Huayuan Securities: Maintaining Mao Geping's (01318) “Buy” Rating Company Issued Voluntary Announcement on Shareholder Reduction Plan

The Zhitong Finance App learned that Huayuan Securities released a research report saying that Mao Geping (01318), as a high-end domestic makeup brand, the founder's IP is deeply empowering the brand. The skincare & cosmetics category is growing steadily, and the offline & online advantages are remarkable. Currently, the brand potential is steadily improving, and the product matrix is still growing rapidly. It is optimistic that the company's IP brand value is scarce, channel endowment+ potential for subsequent growth. The future performance growth is highly certain and maintains a “buy” rating.

The main views of Huayuan Securities are as follows:

The company issued a voluntary announcement of shareholders' holdings reduction plan

The controlling shareholders and executive directors of the company, Mr. Mao Geping, Ms. Wang Liqun, executive directors Ms. Mao Niping, Mr. Wang Lihua, and Ms. Song Hongyi plan to reduce their total holdings by no more than 3.51% of the company's total issued shares within 6 months, mainly through bulk transactions. The use of the proceeds from the holdings reduction includes but is not limited to investment in the beauty-related industry chain, improvement of personal life, etc. The controlling shareholders and directors of the company are confident in the company's development. They will continue to work on the Group's product development, production and operation management, and strive to make outstanding contributions to the Group's brand value enhancement and performance growth. Furthermore, the company reduced its holdings in bulk, and the impact may be moderate.

The company recently signed a strategic cooperation framework agreement with LCatterton Asia Advisors (LVK)

According to the agreement, the two sides reached strategic cooperation intentions in global market expansion, acquisitions and strategic investment, further optimization of the capital structure, and talent introduction and governance. Luwei Kaiteng will use its global investment layout and strategic partner network to assist and empower the Group's brands to expand overseas high-end retail channels; the two sides plan to jointly establish an equity investment fund focusing on the global high-end beauty sector; and cooperate in capital structure optimization, talent introduction and governance. As the world's leading consumer investment institution, Luwei Kaiteng manages approximately US$39 billion in equity capital through three diversified product platforms: private equity, credit and real estate. The organization comprehensively lays out high-quality targets in the consumer sector, and has diversified investment capabilities covering the entire life cycle of an enterprise. The scale of a single investment can cover 5 million to 5 billion US dollars. Relying on deep industry insight, excellent operation management capabilities and an extensive strategic resource network in the global consumer industry, Luwei Kaiteng has deployed more than 200 investment and operation experts in 18 offices around the world and collaborated deeply with management teams to continue to create differentiated value for the investment portfolio. Since its establishment in 1989, Luwei Kaiteng has invested in more than 300 world-renowned consumer brands around the world.

Profit forecast: Based on the company's impressive sales performance in online and offline channels, the bank expects the company's net profit to be 12.1/15.8/2.03 billion yuan respectively in 2025-2027, an increase of 38%/30%/28% over the previous year.

Risk warning: Competition in the cosmetics industry increases risk; channel competition increases risk; new product incubation risk.