Recently, Huaxia Biology has been holding its head high in the secondary market, with a nearly 40% increase in just four trading days, which has also given long-term shareholders the opportunity to reduce their holdings. Among them, the fund under China Life is looking to cash out more than 900 million yuan. It is reported that as early as the beginning of 2019, China Life became one of the shareholders of Huaxia Biology with a cost of 1.2 billion yuan, and the current market value of the former has exceeded 2.7 billion yuan, regardless of dividend factors, China Life has also reaped a lot.

One of the "three musketeers of medical aesthetics," Huaxia Biology, has been reduced by the long-term shareholder China Life.

On October 8, Huaxia Biology announced that China Life Chengda, under China Life, plans to reduce its holdings by a combined total of no more than 12.042 million shares of the company through centralized bidding and block trading, accounting for no more than 2.5% of the total share capital.

As the second largest shareholder of Huaxia Biology, China Life Chengda has been "accompanying" the company as an external investor since 2019. At that time, it invested a total of 1.2 billion yuan to obtain 34.43 million shares of the company.

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As of the announcement date, China Life Chengda holds the company's shares valued at about 2.77 billion yuan, with a floating profit of nearly 1.57 billion yuan. After enjoying the "capital feast," China Life Chengda seems to be gradually leaving.

It is worth mentioning that China Life Chengda once harvested about 9.6 billion yuan in floating profits through Huaxia Biology in 2021; however, the shares it held at that time were in the restricted sale period. As an original shareholder, Yingrui Wuyuan, affiliated with Wuyuan Investment, was more "fortunate." After being released early in November 2020, it was able to continue "cashing out" when the company's share price was still high, with a total harvest of more than 5 billion yuan.

China Life wants to cash out more than 900 million yuan

On October 8, Huaxia Biology announced that China Life Chengda plans to reduce its holdings by a combined total of no more than 12.042 million shares of the company from October 31, 2024, to January 28, 2025, accounting for no more than 2.5% of the total share capital.

Among them, up to 4.8168 million shares will be reduced through centralized bidding, and no more than 7.2252 million shares will be reduced through block trading.

If calculated based on the closing price of 80.45 yuan per share on October 8, the cash-out amount of China Life Chengda is about 970 million yuan.Currently, Guoshou Chengda holds 34.43 million shares of Huaxi Biotech, accounting for 7.15%, making it the second-largest shareholder of the company. Should Guoshou Chengda complete the subsequent "full-scale" operation, its holding ratio in the company's shares will drop below 5%.

It is reported that Guoshou Chengda is an original shareholder of Huaxi Biotech, having acquired the shares before the IPO.

In February 2019, Guoshou Chengda invested 1.2 billion yuan, as an external investor, to transfer the company's 34.43 million yuan of capital contribution to Hong Kong Qinxin at a price of 34.85 yuan per capital contribution.

After the overall transformation and establishment of Huaxi Biotech as a joint-stock company, Guoshou Chengda held 34.43 million shares and has maintained this holding to the present.

As of the announcement release date, Huaxi Biotech closed at 80.45 yuan per share, which is equivalent to a market value of Guoshou Chengda's holdings of approximately 2.77 billion yuan. Even without considering the dividends distributed by Huaxi Biotech over the years, Guoshou Chengda has made a substantial profit. Guoshou Chengda has a floating profit of about 1.57 billion yuan compared to the cost.

It can be said that Guoshou Chengda is an important shareholder who has "accompanied" Huaxi Biotech for five years.

Upon further investigation, it is found that Guoshou Chengda is a large-scale health industry equity investment fund established by China Life in 2016. Looking at the equity structure, the listed company China Life holds 74.94% of its shares, and China Life Insurance Group holds 16.65% of its shares.

Over the past five years, Guoshou Chengda has directly invested in more than ten pharmaceutical, medical, and related industrial chain listed companies, involving both A-shares and Hong Kong stocks.

The mid-year report shows that, in addition to Huaxi Biotech, Guoshou Chengda also holds shares in A-share markets such as Jiahe Meikang, Aopu Mai, Nuozan, Shandong Dadi Wei, Maipu Medical, Puren Ophthalmology, and United Imaging Medical, with holding ratios of 12.13%, 7.91%, 7.74%, 5%, 4.95%, 2.41%, and 2.19%, respectively.

In terms of Hong Kong stocks, Guoshou Chengda holds 3.58% of the shares in the animal gene detection agency - Biocytogen, and 6.8994% of the shares in QuantumPharm Inc. (Jingtai Technology).As of the time of writing, Guoshou Chengda holds a market value of stocks in the secondary market exceeding 8.5 billion yuan.

It is worth mentioning that before Huaxi Bio, Guoshou Chengda had already frequently reduced its holdings in its assets. In the fourth quarter of 2023, Guoshou Chengda first sold 1.462 million shares of Puren Ophthalmology; and in the second quarter of 2024, Guoshou Chengda sold another 574,000 shares of United Imaging Medical.

Shareholders take turns to reduce holdings in Huaxi Bio

Although Guoshou Chengda's investment in Huaxi Bio has been profitable, it has actually experienced a significant drawdown in gains.

Since its listing on the STAR Market on November 6, 2019, Huaxi Bio, known as the "hyaluronic acid giant," has achieved stable profit growth. The financial reports from 2019 to 2021 show that the company's revenue increased from 1.886 billion yuan to 4.948 billion yuan, and the net profit attributable to the company also rose from 567.5 million yuan to 666.3 million yuan.

With a good "report card" and the investment craze in consumer stocks at that time, under the "group buying" of a large amount of funds, Huaxi Bio's stock price rose from the issue price of 47.79 yuan per share to the highest price of 314.99 yuan per share in early July 2021.

At this point, the value of the company's shares held by Guoshou Chengda once reached as high as 10.8 billion yuan, with a floating profit of about 9.6 billion yuan.

However, as an original shareholder with a shareholding ratio of more than 5%, Guoshou Chengda had promised to lock up its shares for the first 36 months after Huaxi Bio's listing, so it did not have the opportunity to "cash out at a high position."

Compared with Guoshou Chengda, who has experienced the "roller coaster" of profits, there is an original shareholder with a shorter lock-up period who has seized the opportunity to reduce holdings in Huaxi Bio, thus obtaining "windfall profits."

In June 2018, Wuyuan Investment's private equity fund Yingrui Wuyuan increased its stake in Huaxi Bio through capital increase. Specifically, it spent a total of 600 million yuan to obtain 33.089 million yuan of registered capital at a price of 18.13 yuan per registered capital, corresponding to 33.089 million shares after the establishment of the joint-stock company.It is understood that the lock-up period for the batch of shares owned by Yingrui Wuyuan is twelve months, and they can be "unrestricted" as early as November 2020.

Immediately after, Yingrui Wuyuan exercised this right.

According to the announcement of Huaxi Biotech, from December 24, 2020, to February 22, 2021, Yingrui Wuyuan reduced its holdings by 8.64 million shares at a price range of 142.19 yuan/share to 203.9 yuan/share, with a total amount of 1.524 billion yuan.

Entering the second and third quarters of 2021, Yingrui Wuyuan accelerated the sale of Huaxi Biotech. From June 1 to June 3 of that year, it first reduced its holdings by 449,400 shares through block trades, and then from June 29 to July 16, it sold 4.8 million shares at a company share price of 264.366 yuan/share to 314.278 yuan/share, with a total amount of 1.38 billion yuan.

After a series of operations, Yingrui Wuyuan's holdings in Huaxi Biotech decreased to 13.8594 million shares, with a shareholding ratio of only 2.89%.

However, Yingrui Wuyuan's reduction has not yet ended. At the end of the third quarter of 2021, its holdings in Huaxi Biotech decreased to 7.5068 million shares; at the end of the first quarter of 2022, it further decreased to 1.9427 million shares; after the second quarter of 2022, it completely exited the list of the company's top ten circulating shareholders.

It is estimated that throughout the reduction process, Yingrui Wuyuan has accumulated "high-position cashing out" of more than 5 billion yuan.

In addition to Guoshou Chengda and Yingrui Wuyuan, Ais Rui Si Medical and Hua Jie Medical, which are also original shareholders, also chose to continuously sell shares when the share price of Huaxi Biotech was relatively high.

After the restricted shares became tradable in November 2022, Ais Rui Si Medical reduced its holdings by 3.522 million shares in the fourth quarter of that year and 225,700 shares in the fourth quarter of 2023, "cashing out" about 430 million yuan; while Hua Jie Medical reduced its holdings by 1.2 million shares in the fourth quarter of 2022 and 1.337 million shares in the fourth quarter of 2023, "cashing out" about 240 million yuan.

In addition, West Supreme Limited, backed by ICBC and Hua Xin Capital, and Fortune Ace, with a background of Hong Wei Capital, reduced their holdings in Huaxi Biotech by 770,000 shares and 4.766 million shares in the fourth quarter of 2022, respectively; while Zhongjin Jia Tai Erqi (Tianjin) under the banner of Zhongjin Capital exited the company's top ten circulating shareholders in the quarter when the "restriction was lifted".Hidden Worries for Huaxi Biotech

Apart from the continuous "cashing out" by original shareholders, the fundamental situation of Huaxi Biotech is also a cause for concern.

Data shows that Huaxi Biotech's main business includes three major areas: functional skincare products, medical terminals, and raw material products. Among them, hyaluronic acid high-end skincare brands such as "Runbayan" and "Kuadi" lead the functional skincare business and are also an important support for the company's development.

Looking at the performance level, in contrast to the early days after going public, there are very obvious signs of a decline in Huaxi Biotech's revenue and profit growth in recent years.

Choice statistics show that in 2023, the company's revenue was 6.076 billion yuan, a year-on-year decrease of 4.45%, and the net profit after deducting non-recurring gains and losses was 490.5 million yuan, a year-on-year decrease of 42.44%; in the first half of 2024, the company achieved a revenue and net profit of 2.811 billion yuan and 315.9 million yuan, respectively, a year-on-year decrease of 8.61% and 12.38%.

At the same time, Huaxi Biotech attaches great importance to "burning money" in the marketing end. From 2019 to 2023, the company's sales expenses accounted for 27.6%, 41.7%, 49.2%, 47.9%, and 46.7% of its revenue, respectively, and in the first half of 2024, this figure was also as high as 41.9%.

The high sales expenses have led to huge cost consumption for Huaxi Biotech. If it were in the past when hyaluronic acid was hot, this hidden danger might be "covered up"; but with the rise of collagen products in 2022, as a substitute, hyaluronic acid products have gradually cooled down, and the company's cost control issues have gradually been exposed under poor sales.

However, being in the medical beauty track with a strong consumer attribute, it is not realistic for Huaxi Biotech to completely reduce costs; therefore, the company must work hard on new products.

It is just like "if you can't beat them, join them". Currently, Huaxi Biotech regards collagen as a new development direction.

In April 2022, Huaxi Biotech announced the acquisition of 51% equity in Yierkang Biotech with an investment of 233 million yuan, officially entering the collagen industry field.In the time since, Huaxi Bio has seen the listing of recombinant Type III collagen, obtained a registration certificate for recombinant collagen wound dressings, and released products such as "Vital Shot." Everything seems to indicate that the company's collagen business is progressing smoothly.

However, collagen may not yet be able to support the overall operations of Huaxi Bio. Taking the acquired target Yi Er Kang Bio as an example, in the first half of 2024, the company only achieved a revenue of 23.014 million yuan and a net profit of 1.7615 million yuan.

It is worth noting that in the emerging field of medical aesthetics, Huaxi Bio is also facing more intense "competition" in the field of collagen. Looking at the company's competitors, the "Kefumei" brand of Juzi Bio and the "Wei Yimei" brand of Jin Bo Bio have both gained a certain level of recognition in the collagen race; while Huaxi Bio, as a "latecomer" entering from the hyaluronic acid field, actually has no significant advantages to speak of.

Looking ahead, if Huaxi Bio wants to "transform," it may need to put in a lot of hard work in drawing the "second curve" of collagen.