Domestic beauty giant's plan for a secondary Hong Kong listing has reached new developments.
On the evening of October 10, Proya Cosmetics Co.,Ltd. (Proya, 603605.SH) announced the resolution of its fourth board of directors' eighth meeting. The board approved the "Proposal on the Company's Issuance of H Shares and Listing on The Stock Exchange of Hong Kong Limited," which requires approval from the company's shareholders' meeting.
On August 26 this year, Proya Cosmetics Co.,Ltd. had already issued a preliminary announcement regarding plans to issue H shares and list on the Hong Kong Stock Exchange. At that time, the announcement stated that the company was discussing relevant work for this issuance with related intermediary institutions, and details of the issuance had not yet been determined. This issuance would not result in changes to the company's controlling shareholders and actual controllers.
Regarding the timing of issuance and listing, this announcement indicated that the board agrees the company will choose appropriate timing and issuance windows within the validity period of shareholders' resolutions to complete this listing. The issuance method will be Hong Kong public offering and international placement of new shares. The number of H shares to be issued shall not exceed 15% of the company's total share capital after this issuance (before exercising over-allotment options), with over-allotment rights of up to 15% of the aforementioned H share issuance granted to the overall coordinators. The H share issuance price will be determined through market-based pricing methods, considering the company's existing shareholders' interests, investor acceptance capacity, domestic and overseas capital markets, and issuance risks, determined jointly by the shareholders' meeting-authorized board and/or board-authorized persons and overall coordinators through market subscription conditions, roadshows, and bookbuilding results, following international practices.
The announcement also stated that the net proceeds from this listing, after deducting issuance expenses, will be used for (including but not limited to) research and development and product innovation, brand building and category expansion, intelligent manufacturing and supply chain capability enhancement, digitalization and AI capability building, global expansion, strategic pursuit of potential investment and acquisition opportunities, working capital, and general corporate purposes. Specific use and allocation plans for raised funds shall be subject to the final version of the company's official H share prospectus disclosure.
Regarding reasons for the proposed secondary Hong Kong listing, the aforementioned announcement indicated that based on the company's overall development strategy and operational needs, this aims to accelerate the company's internationalization strategy and overseas business development, enhance the company's overseas financing capabilities, and further improve the company's comprehensive competitiveness.
Proya Cosmetics Co.,Ltd. management also pointed out during investor communications in late August that the reasons for the proposed secondary Hong Kong listing are primarily based on the company's global expansion. Through Hong Kong stock listing, the company will receive more sufficient financial support for research and development investment, brand building, and overseas market expansion. Simultaneously, Hong Kong listing can provide more flexible methods and faster cooperation channels for overseas mergers and acquisitions, promoting successful future M&A cooperation. Furthermore, Hong Kong listing will significantly enhance the company's brand image and recognition in global markets, further attracting consumers and partners in the Asia-Pacific region, supporting overseas business operations, and accelerating the internationalization process of the company's various brands. Additionally, after Hong Kong listing, the introduction of international investors and long-term capital will enhance stock liquidity and provide shareholders with more diversified value returns.
Regarding shareholder returns, Proya Cosmetics Co.,Ltd. indicated in late August that it has maintained stable dividends of over 30% annually since listing. The 2025 interim dividend plan introduced this time raises the cash dividend ratio of attributable net profit to nearly 40%. Proya Cosmetics Co.,Ltd. noted that this year marks the inaugural year of the company's "Double Ten Strategy" and a new starting point for the company's revenue exceeding 10 billion yuan. The company will maintain excellent and sustainable dividends in the future.
Proya Group was established in 2003 and listed on the Shanghai Stock Exchange in November 2017. It owns well-known brands including Proya, CAITANG, and YUE FU TI, covering skincare, cosmetics, cleansing care, and high-efficacy skincare in the beauty sector. Since listing, revenue and net profit have grown year-over-year, continuously reaching historical highs. Last year, Proya Cosmetics Co.,Ltd. continued to be the most profitable domestic beauty company, becoming the first domestic beauty enterprise to join the "10 billion club." However, it should be noted that 2024 and H1 2025 performance faces challenges of slowing growth rates.
Specifically, in H1 2025, Proya Cosmetics Co.,Ltd. achieved revenue of 5.362 billion yuan, up 7.21% year-over-year, compared to 37.9% growth in the same period of 2024; attributable net profit reached 799 million yuan, up 13.80% year-over-year, compared to 40.48% growth in the same period of 2024; net cash flow from operating activities was 1.293 billion yuan, up 95.34% year-over-year. The company's gross margin in H1 2025 was 73.38%, up approximately 3.56 percentage points year-over-year, mainly due to significant results from cost reduction and efficiency improvement measures. This includes maintaining further increases in average order value amid intense market competition; declining shipping cost rates and optimization of promotional mechanisms; and improved negotiating power for raw materials and packaging materials procurement.
In terms of product strategy, Proya Cosmetics Co.,Ltd. began implementing a flagship product strategy in 2020. Ruby Cream and Early C Late A Essence quickly became category leaders and have maintained top positions for consecutive years. However, the Proya brand currently holds only slightly over 2% market share in China's skincare market. Compared to leading brands in mature international markets, the company still has enormous growth potential.
Generally speaking, compared to domestic brands, international beauty groups with longer establishment histories have obvious advantages in product matrices, especially in high-end categories. However, many international beauty groups have experienced negative growth in the Chinese market over the past two years. Previously, multiple foreign beauty groups stated in their interim reports that China's luxury skincare market is sluggish and faces development challenges. Domestic beauty groups have also welcomed new opportunities in recent years, with rapid market development.
Facing market deceleration and competition, Proya Cosmetics Co.,Ltd. indicated in late August that longevity and iteration are the company's primary strategies for continuous brand advancement and optimization. Category expansion of flagship product series also plays an important role in "customer acquisition + cross-selling." Compared to mature leading groups or brands, the Proya brand still has considerable category growth space. The company is currently expanding into categories such as whitening, oily skin renewal, and base makeup.
Regarding overseas expansion progress, Proya Cosmetics Co.,Ltd. indicated in previous communications that the company currently focuses primarily on Japanese and Southeast Asian markets for overseas expansion. In Japan, the Off&Relax series products have had sales history for some time with good overall performance and growth trends; in Southeast Asian markets, the company focuses on whether products match local consumers' skin needs and acceptable price ranges, with key consideration given to brands including YUE FU TI, which targets young oily skin and other skin concerns, matching well with Southeast Asian market demands.
As of October 10 closing, Proya Cosmetics Co.,Ltd. (603605.SH) closed at 80.36 yuan per share, up 0.34%, with year-to-date stock price down 3.75%.
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