21st Century Business Herald reporter Lei Chen reported from Beijing
As "China's largest producer of hyaluronic acid", Bloomage Bio (688363. SH) has been in the spotlight since its listing on the Star Market in 2019. A few days ago, Bloomage Bio released its 2021 annual report, which caused heated discussion in the market, although revenue and net profit both achieved growth, but the surge in sales expenses and other issues were placed under the spotlight.
On the afternoon of March 14, at the performance communication meeting of Bloomage Biologics, on the issue of cost-related issues, Zhao Yan, chairman and general manager of Bloomage Biologics, told many media such as 21st Century Business Herald that in the initial construction of the brand, the investment is relatively large, but with the gradual maturity of brand building, the expense rate is gradually reduced.
Taking Runbaiyan, one of the four major brands in the functional skin care business, as an example, Zhao Yan said that the sales expenses of Runbaiyan in 2021 have decreased compared with 2020, and will enter a benign development period by 2023, and the revenue and profit will gradually be proportional.
Net profit margin on sales hit a near six-year low
According to the annual report, Bloomage Bio has raw material products in the three major application fields of medicine, cosmetics and food, as well as multi-field and multi-pipeline medical terminal products and functional skin care products in orthopedics, ophthalmology, plastic surgery and other fields, opening up the whole industrial chain from upstream raw material products to downstream terminal products.
In 2021, Bloomage Achieved Operating Income of RMB4.948 Billion, an increase of 87.93% year-on-year; Net Profit Attributable to Shareholders of Listed Companies was RMB782 Million, an increase of 21.13% year-on-year; Excluding the impact of share payments, net profit attributable to shareholders of listed companies was RMB868 million, an increase of 34.33% year-on-year.
For the problem that the profit growth rate is not as fast as the revenue growth rate, Bloomage Bio explained in the annual report that this mainly comes from the company's adherence to long-term doctrine and attaches great importance to the strategic investment required for long-term sustainable development. "Strategic investment does not contribute much to short-term performance, but it is of great significance for the company to broaden the moat, continuously consolidate core competitiveness, continuously expand the leading edge, and obtain new strategic opportunities, and will gradually produce a direct contribution to the operation in the next 2-5 years."
It is worth mentioning that Bloomage's functional skin care products achieved revenue of 3.319 billion yuan, an increase of 146.57% year-on-year, becoming the main source of the company's revenue. Behind this eye-catching "report card", the increase in sales investment in the process of brand building is an important reason.
Bloomage Biotech said in its annual report that due to the continuous increase in the proportion of functional skin care business revenue in the company's overall business revenue, while the company has increased strategic investment in brand building, channel construction and the introduction of key talents, the company's expense ratio has increased to a certain extent.
In this regard, Bloomage Bio said that although the company will actively introduce a series of measures to strengthen rate control, the net profit margin of the company's overall business may still decline.
The 21st Century Business Herald reporter analyzed the net profit margin of Bloomage Bio's sales and found that the company's net profit margin on sales in 2021 was 15.67%, a new low in the past six years. From 2016 to 2020, the company's net profit margin on sales was 36.75%, 27.17%, 33.56%, 31% and 24.5% respectively.
(Picture: The company's net profit margin on sales in the past six years Source: Wind)
It is understood that the net profit margin of sales is the percentage of net profit to sales revenue, reflecting the amount of net profit brought by each yuan of sales revenue, reflecting the income level of sales revenue. Industry insiders believe that the decline in net profit margin on sales indicates that sales expenses are "eroding" net profits.
Moreover, compared with comparable listed companies in the same industry, Bloomage Bio's sales expense revenue accounted for a high proportion of 49.24%.
The annual report shows that in 2021, aimek (300896. SZ) was a selling expense of $156 million, representing 10.81% of revenue for the same period. In 2020, Hao Hai bioaceae (688366. SH) was 556 million yuan, accounting for 41.71% of revenue; Shanghai Jahwa (600315. SH) sales expenses of 2.924 billion yuan, accounting for 41.58% of revenue.
So, where did Bloomage's sales expenses go?
According to the annual report, in 2021, Bloomage Bio's sales expenses were 2.436 billion yuan, an increase of 121.62% year-on-year. Among them, online promotion service fees accounted for 53.91%, employee salaries accounted for 18.92%, advertising fees accounted for 11.05%, market development fees accounted for 8.76%, and other projects accounted for less than 2%.
Further, in 2021, Bloomage Bio not only increased the promotion of various e-commerce platforms such as Tmall and Douyin, but also promoted through new media marketing methods (such as live broadcasting, short videos, search engines, social media, etc.), resulting in a significant increase in the cost of online promotion services.
In terms of offline promotion, Bloomage Bio promoted its brand concept and image through offline promotion forms such as cooperation with Focus Media and other media companies, participation in exhibitions, and holding events, resulting in an increase in advertising and publicity fees and market development fees.
In addition, Bloomage Bio also said that in 2021, in order to meet the company's sales business expansion needs, the increase in sales staff led to an increase in employee compensation and an increase in sales staff performance incentives.
Adhere to the brand's "long-termism"
"We emphasize that all of them must eventually return to the product and brand, and the brand must have a long-term proposition, so we will position each brand differently in the development process, the development stage is different, and the investment in brand building is not the same." Zhao Yan said.
According to the annual report, in the functional skin care products business sector, Bloomage Bio mainly has four major brands: Runbaiyan, Quadi, Mibel and BM Muscle Activity.
According to Zhao Yan, "the criterion for defining a brand to enter the first year is that the sales revenue reaches the order of 500 million yuan, because there is no certain customer base to do brand building, and the effect is not good." "When Bloomage Bio formulates a brand strategy for each brand, it takes three years as a basic construction cycle for brand building.
According to the definition of Bloomage Biology, 2020 is the first year of the brand of Runbaiyan, 2021 is the first year of the brand of Quadi, and this year, Mibel and BM Muscle Work have successively entered the first year of the brand. From the perspective of revenue growth, BM Muscle Vitality achieved revenue in 2021 increased by 286.21% year-on-year, and the remaining three brands also doubled their revenue.
According to Zhao Yan, "Runbaiyan's sales expenses in 2021 have decreased compared with 2020, which is a benign trend." This year has entered the third year of its brand building, and by 2023, it should enter a period of benign development, and revenue and profit should be gradually proportional. ”
Zhao Yan believes that brand building should adhere to long-term doctrine, not only short-term benefits, only brands can bring compound interest to the sustainable development of an enterprise, so it is necessary to increase investment in basic capabilities.
She also pointed out that at the end of the new business layout, it is necessary to take into account the company's development in the next 5 years, 10 years, or even longer, so the basic investment in the research and development end is carried out in advance, and the investment in synthetic biology is increased. On the market side, Bloomage Biotech also has a layout in new business areas such as functional food, maternal and infant, and washing and nursing. At the same time, the company has built the world's largest pilot conversion platform to open up production, education and research.
The 21st Century Business Herald reporter noted that in bloomage's annual report, there is actually no shortage of surprises brought about by research and development investment.
In 2021, the company's R&D investment was 284 million yuan, an increase of 101.43% year-on-year, and the proportion of R&D investment in revenue increased from 5.36% in 2020 to 5.75%. In the same period, the number of R&D personnel of the company reached 571, an increase of 194 over 2020, and an increase of 116 projects under research year-on-year.
In addition, the company also focused on the layout of synthetic biology technology in advance, and in December 2021, the "Shandong Provincial Key Laboratory of Synthetic Biology of Bioactive Substances (Preparation)" was recognized by the Shandong Provincial Science and Technology Department. In addition, the "Synthetic Biotechnology International Innovation Industrial Base" has also settled in Beijing Daxing Biomedical Base and will be put into use soon.
This is also bloomage's most important work this year. Zhao Yan said that in 2022, the company's synthetic biology research and development platform will further lay a good foundation, to build high company barriers and widen the moat, and get more bioactives through this platform.
In addition, Bloomage Biotech carried out the layout of new production capacity and new platform in advance. Its Tianjin plant will increase the production capacity of hyaluronic acid by 300 tons, and 30 pilot production lines will empower the industry and help transform scientific research achievements. Bloomage Biotechnology Industrial Park started construction in Hainan Free Trade Port, and will also establish an international business center in the medical aesthetic sector in the future.
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