On December 25, 2025, the "Economic Half-Hour" program on China Central Television conducted sampling tests on several popular cosmetics available on the market. Among them, Kans brand's "Volumizing and Firming Essence Mask" and "Brightening and Whitening Mask" were found to contain epidermal growth factor (EGF), with concentrations of 0.07 pg/g and 3.21 pg/g, respectively. Subsequently, Kans publicly responded, stating that none of its products contain the human epidermal growth factor EGF ingredient.
Although the incident manifested as an ingredient controversy, its impact quickly spilled over from the brand side to the capital markets, causing significant fluctuations in the company's stock price. On December 29, 2025, CHICMAX Chairman Lyu Yixiong issued an announcement stating that Executive Director Luo Yan purchased 364,000 shares at a price of approximately HKD 75.5 per share.
Beyond the controversy over "whether it was added," the incident has also pushed CHICMAX's growth model into the spotlight. An examination of its 2025 interim report and 2024 annual report reveals impressive revenue and profit growth. However, the cost side also shows a strong characteristic of upfront investment; notably, in the first half of 2025, selling and distribution expenses accounted for 56.9% of revenue, while R&D costs accounted for approximately 2.5% in the same period.
When marketing investment is excessively high and revenue is heavily reliant on a single brand, any external fluctuation is more easily "amplified" into a real operational challenge. The "controversy" is merely an episode; the real tests for CHICMAX likely lie ahead: whether the expense ratio can be reduced, whether a solution can be found for the high revenue dependence on a single brand, and whether the channel structure can be balanced.
01 While Profits Thicken, Expenses Also Weigh Heavily
Judging from the relevant data in CHICMAX's 2025 interim report, its growth remains built upon a high-investment expense structure. The report shows that revenue for the first half of 2025 reached RMB 4.108 billion; selling and distribution expenses were RMB 2.337 billion, accounting for 56.9% of revenue; R&D expenses were RMB 103 million, representing 2.5% of its revenue.
Looking back at the relevant data from CHICMAX's 2024 annual report, its selling and distribution expenses accounted for 58.1% of revenue in 2024, compared to 53.5% in 2023.
Delving into the expense details, according to CHICMAX's 2024 annual report, its marketing and promotion expenses reached RMB 3.317 billion in 2024, a year-on-year increase of 90%. CHICMAX explained in the report that this was "mainly due to increased brand promotion efforts and channel construction investments to enhance brand exposure and seize new channel opportunities." Meanwhile, CHICMAX's revenue increased by 62.1% year-on-year in 2024.
When the growth rate of marketing and promotion expenses consistently outpaces revenue growth, it may indicate, to some extent, that the core issue is not the necessity of the spending, but rather a decline in the output efficiency per unit of investment. If future revenue growth slows while investment costs remain rigid, the profit side becomes more vulnerable to pressure.
Furthermore, when selling and distribution expenses remain consistently above half of the revenue, while R&D expenses hover around 2.5%, the allocation of corporate resources inherently appears skewed. More resources flow into traffic acquisition, platform resource placements, content投放 (placement), and promotional tools, while fewer resources are directed towards raw material development, formula iteration, testing methods, and long-term technological reserves in R&D. This is not a value judgment but rather a reflection of the contrast between the proportions of these two expense categories.
Of course, a high expense ratio is not inherently "frightening," but what warrants attention is when a high expense ratio is tightly bound to a single brand and a single channel. A high expense ratio signifies that the company's high-turnover marketing "engine" is operating effectively. However, once factors such as platform rules, traffic distribution, competitor investment intensity, key opinion leader collaboration costs, or advertising conversion efficiency change, the cost side tends to exhibit rigidity before the revenue side, potentially leading to more direct fluctuations in profits.
The market's sharp reaction to Kans' recent controversy might also be related to this growth model. Brand controversies affect conversion rates, which in turn affect the payback周期 (cycle) of marketing investments, ultimately influencing the company's decision-making boundaries for the next round of spending. These issues transcend the debate over the EGF ingredient itself; the focus should be on the fact that the high marketing expense ratio model is intrinsically linked to high exposure and high sales volume. This very linkage makes any negative incident prone to rapid and significant amplification in a short period, consequently impacting the capital market through stock price fluctuations.
02 Kans Contributes 81.4% of Revenue: Is CHICMAX's "Cushion" Thick Enough?
The distribution of CHICMAX's brand revenue contribution is also noteworthy. According to the brand revenue breakdown presented in its 2025 interim results announcement, for the six months ended June 30, 2025, revenue from the Kans brand amounted to RMB 3.344 billion, accounting for 81.4% of total revenue. This data indicates that Kans contributes over 80% of the company's income.
This high reliance on a single brand for revenue is not a simple matter of being "good or bad," but it directly determines the company's resilience to external shocks. If a company possesses multiple brands of similar scale, other brands can provide a buffer on the revenue side when one brand faces controversy or sales volatility. However, when a single brand contributes over 80% of revenue, any changes at the brand level are more likely to directly impact financial performance. The rapid transmission of the Kans "controversy" to the stock price fluctuations of its parent company, CHICMAX, in the capital market is likely partly attributable to this high revenue concentration, meaning the market is quicker to equate a brand controversy with corporate risk.
Reviewing the brand revenue distribution for 2024, the characteristic of heavy reliance on a single brand was also prominent and showed an increase compared to 2023. CHICMAX's 2024 annual report shows that revenue from the Kans brand was RMB 5.591 billion, accounting for 82.3% of total revenue; the Red Elephant (红色小象) brand contributed 5.5%; the newpage (一页) brand contributed 5.5%; the One Leaf (一叶子) brand contributed 3.4%; and other brands collectively contributed 3.3%.
Under this revenue distribution, the core challenges facing the company become more specific. First, the main brand must continuously launch new products, create bestsellers, produce marketing content, and seize channel resources; otherwise, revenue fluctuations will be difficult to hedge through other brands. Second, all operational practices must scale accordingly, as any incident is more likely to affect the core revenue source. Third, the main brand, operating heavily in the short-video e-commerce and platform self-operated model, relies intensely on advertising and content supply, making profit more susceptible to changes in advertising efficiency. These three points essentially constitute a major test for CHICMAX, given the current reality where Kans accounts for over 80% of revenue.
This further explains why a controversy regarding Kans' ingredients quickly triggered a reaction in the capital market and a response from the company. The purchase of 364,000 shares by Executive Director Luo Yan on December 29, 2025, at approximately HKD 75.5 per share, was essentially an attempt to signal confidence to the market. However, for external observers, confidence ultimately must be rooted in concrete operations. When revenue is highly dependent on a single brand, the company needs to demonstrate a more sustainable path towards diversification, such as boosting the scale of brands like One Leaf and Red Elephant, improving the continuity of the new product matrix, and reducing reliance on single blockbuster product cycles.
03 High Growth Reliance on a Single Channel: How Rigid are Platform Costs?
From a channel perspective, the channel revenue distribution for CHICMAX's first half of 2025 is also noteworthy. Its 2025 interim report indicates that for the six months ended June 30, 2025, online channel revenue accounted for 92.7% of the total. Within this, online self-operated revenue constituted 83.3%. Offline channel revenue accounted for 6.5%. This data suggests a significant concentration of revenue in online channels, particularly within online self-operated channels, indicating a singular channel structure.
Reviewing the channel proportions for 2024, the online share was also high, but the online self-operated share was lower than in the first half of 2025. CHICMAX's 2024 annual report shows that online channel revenue accounted for 90.5% in 2024. Within this, online self-operated revenue was 78.2%; online retailer revenue was 7.9%; online distributor revenue was 4.4%; and offline channel revenue accounted for 8.5%.
Online self-operation typically implies stronger pricing control, more direct user reach, faster new product listing and promotional response, but it also entails heavier operational investments and higher platform service fees. The increase in marketing and promotion expenses includes increased platform service fees, which aligns with the rising trend in the proportion of online self-operated revenue.
When the proportion of online self-operated revenue increases further from 78.2% in 2024 to 83.3% in the first half of 2025, the sources of the company's growth become more concentrated. Factors such as changes in platform rules, fluctuations in traffic costs, variations in key opinion leader collaboration prices, volatility in live-streaming room conversion rates, and changes in return rates and after-sales costs can more easily manifest on the expense and cash flow sides. Furthermore, when 83.3% of revenue comes from online self-operation, the company must allocate more resources to continuous operational maintenance.
Moreover, its product categories also show concentration. CHICMAX's 2024 annual report indicates that skincare product revenue was RMB 5.922 billion, accounting for 87.2% of the total, while maternal and infant care accounted for 11.3%.
This means that if the main brand continues to grow, platform红利 (dividends) persist, and content supply remains steady, this concentration can bring scale efficiencies. However, should any of these links experience disruption, the buffer space becomes smaller.
The reason this controversy was able to trigger stock price fluctuations so quickly can also be found here: the higher the business concentration, the faster the market tends to price in uncertainty.
The debate over whether Kans "added" the ingredient is not the main point. However, the underlying logic of why the controversy could so rapidly affect the company's market valuation becomes clearer. It serves as a reminder to any listed company that they must address three issues more seriously: first, whether a high marketing expense ratio can consistently yield revenue growth of equivalent strength; second, whether non-core brands can form a more substantial revenue contribution; and third, whether the company can maintain stability regarding platform costs when online revenue share is highly concentrated. As long as its financial reports fail to consistently address these questions, any single controversy is more likely to become a trigger for market sentiment, while the company's long-term value ultimately depends on its fundamentals, not on individual events.