In the first year of reform, Bloomage Biotech (688363. SH) is going through a period of transformation.

According to the 2024 annual report released on April 10, during the reporting period, Bloomage Biotech recorded an operating income of 5.371 billion yuan, a year-on-year decrease of 11.61%; the net profit attributable to the parent company was 174 million yuan, a year-on-year decrease of 70.59%; recorded a net profit of 107.3 million yuan, a year-on-year decrease of 78.13%; The basic earnings per share in 2024 will be 0.36 yuan, compared with 1.23 yuan in the previous year, a year-on-year decrease of 70.73%.

This is the worst "report card" handed over by Bloomage Biotech since its listing. Compared with the data of previous years, both the net profit attributable to the parent company and the non-net profit deducted have hit the lowest level since the listing of Bloomage Biotech.

In response to the performance changes in 2024, Bloomage Biotech responded to Times Finance, saying, "During the reporting period, the company's performance was under short-term pressure, mainly affected by multiple factors such as the cost of management change, long-term strategic investment, the increase in forward-looking R&D expenses, innovative business investment, and consumer goods business adjustment. ”

Judging from the timeline, in 2023, Bloomage Biotech's performance will begin to decline, and the company will start reform in 2024. According to Bloomage Biotech's explanation to Times Finance, in 2024, the company will officially enter the first year of change, launching a number of reform projects including business process remodeling, organizational and talent reform, indicator and performance system reform, and promoting enterprise digital intelligence, and focusing on promoting the implementation of reform projects.

However, under the internal and external troubles, the market is concerned about whether this "scraping bones and curing poison" type of reform can work, how long the painful period of performance will last, and whether it can finally reverse the decline in performance and achieve a turnaround in adversity.

"Although management changes and strategic upgrades have brought short-term performance pressure, in the long run, these initiatives will bring more room for the company to grow." Bloomage Biotech told Times Finance.

Functional skincare business revenue continues to decline, and the business unit has been renamed

Bloomage Biotech was founded in 2000 and listed on the A-share market in 2019. In the early years, Bloomage Biotech made its fortune with hyaluronic acid raw material business, and its founder Zhao Yan was once known as the "Queen of Hyaluronic Acid", and with the development of the business system, the company gradually expanded the functional skin care products and medical terminal business, and functional skin care products gradually replaced the raw material business and became the main sector supporting revenue, helping Bloomage Biotech to enter the peak of performance.

However, this help did not last long. In the 2024 annual report, Bloomage Biotech once again mentioned the negative impact of the year-on-year decline in the performance of functional skin care products when explaining the reasons for the decline in performance.

According to the financial report data, in 2024, the functional skin care products business will record revenue of 2.569 billion yuan, a year-on-year decrease of 31.62%, accounting for 47.92% of Bloomage Biotech's main business income. This is the second consecutive year of significant decline in the functional skincare business.

According to the financial report data of previous years, in 2020, the functional skin care products business surpassed the raw material business of 703 million yuan with 1.346 billion yuan, becoming the segment with the largest revenue of Bloomage Biotech, and continued to record rapid growth, reaching a peak of 4.607 billion yuan in 2022.

In terms of gross profit margin, from 2019 to 2024, the gross profit margin of Bloomage Biotech's functional skin care products business reached 81.89% at its peak, which was in 2020, and since then, the gross profit margin has declined year by year, reaching 72.80% in 2024.

In the 2024 annual report, Bloomage Biotech explained that the consumer goods-related business is affected by various factors such as intensified market competition, industrial cycle fluctuations and strategic adjustments.

Times Finance paid attention to the fact that around June 2024, the former manager of Bloomage Biotech's sub-brand Quadi (Cheng Fei) posted videos on Douyin and Xiaohongshu saying that he had suffered workplace bullying and cyberbullying, and had sued Bloomage Biotech for "reputation rights infringement". The matter continued to ferment for several days, and Bloomage Biotech issued a statement on the evening of June 26 of the same year, saying that the relevant people speculated on personal IP and had fully grasped all the facts of the relevant individuals' infringement of intellectual property rights, violation of non-compete agreements, and illegal arbitrage of economic interests, which will definitely safeguard the rights and interests of investors and the normal order of the market.

According to the annual report, Quadi is an important brand in Bloomage Biotech's functional skin care business. According to the financial report data, at the peak of 2022, the Quadi brand contributed 1.368 billion yuan.

In 2023, Bloomage Biotech proposed to take the initiative to make phased adjustments to the major brands of functional skin care products, and Times Finance paid attention to the fact that from this year, Bloomage Biotech will no longer disclose the revenue data of specific brands in the functional skin care products business.

In the 2024 annual report, Bloomage Biotech officially renamed its functional skin care products business as Skin Science Innovation and Transformation Business, and mentioned that it had renamed the "Personal Health Consumer Products Business Line" to "Skin Science Innovation and Transformation Business Line".

Regarding the above adjustments, Bloomage Biotech told Times Finance, "(This) means that Bloomage Biotech will focus its business on the field of skin science more precisely, and is committed to transforming cutting-edge biotechnology research results into practical and effective skin care products." Zhao Yan, general manager of the company, went deep into the front line of business, reorganized the brand positioning and scientific research foundation of some brands, and clarified the direction of brand development. ”

According to Bloomage Biotech, the specific adjustments include upgrading the product system of the brand and deepening the category system with large single products as the core; Continuously develop and iterate team capabilities, and cultivate entrepreneurial teams that are in line with the company's values and scientific and technological beliefs.

From the perspective of revenue, in addition to functional skin care products, as of the disclosure of the 2024 annual report, Bloomage Biotech also has raw material products, medical terminal products and other businesses, and other businesses account for a small proportion of revenue.

Functional skincare was the only sector to see a decline, which is in line with the trend in the 2023 annual report. According to the financial report data, in 2024, raw material products and medical terminal products will record revenue of 1.236 billion yuan and 1.440 billion yuan respectively, a year-on-year increase of 9.47% and 32.03%, accounting for 23.06% and 26.85% of the company's main business income respectively, and the gross profit margin during the period will be 65.57% and 84.37% respectively, a year-on-year increase of 0.86% and 2.27%.

According to the annual report, the raw materials business mainly relies on the sales of hyaluronic acid and other new ingredient raw materials. In the composition of performance, Bloomage Biotech divides it into domestic and foreign market revenue. The annual report shows that in 2024, the sales revenue of raw materials in the domestic and international markets will increase, of which the revenue of raw materials in the international market will be 608 million yuan, a year-on-year increase of 17.65%, accounting for 49.19% of the company's raw material business sales revenue, of which the sales revenue in the Americas, Europe, Southeast Asia and other places will continue to grow, with a year-on-year increase of more than 20%.

In terms of medical terminal products, Bloomage Biotech mentioned in its annual report that in 2024, the transformation effect of the company's medical aesthetic business will be significantly highlighted, and during the reporting period, skin medical products will achieve revenue of 1.073 billion yuan, a year-on-year increase of 43.57%. Among them, the company's differentiated and advantageous category micro-cross-linked Runzhi doll needle revenue increased by more than 100% year-on-year, and Runzhi filler revenue increased by more than 30% year-on-year.

The inventory scale exceeded 1.2 billion yuan, and the executive compensation rose "against the trend

What is the reason behind the decline in net profit of more than 70% is still the focus of the market's attention on Bloomage Biotech.

In the 2024 annual report, Bloomage Biotech clearly mentioned some specific reasons that affect the net profit data. In terms of investment, the company increased long-term, strategic and front-loaded investment, including promoting the transformation of the supply chain, improving production efficiency and intelligence, and implementing the production capacity layout of Haikou, Tianjin, Dongying, Xiangtan, etc., and increasing related expenses by more than 100 million yuan; invested more than 100 million yuan in strategic innovation business; In addition, in 2024, Bloomage Biotech's R&D investment will be 466 million yuan, a year-on-year increase of 4.46%, and R&D investment will account for about 8.68% of revenue.

In addition to the above-mentioned investments, other aspects that affect profit and loss include: in 2024, Bloomage Biotech will conduct impairment tests on assets such as accounts receivable, inventory, and goodwill, and make a large impairment provision of about 189 million yuan for related assets with signs of impairment, and more than 70 million yuan due to the upgrading of the organizational structure of management changes, salary system reforms, consulting company fees and equity incentive expenses, etc., which will affect short-term profits and losses; The government subsidy included in profit or loss for the current period will be reduced from $126 million in 2023 to $66 million in 2024.

As of the end of 2024, the book value of Bloomage Biotech's inventory is 1.248 billion yuan.

Times Finance paid attention to the fact that in 2024, Bloomage Biotech's hyaluronic acid raw materials (excluding derivatives), medical terminal products - injection products and skin science innovation and transformation business - disposable stock solution will all produce more than sell, and the inventory of these three types of products will be 349.76 (tons), 287.97 (10,000 pieces), and 24513.58 (10,000 pieces), a year-on-year increase of 8.53%, 34.18%, and 2.08% respectively.

In this regard, Bloomage Biotech told Times Finance, "The management reform is being optimized for production and marketing synergy, and it has initially produced results, and the company's inventory level is gradually declining." ”

As for the above-mentioned reform-related expenses of more than 70 million yuan, Times Finance paid attention to the fact that in 2024, the total salary of directors, supervisors, senior executives and core technical personnel will increase from 25.4343 million yuan to 43.5502 million yuan, and the salary of individual executives will increase by more than 5 million yuan.

Regarding the salary change, Bloomage Biotech only responded to Times Finance that the company is committed to creating a reasonable salary system, which will help improve the stability and enthusiasm of the team and promote the realization of the company's long-term strategic goals.

The 2024 annual report shows that in 2024, the total number of employees of Bloomage Biotech will be 4,444, and the number in 2023 will be 4,655, a year-on-year decrease of 211. In the full text of Zhao Yan's internal speech released by Bloomage Biotech in March this year, Zhao Yan clearly mentioned that it is necessary to strictly build a team, govern the organization, return to an entrepreneurial organization, and all corrupt personnel, regardless of their positions, explain their problems and submit their resignations within a limited time.

This change is still continuing, and how Bloomage Biotech will develop still affects the heart of the market.

Looking back on the development of the past few years, hyaluronic acid has supported Bloomage Biotech to write a high-growth myth, and Zhao Yan was once known as the queen of hyaluronic acid, but the times are moving forward, whether it is in the field of hyaluronic acid or such as collagen new ingredient track, new competitors are constantly emerging, and whether they can achieve self-help through reform is still a question mark.

In the full text of the above speech, Zhao Yan mentioned that at present, Bloomage Biotech has not yet come out of the crisis, and this crisis is not because of the decline in performance, but because the entropy increase of the existing organization far exceeds the speed allowed in this era, and it has come to the time when it must be rectified; In view of the relaxed atmosphere before the management of the enterprise, there are many internal problems.

In the fourth quarter of 2024, Bloomage Biotech was reduced by the company's second largest shareholder, China Life Chengda (Shanghai) Health Industry Equity Investment Center (Limited Partnership) (hereinafter referred to as "China Life Chengda"). According to the announcement, China Life Chengda intends to reduce its stake in Bloomage Biotech by no more than 2.5% from October 31, 2024 to January 28, 2025. As of January 28, 2025, the time period for this reduction has expired, and China Life Chengda has reduced its holdings by a total of 5,496,800 shares, accounting for 1.14% of Bloomage Biotech's total share capital, and cashed out 341 million yuan.

In this regard, Bloomage Biotech explained to Times Finance, "Since the listing of Bloomage Biotech, China Life Chengda has not reduced its shareholdings, and the holding period is close to 6 years. China Life Chengda's reduction is based on its own capital needs and market conditions. ”