Makeup artist Mao Geping approaches billionaire ahead of Hong Kong IPO

Chinese makeup artist Mao Geping, who founded his eponymous cosmetics brand more than 20 years ago, is on the verge of becoming a billionaire as his company prepares for an initial public offering in Hong Kong that could value it at as much as $1.8 billion.

The 60-year-old company chairman has amassed a fortune of $830 million, according to Forbes estimates, largely from his family’s stake in Mao Geping Cosmetics Co. The company, based in scenic Hangzhou, is trying to raise up to $270 million by selling 70.6 million shares at HK$26.3 ($3.40) to HK$29.8 each, according to its prospectus.

At the higher price, HK$29.8, the company’s market capitalization would reach US$1.8 billion.

The prospectus stated that Mao Geping Cosmetics will use the proceeds to promote its brand, expand its sales network and expand overseas. The prospectus shows that six cornerstone investors, including private equity firms CPE Investment and Zhengxingu Capital, have agreed to purchase shares worth US$100 million. Trading is expected to begin on December 10.

The company did not respond to an emailed request for comment. Hwee Chung, a Shanghai-based research director for China’s beauty industry, said Mao, who worked at a local opera house for five years before launching her own cosmetics brand in 2000, now enjoys some advantages over high-end international rivals such as Estée Lauder and L’Oréal. .

She said the company’s products could be more suitable for Asian consumers’ skin. Mao Geping Cosmetics also followed the trendNest tide– This term loosely refers to consumers’ growing preference for local brands over foreign brands as they come to believe that domestic products are just as good.

“Before them [Chinese consumers] Don’t have much trust in Chinese brands,” Zhong said. “Now people believe that Chinese brands can provide what they want. Mao Geping can continue to deliver in terms of quality satisfaction and product innovation.

Mao herself provides makeup tutorials and tips on social media platforms such as Douyin, TikTok’s sister app in China. According to local media reports, the prospectus shows that the entrepreneur studied opera performance at Zhejiang Art Vocational College and received makeup-related training in his early 20s. Mao has used his company’s products to apply makeup to many Chinese celebrities and social media influencers over the years. He is so powerful, some netizens joked that Mao Zedong could do it Turn back– Make someone look completely different.

These selling points have translated into rapidly growing revenue. In the first six months of this year, the company’s revenue rose 41% year-on-year to nearly 2 billion yuan ($271 million). Net profit was 492.5 million yuan, an increase of 41% year-on-year. Maogeping Cosmetics relies on its high-end brands for more than 99% of its sales, but it also generates revenue from Love Keeps, a mass-market cosmetics brand launched in 2008.

Mao runs the company with his family. His wife and two sisters are shareholders and serve on the board of directors. The president is a senior executive named Song Hongquan, who, according to the prospectus, has no ties to the family.

Mao Geping Cosmetics tried to be listed on the mainland’s main board as early as 2016, but failed. Mainland China’s securities regulators have asked the company to reveal more information about its suppliers, shareholding structure and sales model. Earlier this year, Mao Geping Cosmetics withdrew its listing application in Shanghai. The company wrote in its prospectus that it chose Hong Kong in part because of the city’s direct access to international capital markets. The company said previous listing attempts would not adversely affect the Hong Kong IPO.

Mao Geping Cosmetics also faces challenges in other areas. Kenny Wu, a securities strategist at Everbright Securities International in Hong Kong, said that China’s economic downturn has comprehensively damaged consumption, and there is still uncertainty about whether the company can maintain rapid growth.

Competition is also fierce. Although Mao has successfully carved out a niche market, his brand will only account for 1.8% of China’s high-end beauty market in terms of retail sales by 2023, according to data cited in Frost & Sullivan’s prospectus. According to the prospectus, the top five brands – all international brands – collectively account for 32.1% of the market share. Mao Geping ranked seventh^th In terms of market share, its prospectus shows.

To survive such competition and achieve greater growth, companies must continue to attract consumers and invest in marketing, said Kantar Worldpanel’s Chung.

“Consumers have become more fickle than ever,” she said. “They’ve become more pragmatic and cautious about their choices about spending money. It’s very challenging.