Marubi's net profit growth slows: stock price plunges as sales expense ratio nears 58%, receives regulatory warning letter before IPO

$Guangdong Marubi Biotechnology (603983.SH)$$Guangdong Marubi Biotechnology Co., Ltd. (811016.HK)$

In December 2025, Guangdong Marubi Biotechnology Co., Ltd. (hereinafter referred to as Marubi; 603983.SH) filed for listing on the Hong Kong Stock Exchange, seeking dual listings in A+H shares. Goldman Sachs and CITIC Securities are joint sponsors.

Despite stable revenue growth during the period, concerns remain. Relying heavily on massive marketing investments, Marubi’s net profit margin hovers around 11%. Moreover, just before the IPO, the company received a regulatory warning letter due to issues such as improper financial accounting and disorganized fundraising management, exposing significant deficiencies in corporate governance and internal controls.

Net profit growth slowed in the first three quarters

According to the prospectus and Tianyancha, Marubi Biotech was founded in 2002 as a cosmetics company driven by synthetic biology technology, focusing on providing anti-aging solutions for consumers. The company has been deeply engaged in the anti-aging skincare industry for over two decades, continuously applying cutting-edge scientific innovations through core technologies such as recombinant collagen to develop tender skin products with anti-wrinkle, firming, and repair effects.

Marubi Biotech primarily generates revenue by selling skincare and cosmetic products in China. During the performance record period, the company mainly operated two brands: Marubi and Passion. Stemming from research in eye care products within the anti-aging skincare sector, Marubi focuses on eye and facial care solutions with anti-wrinkle, firming, and repair functions. Passion concentrates on high-quality and cost-effective foundation products.

During the period, Marubi Biotech's revenue mainly came from skincare product sales, especially eye and facial products under the Marubi brand. From 2022 to 2024 and January to September 2025 (hereinafter referred to as the reporting period), skincare products generated revenues of 1.436 billion yuan, 1.575 billion yuan, 2.055 billion yuan, and 1.771 billion yuan respectively, accounting for 82.9%, 70.8%, 69.2%, and 72.3% of the revenue for the respective periods, making it the company's primary source of income.

Among these, revenue from eye care products was 435 million yuan, 429 million yuan, 689 million yuan, and 569 million yuan respectively, accounting for 25.1%, 19.3%, 23.2%, and 23.2% of the revenue for the respective periods. Revenue from facial products was 1.001 billion yuan, 1.146 billion yuan, 1.366 billion yuan, and 1.202 billion yuan respectively, representing 57.8%, 51.5%, 46.0%, and 49.1% of total revenue for the respective periods. The proportion of the company's main business remained stable.

At the same time, Marubi Biotech began operating the Passion brand and extended its emulsification technology to the development of makeup products. During the period, makeup and other products generated revenues of 295 million yuan, 650 million yuan, 915 million yuan, and 679 million yuan respectively, accounting for 17.1%, 29.2%, 30.8%, and 27.7% of the revenue for the respective periods.

During the reporting period, Marubi Biotech's gross profit margin was 67.8%, 70.1%, 73.3%, and 74.8% respectively, maintaining steady growth.

In terms of overall revenue performance during the reporting period, Marubi Biotech achieved revenues of 1.732 billion yuan, 2.226 billion yuan, 2.97 billion yuan, and 2.45 billion yuan respectively, with net profits of 167 million yuan, 278 million yuan, 342 million yuan, and 247 million yuan respectively. Net profit margins were 9.7%, 12.5%, 11.5%, and 10.0% respectively.

In each period, Marubi Biotech’s revenue growth rates were 28.52%, 33.44%, and 25.51%, all maintaining double-digit growth. In contrast, net profit growth rates were 48.93%, 31.69%, and 2.13% respectively. After two years of high growth, Marubi Biotech's net profit growth rate significantly declined in the first three quarters of 2025, reflecting a clear weakening in profitability.

Combined with financial data disclosed on the Shanghai Stock Exchange, from 2022 to 2024 and January to September 2025, the company achieved non-GAAP net profits attributable to shareholders of 136 million yuan, 188 million yuan, 327 million yuan, and 214 million yuan respectively. In the first three quarters of 2025, the company's non-GAAP net profit attributable to shareholders declined by 5.42% year-on-year, marking negative growth.

It is worth mentioning that in terms of capital market performance, from May 20, 2025, to March 18, 2026, Marubi Biotech's stock price fell by as much as 47.82%.

Selling expense ratio is nearly 58%, and inventory turnover days have increased

Due to the increasingly fierce competition in China's beauty product industry, Marubi Biological has also invested substantial resources in promoting its brands and products. The company's overall rapid performance growth cannot be separated from massive marketing investment.

Marubi Biological’s sales and distribution expenses mainly include advertising and promotional costs as well as employee welfare expenses for sales and distribution personnel. During the reporting period, the company’s sales and distribution expenses were 846 million yuan, 1.199 billion yuan, 1.635 billion yuan, and 1.415 billion yuan, accounting for 48.8%, 53.9%, 55.1%, and 57.7% of the current period's revenue, respectively. In each period, the company's sales investment accounted for about 50% of total revenue. To put it more plainly, behind Marubi Biological's 2 billion yuan revenue scale, more than half of its annual income is allocated to sales expenditures.

During the period, advertising and promotional expenses accounted for 83.1%, 86.9%, 89.1%, and 89.4% of sales and distribution expenses, while employee welfare expenses accounted for 10.3%, 7.8%, 7.1%, and 7.2%, respectively.

In 2023, 2024, and January-September 2025, Marubi Biological's sales and distribution expenses increased year-over-year by 41.7%, 36.4%, and 32.1%, respectively, showing a trend where this growth rate exceeded the revenue growth rate during the same period.

Marubi Biological pointed out: The increase in sales and distribution expenses is mainly due to the company's unwavering promotion of brand development efforts, as well as the continuous promotion of online business amid intensifying market competition and rising online traffic costs.

A more striking comparison is that during the reporting period, the company’s R&D expenses were 52.9 million yuan, 62.3 million yuan, 73.5 million yuan, and 62.8 million yuan, accounting for 3.1%, 2.8%, 2.5%, and 2.6% of total revenue during the same period, respectively. Compared to over 50% of revenue being allocated to sales investment, Marubi Biological's R&D investment during the period was less than 4%. Insufficient long-term R&D investment inevitably impacts the company's core competitiveness.

Gao Chengyuan, Dean of the Influence Research Institute, stated: The high marketing investment in the cosmetics industry essentially pays for brand premium and capturing consumer mindshare. In the short term, it reflects high traffic costs, but in the long run, it is a necessary means to build pricing power.

Founder Securities noted in its research report on November 26, 2025, that the company is still in the growth-stage investment phase. Temporary increases in expenses may affect short-term profitability. It is essential to track the effectiveness after expanding the target audience. Subsequent attention should focus on new customer conversion growth and the pace of profit recovery. The projected net profits attributable to shareholders in 2025 and 2026 are 370 million yuan and 460 million yuan, corresponding to PE ratios of 36x and 29x, respectively. Risk warnings include: intensified industry competition; failure to manage marketing expenditure as expected; risks associated with incubating new brands; and teams responsible for cultivating new categories not meeting requirements.

While revenue grows, Marubi Biological also faces risks such as inventory accumulation.

As of the end of each reporting period, the company's inventory was 1.52 billion yuan, 1.72 billion yuan, 2.2 billion yuan, and 2.81 billion yuan, respectively, with inventory turnover days being 95 days, 89 days, 90 days, and 111 days, respectively. As of the end of September 2025, the inventory turnover days have significantly lengthened compared to the initial period.

During the same period, the company's receivables, prepayments, and other current assets were 5.75 billion yuan, 5.14 billion yuan, 3.05 billion yuan, and 3.06 billion yuan, respectively.

In terms of liquidity, as of the end of each reporting period, the net cash flow generated from operating activities by Marubi Biotech was 48.436 million yuan, 338 million yuan, 301 million yuan, and 159 million yuan, respectively. The cash and cash equivalents at the end of the period were 1.062 billion yuan, 1.04 billion yuan, 1.579 billion yuan, and 1.188 billion yuan, respectively, with current ratios for each period being 3.3, 2.5, 1.9, and 1.8, respectively.

Chairman and board secretary receive regulatory letters; on-site inspection reveals two major issues.

In this IPO, Marubi Biotech plans to primarily use the raised funds for: establishing a comprehensive omnichannel sales system; strengthening the overall brand image; optimizing and expanding the brand portfolio; enhancing R&D capabilities; improving supply chain capacity related to products and raw materials; working capital and general corporate purposes.

As of the latest practicable date, the couple Sun Huaiqing and Wang Xiaopu jointly hold 324 million shares of the company, accounting for approximately 80.80% of the total issued share capital, making them the actual controlling parties of the company.

On October 31, 2025, Marubi Biotech announced that the company and its relevant personnel recently received the 'Administrative Regulatory Measures Decision Document' issued by the Guangdong Regulatory Bureau of the China Securities Regulatory Commission (hereinafter referred to as 'Guangdong CSRC'). The Guangdong CSRC conducted an on-site inspection of Marubi Biotech and found that the company had irregular financial accounting practices and mismanagement, misuse, and improper disclosure of raised funds. According to Article 52 of the 'Administrative Measures for Information Disclosure of Listed Companies', the Guangdong CSRC decided to take administrative regulatory measures to order Marubi Biotech to make corrections and issue warning letters to Chairman Sun Huaiqing, CFO Wang Kaihui, and Board Secretary Cheng Di.

In detail, based on the 'Rules for On-Site Inspection of Listed Companies' (CSRC Announcement [2025] No. 5) and other regulations, the Guangdong CSRC conducted an on-site inspection and found the following issues with the company:

First, irregular financial accounting practices. One, inaccurate revenue accounting. The company did not estimate return rates for sales business based on return situations and included a small number of non-actual sales orders in revenue, leading to inaccurate revenue accounting. Two, inaccurate construction-in-progress accounting. The company did not timely estimate 'construction in progress' and 'accounts payable for construction' based on actual project progress, leading to inaccurate disclosures of construction in progress and related liability accounts. After the relevant engineering projects reached a usable state, the company did not promptly capitalize them, resulting in inaccurate depreciation amounts for fixed assets. Three, there are cases of incorrect reporting of related accounting items. The company reported and disclosed funds placed on third-party payment platforms such as Alipay through the 'accounts receivable' account and included a small amount of consulting fees unrelated to research activities in R&D expenses, leading to inaccurate accounting of related items.

Second, mismanagement, misuse, and improper disclosure of raised funds. One, improper use of raised funds. The company used raised funds and its own funds to construct the Pazhou headquarters building without separating the fundraising project from non-fundraising projects for independent accounting, resulting in the use of raised funds to pay for non-fundraising project expenditures. After standardization and rectification, the company has returned non-fundraising project expenditures to the dedicated fundraising account. Two, failure to timely deliberate and disclose adjustments to fundraising projects. The company's related fundraising projects exceeded the original completion deadline without being finished, and adjustments were made to the fundraising projects with actual payment of related expenses, but the company did not timely deliberate and disclose the project extension or adjustment proposals. Three, irregular information disclosure regarding fundraising management. In the company's 2023 and 2024 announcements of related reports, the disclosed progress of fundraising projects was inconsistent with reality. The company used raised funds for cash management investments but did not disclose information such as investment returns during the reporting period, end-of-period investment shares, contracting parties, product names, and durations in the annual 'Special Report on the Placement and Actual Use of Raised Funds' as required by relevant regulations. (Produced by Harbor Finance)

"Harbor Business Observation" by Shi Zifu

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