Bloomage Bio (688363.SH), a giant in medical beauty, hit the brakes on its performance.
On August 30, Bloomage Bio released the 2023 semi-annual report. The financial report shows that Bloomage’s performance has experienced negative growth in net profit for the first time since its listing in 2019, and its revenue growth rate has also fallen into the predicament of the lowest value in previous mid-term reports since its listing.
Specifically, in the first half of 2023, Bloomage Biotech achieved operating income of 3.076 billion yuan, a year-on-year increase of 4.77%; net profit attributable to shareholders of listed companies was 425 million yuan, a year-on-year decrease of 10.27%; The profit was 361 million yuan, a year-on-year decrease of 12.69%.
What makes Bloomage Biotech even more critical is the “fleeing” of capital in the secondary market. Now Bloomage Biotech’s stock price is hovering around 92 yuan per share. As of the close on September 5, 2023, it was reported at 93.19 yuan per share, with a total market value of approximately 44.888 billion yuan.
In stark contrast, in July 2021, Huaxi Biotech hit a historical high of 313.48 yuan per share, with a market value of more than 140 billion. In just the past two years, it has fallen by more than 70% of its market value.
We can't help but ask, what's going on with this sweet pastry that once had the aura of "the first hyaluronic acid stock" to go public smoothly and was favored by capital? Can it turn the tide?
1. The core functional skin care business is under pressure in an all-round way
Bloomage Bio's main business covers four major business segments: bioactive material raw materials, medical terminals, functional skin care products, and functional food.
The financial report shows that in the first half of the year, Bloomage Biotech's raw material and medical terminal business revenue achieved double-digit growth. Among them, the company's raw material business realized revenue of 567 million yuan, a year-on-year increase of 23.20%; medical terminal business realized revenue of 489 million yuan, a year-on-year increase of 63.11%.
If you look at it further, "Beduo Finance" found that the net profit of Bloomage Biotech has dropped sharply this time, and the reason is directly related to the decline in revenue and gross profit margin of its core business of functional skin care products.
As we all know, with the continuous iteration of medical beauty technology, the medical beauty consumer market has hatched many explosive products under the innovation of major brands. At present, the popular mainstream products in the market are mainly functional skin care products. And this business has contributed more than 60% of Bloomage Bio's operating income throughout the year. The products mainly launched to the market include four core brands of Runbaiyan, Quady, Mibel and BM Muscle.
In the first half of the year, Bloomage Bio's functional skin care business achieved revenue of 1.966 billion yuan, a year-on-year decrease of 7.56%, and a gross profit margin of 4.35%. The revenues of Runbaiyan, Quady, Mibel, and BM Muscle were 632 million yuan, 543 million yuan, 217 million yuan, and 341 million yuan, respectively, corresponding to a year-on-year decrease of 2.04%, 10.10%, 16.81%, and 29.62%.
In fact, as the main product of medical beauty consumer products, every step of Bloomage Biotechnology’s advanced road is inseparable from the following set of strategies:
The first is to develop online and offline channels for Chongcang.
On the channel side, in order to expand market coverage, Bloomage Biotech has carried out a diversified channel layout, creating a new marketing model of traditional e-commerce + live broadcast interest e-commerce in the online market. In the offline market, we actively extended our cooperation with offline media, provided consumers with an immersive and scene-based experience, and continued to improve our marketing capabilities and user stickiness.
The second is to use a variety of promotional methods to amplify the volume.
Bloomage Bio has formed a marketing matrix of live broadcast, evaluation and soft articles on Xiaohongshu, Douyin, Weibo, WeChat and other platforms, combining content operation and live broadcast to speed up reaching core customers and forming sales transformation. With the output, Bloomage Biotech has accumulated many high-quality fans on major online official platforms. For example, searching for the topic "Bloomage Biotechnology" on the Douyin platform has as many as 470 million views.
2. Under the two major strategies, the pressure is doubled
However, the above set of strategies, reflected in financial indicators, obviously brought a lot of pressure to Bloomage Biotech.
First, the net cash flow from its investment and financing activities in the first half of the year was negative, resulting in a sharp drop in the balance of cash and cash equivalents at the end of the period.
The financial report shows that in the first half of this year, the net cash flow generated by Bloomage Bio's investment activities and financing activities was -184 million yuan and -385 million yuan respectively, which also means that the funds consumed by its investment and financing activities have long been much higher than those generated. the amount of income.
The interaction of the two indicators has directly affected the cash flow port of Bloomage Biotechnology. As of the end of June this year, its cash and cash equivalent balance dropped by 38.9% from 1.432 billion yuan in the same period last year to only 875 million yuan.
Obviously, such a situation is inseparable from the construction of online and offline channels of Bloomage Biological Heavy Warehouse mentioned above. We must know that for high-tech medical and aesthetic consumer products, it is the most important to create an integrated online and offline channel to ensure the effective supply of products. However, Bloomage Biotech has used such a large amount of funds to invest, but judging from the current performance growth, the effect is not obvious, and the revenue cycle will also be lengthened.
Second, high marketing costs.
In the first half of this year, Bloomage Bio's sales expenses were approximately 1.42 billion yuan, a year-on-year increase of 2.4%, accounting for 46.17% of the company's total revenue.
Looking at the timeline, from 2019 to 2022, its sales expenses are 521 million yuan, 1.099 billion yuan, 2.436 billion yuan, and 3.049 billion yuan, accounting for 27.65%, 41.75%, and 49.24% of total revenue. %, 47.95%, the two indicators are rising year by year. However, Aimec (300896.SZ) and Haohai Biotech (688366.SH), which are also known as the "Three Musketeers of Medical Beauty" along with Bloomage Biotech, have far lower sales expense ratios than Bloomage Biotech.
Especially compared with Amic’s annual sales expense rate of less than 10%, Bloomage Biotech obviously spends a lot of money on marketing.
Third, the extremely low investment in research and development does not match its own label of "light of domestic products".
Contrary to the ultra-high marketing investment, Bloomage Biotech's poor investment in R&D costs. From 2019 to 2022, Bloomage Bio's R&D expenses were 94 million yuan, 141 million yuan, 284 million yuan and 388 million yuan respectively, accounting for only 4.98%, 5.36%, 5.74% and 6.1% of revenue. In the first half of this year, its research and development expenses were 187 million yuan, and the research and development expense ratio has not yet broken through the double-digit mark, only 6.08%.
As we all know, unlike traditional industries, for the capital and technology-intensive medical aesthetics technology industry, R&D investment has become an important source of improving its continuous innovation ability and core competitiveness, and it is also an important driving force for the sustainable development of enterprises. It is not difficult to foresee that if Bloomage Bio has been advancing on the road of emphasizing marketing and ignoring research and development, it also means that it will lose market competitiveness over time, and the position of the industry leader is very likely to be faced by other high-product strength brands. catch up.
3. Under the market involution, high inventory is worthy of vigilance
Undoubtedly, with the rise of e-commerce platforms and social software live broadcasts, the medical beauty consumption track with functional skin care products as the core is becoming more and more introverted, from the initial technology innovation of products to the current price , The industry has spawned more and more companies to grab the market.
However, under the unfavorable situation where many new and old brands are making efforts at the same time, Bloomage Bio itself is facing great pressure to destock. From its recent high inventory, we can see the difficulties it is encountering.
In 2022, the inventory of Bloomage Biotech increased by 63.8% compared with the previous year, reaching 1.162 billion yuan; It is as high as 84.26% than the total inventory value.
The increase in the amount of inventories directly leads to an increase in its inventory depreciation reserves. As of the end of the second quarter, Bloomage Biotech had accrued a total of 22.0745 million yuan in inventory depreciation reserves. Among them, the provision for falling prices of inventories accounted for as high as 71.72%.
History has proved countless times that the increase in inventory is something worthy of vigilance, and inventory backlog is often the source of crisis outbreaks.
Bloomage Bio also highlighted this point in the semi-annual report, and expressed the risk of impairment caused by high inventory: "In the future, if the company's downstream customer demand and market competition pattern change, or the company cannot effectively expand Sales channels and inventory management optimization may lead to unsalable inventory, and the company may face the risk of inventory impairment, which will have a certain adverse impact on the company's operations."
In other words, under the expectation that the market will be highly competitive in the future, what Bloomage Bio has to do is to maintain an appropriate inventory level, maintain a high inventory turnover rate, or find a way to digest the external adverse factors as soon as possible. The problem of unsalable goods in stock, so as to absorb the risk of inventory price decline to the greatest extent.
4. Can opening up the second growth curve relieve worries?
Under the situation of domestic and foreign difficulties, Bloomage Biotech did not sit still, but sought to achieve breakthroughs in new incremental businesses outside the main business.
On the one hand, vigorously develop functional food business.
In fact, Bloomage Bio has launched the hyaluronic acid drinking water brand "Shuijiquan", the hyaluronic acid food brand "Black Zero" as early as 2021, and the GABA night health drink brand "Shuxiang Corner".
However, as the market continued to question, the discussion of "whether oral hyaluronic acid is an IQ tax" once became a hot topic. Affected by this, Bloomage Bio's functional food business began to decline. In the first half of this year, the business revenue was only 32.9133 million yuan, a decrease of 11.4525 million yuan from 44.3658 million yuan in the first half of 2022, a year-on-year decrease of 25.81%.
On the other hand, Bloomage Biotech's research and development focus has shifted to the direction of synthetic biology, hoping to further enhance market competitiveness.
According to statistics, the term "synthetic biology" was mentioned 87 times in Bloomage Bio's 2022 financial report, and 52 times in the first half of this year's financial report. Moreover, Zhao Yan, chairman of Bloomage Biotechnology, has repeatedly emphasized that Bloomage Biotechnology is a biotechnology company, not a pure cosmetics company, raw material company or medical beauty company, and has invested 2 billion yuan in the field of synthetic biology.
However, up to now, Bloomage Biotechnology has not released any products produced by synthetic biology technology, and only some raw materials are in the pilot test stage. There are still many bottlenecks to be overcome in order to become a leader in synthetic biology.
Judging from the actual results achieved so far, the two new directions of Bloomage Biotech's new efforts have still limited the improvement of performance. But in any case, this shows us its determination to face future reform and transformation, and it is worth looking forward to.