase from the same period in the previous year. Net profit for the same period rose to 492.5 million yuan, up from 349.3 million yuan, indicating strong financial growth.

The company is the only domestic player among China’s top ten premium beauty groups. As of June 30, 2024, it operated 372 self-operated counters nationwide, the second-largest network among all beauty brands in China.

Sector Trends:
China’s beauty market was valued at approximately 579.8 billion yuan in 2023, with the premium segment accounting for 194.2 billion yuan. The premium beauty sector has been growing faster than the mass market, indicating strong underlying demand.

Despite China’s slowing economy, the premium beauty segment continues to show resilience, driven by increasing consumer demand for high-quality domestic brands.

Mao Geping’s IPO marks the first share listing by a Chinese beauty brand in Hong Kong, highlighting the rising prominence of domestic beauty brands in the global market.

Risk Factors: Potential risks include reliance on the reputation of Mr. Mao Geping, competition within the premium beauty market, and economic fluctuations affecting consumer spending.

Growth Strategy: The company aims to expand its sales network, enhance branding, pursue overseas expansion, and strengthen its production and R&D capabilities, indicating a focus on long-term growth.

Peer Comparison

It’s noted that price-to-sales (P/S) ratios for cosmetics providers vary widely, with domestic peers like Yatsen Holding and Shanghai Chicmax having P/S ratios of 0.61 and 1.91, respectively, while global giant L’Oréal has a P/S ratio of 4.23.

IPOs in the Same Period

Other companies that have filed for Hong Kong listings around the same time include data intelligence software firm Leading Smart Holdings and private dental service provider Wuhan Dazhong Dental Medical.

Sponsor details:
The sole sponsor for the IPO is China International Capital Corporation Hong Kong Securities Limited (CICC). Other underwriters include China Galaxy International Securities (Hong Kong) Co., Limited, Huatai Financial Holdings (Hong Kong) Limited, and Guotai Junan Securities (Hong Kong) Limited.

The involvement of these reputable institutions suggests a positive outlook for the IPO’s performance on the first day of listing.

The relatively moderate size of the IPO aligns with the company’s growth-focused plans and may lead to a favorable supply-demand dynamic on the listing day, potentially boosting the stock’s debut performance.

Based on strong financials and the premium beauty sector’s growth trajectory, the IPO is expected to attract significant interest. Subscription levels are likely to be robust, particularly from retail investors, given the cultural resonance of Mao Geping in China.

Considering peer performance and the company’s market position, Mao Geping’s shares may trade within the range of HKD 32 to HKD 36 on the first day, representing a 10%-20% premium over the top end of the IPO price range (HKD 29.80). The stock is likely to trade strongly above the IPO price given the demand in the premium beauty sector.

Investors can download the prospectus for Mao Geping’s IPO from the Hong Kong Stock Exchange’s official website or the company’s dedicated IPO page. The HKEX website for IPO documents is typically: www.hkex.com.hk.

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