On November 30, Bloomage Biotech (688363. SH) announced that it will hold a third-quarter 2024 results briefing on December 9. In the face of the company's "worst report card" handed over again in the third quarter, Bloomage Biotech's senior management should indeed give some explanations to the majority of investors.

In the secondary market, a few days ago, China Securities Index announced that it would remove Bloomage Biotech from the composition of the CSI 300 Index, and the adjustment plan will take effect after the market closes on December 13. As we all know, the CSI 300 Index is composed of the 300 most representative securities in the Shanghai and Shenzhen markets with large scale, good liquidity and active trading. Bloomage Biotech was excluded from the CSI 300 Index, and the meaning behind this is self-evident.

The performance continued to decline and was excluded from the CSI 300 index, and the major shareholders of Bloomage Biotech did not "share weal and woe" with it in this situation, and continued to reduce their holdings on a large scale in the fourth quarter of this year, which also exacerbated the uncertainty of the market. Especially after the announcement of the shareholding reduction plan of the second shareholder China Life Chengda, the restricted shares of the original shareholders with a market value of about 17 billion yuan were lifted, and the share price of Bloomage Biotech fell significantly, and the market value evaporated more than 100 billion yuan.

There is no worst, only worse

According to public information, Bloomage Biotech was established in 2000 and was officially listed on the A-share market on November 6, 2019 by virtue of its technical advantages of "one of the earliest enterprises in China to produce hyaluronic acid by fermentation" and the industrial advantages of "the only enterprise in China that has the approval number for the production of sodium hyaluronate APIs and pharmaceutical excipients by fermentation and realizes commercial production". After that, taking advantage of the east wind of medical cosmetology, the market value once exceeded 100 billion yuan.

However, in recent years, with the rise of competing collagen products and changes in the overall environment of the industry, the growth of Bloomage Biotech has gradually lost its support.

On October 30, 2024, Bloomage Biotech disclosed the third quarter report of 2024, the company's revenue in the first three quarters was 3.875 billion yuan, a year-on-year decrease of 8.21%; The net profit was 359 million yuan, a year-on-year decrease of 29.09%. In particular, the revenue in the third quarter was 1.064 billion yuan, a year-on-year decrease of 7.14%; The net profit was 18.5457 million yuan, a year-on-year decrease of 78.31%.

It is worth noting that the decline in revenue and profit of Bloomage Biotech has begun to appear since the third quarter of 2022, and it has been two consecutive years, and the net profit of Bloomage Biotech in a single quarter in the third quarter of this year has seen the largest decline in history. The 2023 annual report was already known as the "worst report card" in the market at that time, and now Bloomage Biotech has handed over an even worse report card again.

As the former "medical beauty mao" and "first stock of hyaluronic acid", Bloomage Biotech's performance is also relatively sluggish compared with comparable companies in the same industry.

According to the classification of Shenwan's secondary industry (2021), in the category of beauty care - medical cosmetology, Bloomage Biotech's comparable listed companies include Jinbo Biotech (832982. BJ) and Aimec (300896.SZ). According to the company's third quarter report data in 2024, Jinbo Biotech has an operating income of 988 million yuan and a net profit of 520 million yuan, and Aimeike's operating income is 2.376 billion yuan and a net profit of 1.585 billion yuan, and the revenue and net profit of both companies have increased. In contrast, Bloomage Biotech, as a leader in medical cosmetology, has seen a worrying decline in revenue and net profit.

It is true that at present, the overall industry competition is becoming increasingly fierce and gradually entering the integration cycle, but it is also an indisputable fact that Bloomage Biotech is not performing as well as comparable peers.

According to the data of the third quarter report of 2024, the gross sales margin of Bloomage Biotech is 73.93%, and the net profit margin of sales is 9.27%; Jinbo Biotech's gross sales margin was 92.37%, and the net sales margin was 52.50%; Aimeike's gross profit margin was 94.80%, and the net profit margin was 66.73%; The industry average data are 77.72% and 29.54% respectively. It can be seen that the current profitability of Bloomage Biotech is not only lower than the data of comparable peers, but also significantly lower than the industry average (overall method).

The "second growth curve" that is hard to buy

In 2021, Zhao Yan, the founder of Bloomage Biotech, also ranked among the top ten on the Hurun Female Entrepreneur List with a net worth of 56.5 billion yuan, and was once known as the "Queen of Hyaluronic Acid" by the outside world. Indeed, hyaluronic acid-related functional skin care products have supported the "façade" of Bloomage Biotech. According to the 2022 annual report, functional skin care products contributed 72.45% of the total operating income and 73.75% of the total profit.

However, the functional skin care products business that once drove the rapid growth of Bloomage Biotech is now growing sluggishly, and the overall performance is no longer prosperous.

According to Bloomage Biotech's interim reports over the years, from 2022 to 2024, the operating income contributed by functional skin care products will be 2.127 billion yuan, 1.966 billion yuan, and 1.381 billion yuan respectively, with year-on-year growth rates of 77.17%, -7.56%, and -29.74% respectively. The operating income in the same period was 2.935 billion yuan, 3.076 billion yuan and 2.811 billion yuan respectively, with a year-on-year growth rate of 51.58%, 4.77% and -8.61% respectively. It can be seen that the functional skin care products business has a significant effect on the overall performance, whether positive or negative.

While the first growth curve is flattening, the second growth curve has not yet appeared.

It's not that Bloomage Biotech doesn't know how to explore new directions. As early as 2015, Bloomage Biotech tried to enter the field of botulinum toxin through cooperation with Medytox, a South Korean botulinum toxin research and development company. Bloomage Biotech established a joint venture company in Hong Kong, China, and has successively invested nearly 100 million Hong Kong dollars.

But in the end, it was helpless to fail due to the explosion of Medytox. On September 5, 2023, Bloomage Biotech issued the "Announcement on the Signing of the Termination Agreement between the Holding Subsidiary and Medytox and the Follow-up Progress of the Investment in Medybloom", officially announcing that it has terminated the joint venture agreement and exclusive agency agreement with Medytox. The plan for botulinum toxin to become the growth direction of the second curve ultimately fell through.

In 2022, Bloomage Biotech will set foot in the collagen industry through the acquisition of Yierkang Biotech. In September 2022, Zhao Yan, chairman of Bloomage Biotech, attended the collagen product launch conference and said, "We want to make collagen the second strategic bioactive after hyaluronic acid." However, founder Zhao Yan is skeptical of collagen, "Collagen is used in skin care products, that is a concept. ”

At present, the medical terminal products business is gaining momentum, but the impact on the overall business is limited. According to the 2023 and 2024 interim reports, the year-on-year growth rates of Bloomage Biotech's medical terminal product business contributed revenue of 63.11% and 51.92% respectively, but its proportion in total revenue was 35.45% and 26.43% respectively.

"Organizational management change" that still takes time

In the face of sluggish performance, the diagnosis and prescription given by Bloomage Biotech is organizational management change. In its 2023 annual report, Bloomage Biotech said that "the company's rapid growth is under pressure, mainly due to the rapid growth of its business in the past, which has caused internal organization and management to lag behind the development speed of the business", and said that it would take the initiative to get rid of path dependence and promote the company's comprehensive management reform.

On October 17 this year, Bloomage Biotech's official Weibo released a "Letter to Everyone", which mentioned that "Bloomage Biotech is experiencing an unprecedented organizational management change" and announced that it had hired a world-renowned IBM management consulting team to "conduct a comprehensive investigation and system diagnosis of the company in 4 months" and "release 48 change projects". The letter also mentioned that "in 2024, Bloomage Biotech will enter the 'first year of change'". Now that the end of 2024 is approaching, what is the effect of Bloomage Biotech's transformation?

Analyzing the financial report, it can be clearly seen that Bloomage Biotech has changed its internal resource allocation structure.

From the third quarter of 2021 to the third quarter of 2024, the sales expense ratio will be 46.53%, 46.40%, 45.58%, and 42.53% respectively, although it has decreased, it is still much higher than the sales expense ratio of 8.66% of Aimeike; The management expense ratio of Bloomage Biotech continued to grow, which was 6.93%, 7.07%, 9.97% and 16.59% respectively, increasing in turn; The R&D expense ratios were 7.93%, 7.06%, 7.89%, and 10.58%, respectively, and the overall trend was also upward.

Bloomage Biotech hopes to change the strategy of heavy marketing in the past, and the intention to reform the internal organization and management is quite obvious. However, this did not happen overnight.

In terms of the structure of researchers, although the number of R&D personnel has continued to increase in recent years, the overall structure of the current cost use has not changed, and the gap between the current R&D investment intensity and sales expense investment of Bloomage Biotech is still obvious.

Whether it's the second growth curve or internal organizational reforms, it will take time to see results, but time waits for no one.

Under the pressure of lifting the ban, the two shareholders reduced their holdings and "ran away".

The performance continued to decline, and the reform has not yet taken effect, but the shareholders of Bloomage Biotech have started the shareholding reduction plan early. On October 9, Bloomage Biotech issued an announcement on the shareholding reduction plan of the shareholder China Life Chengda (Shanghai) Health Industry Equity Investment Center (Limited Partnership), which shows that China Life Chengda will reduce its holdings of no more than 2.50% of the total share capital through centralized bidding and block trading from October 31, 2024 to January 28, 2025; Before the reduction, China Life Chengda held 7.15% of the company's total share capital. This is also the first time that China Life Chengda has reduced its stake in the latter since the listing of Bloomage Biotech.

As soon as the announcement was released, the market reacted immediately, and the previous upward trend was reversed, falling for 4 consecutive days. As of December 5, Bloomage Biotech's share price closed at 57.70 yuan/share, with a total market value of 27.79 billion yuan, compared with 313.10 yuan/share at the highest point, and the market value has shrunk by more than 100 billion yuan.

According to the "Reminder Announcement of Bloomage Biotech on Reducing the Shareholding of Shareholders Holding More than 5% to 1%" issued by Bloomage Biotech on November 12, from October 31 to November 11, China Life Chengda reduced its holdings by 1% and reduced its holdings of 4.8168 million shares of the company. If calculated at the closing price of 65.51 yuan per share on November 11, China Life Chengda has reduced its holdings and cashed out 3.155 billion yuan during the period.

It is worth noting that on November 6, Bloomage Biotech ushered in the lifting of the restricted shares of the original shareholders for the first time, with 284 million shares being lifted this time, accounting for 143.05% of the outstanding shares before the lifting of the ban, 58.86% of the outstanding shares after the lifting of the ban, and 58.86% of the total share capital. From the perspective of market capitalization, the market value of the shares lifted this time is about 17 billion yuan.

After the ban was lifted, the market's reaction to Bloomage Biotech was more complicated. On the one hand, due to the relatively high proportion of shares lifted, there is widespread concern that this may put pressure on stock prices, especially if the company is underperforming. The reduction of the company's second largest shareholder, China Life Chengda, has further damaged the confidence of the market.

Although shareholders did not explicitly state their plans to reduce their holdings, market sentiment was still negatively affected, and the stock price fell to a certain extent after the announcement. In the face of such a large-scale lifting of restrictions, investors need to remain cautious and pay attention to the company's fundamental changes and market sentiment fluctuations. (Produced by Money Weekly).