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Zhongcao Fragrance IPO

Zhongcao Fragrance Breaks Through: First Fragrance Stock Listed on Beijing Stock Exchange

Zhongcao Fragrance IPO Breaks Through: First Fragrance Stock Listed on Beijing Stock Exchange

Despite a wave of IPO terminations, Zhongcao Fragrance succeeds, becoming the first fragrance company to list on the Beijing Stock Exchange after more than two years of preparation.
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Amidst a surge of IPO withdrawals, some companies in the beauty industry are still successfully making their way to public markets. Following Bawei Co.’s achievement of becoming the first beauty manufacturing stock listed on the Beijing Stock Exchange (BSE) earlier this year, Anhui Zhongcao Fragrance Co., Ltd. has now made history as the first fragrance company to go public on the BSE on September 13, 2024.

Zhongcao Fragrance’s stock, trading under code 920016, was priced at 7.50 yuan per share. On its first day of trading, the stock reached as high as 19.99 yuan, closing at 12.49 yuan, with a market value of 1.494 billion yuan. This marks the culmination of a journey that began in April 2022 when the company entered its listing preparation phase, finally ringing the bell on the BSE today.

Market Leader in Coolants with 30% Market Share

Founded in 2009, Zhongcao Fragrance specializes in the research, production, and sale of fragrances, including coolants, synthetic fragrances, and natural flavors. Its products find application in industries such as cosmetics, food, beverages, tobacco, and pharmaceuticals. According to its prospectus, Zhongcao Fragrance’s largest international client is Givaudan, one of the top ten fragrance companies worldwide.

In 2023, Zhongcao Fragrance generated revenue of 206 million yuan, a growth of 8.72% from 2022, with a gross profit margin of 33.33%. The company’s main revenue driver is its coolant business, with products like WS-23 and WS-3 coolants widely used in skincare, oral care, and cosmetics. In 2023, coolants contributed 77.82% of its total revenue, marking significant growth since 2021.

Zhongcao Fragrance’s products have taken a strong position in the domestic market, with a 30% share in the coolant sector. From 2019 to 2022, demand for coolants such as WS-23 in China grew by over 40% annually, reflecting the product’s widespread application and growing consumer base.

Small in Size, But Room for Growth

Despite steady growth, Zhongcao Fragrance faces challenges. Its relatively small scale means it lags behind domestic competitors such as Givaudan and other major players. In 2023, its revenue of 206 million yuan pales in comparison to larger firms like New Fragrance and Jinhe Industrial, which posted revenues of 3.27 billion yuan and 2.89 billion yuan, respectively.

Additionally, Zhongcao Fragrance’s research and development spending, although increasing from 6.56 million yuan in 2021 to 8.66 million yuan in 2023, still trails behind industry leaders. The company currently holds 10 invention patents but lacks the extensive patent portfolios of its peers, indicating that more investment in innovation is needed.

Overcoming the IPO Termination Wave

Zhongcao Fragrance’s listing is particularly noteworthy given the difficult market environment for IPOs. Since the China Securities Regulatory Commission (CSRC) tightened IPO requirements in August 2023, multiple beauty-related companies have halted their listing plans. For instance, GreenBio, a fragrance company, withdrew its IPO application in early September after two rounds of inquiries from the stock exchange. Similarly, other businesses like facial mask brand Chuangfu Bio have terminated their listing journeys.

Yet, despite these challenges, Zhongcao Fragrance has persevered, making its IPO a significant achievement in a time of heightened scrutiny and regulatory hurdles.

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