Once famous for its slogan “You’re beautiful as you are,” CHANDO, a well-established domestic beauty brand, has finally taken the first step toward becoming a publicly listed company. Recently, its parent company, CHANDO Global Holding Limited, submitted an IPO application to the Hong Kong Stock Exchange.

In terms of growth, CHANDO's performance in recent years has shown signs of stagnation. In 2024, the company reported revenue of 4.601 billion yuan, a modest increase of 3.58% year-on-year, while net profit fell by nearly 40% to 190 million yuan in the same period. Although the prospectus cites data from Frost & Sullivan indicating that CHANDO is the second-largest domestic cosmetics brand in China by retail sales as of 2024, its revenue has lagged behind other listed domestic beauty firms. For instance, the "Domestic Beauty Giants" Proya (603605.SH) and ShuMei (2145.HK) achieved revenues of 10.778 billion yuan and 6.793 billion yuan, respectively, in 2024. Notably, its revenue even falls short of newer competitor Beitai (300957.SZ), which reported a substantial 5.7 billion yuan in 2024.

The critical issue lies in CHANDO's relatively slow transition to online sales channels. In comparison, Proya's online revenue proportion exceeds 80%, while CHANDO's online channel share remains under 70%. Even so, CHANDO plans to focus on opening new offline flagship stores as part of its growth strategy, although whether this will create a differentiated competitive advantage remains to be seen.

CHANDO's marketing investment has been significant, totaling 7.568 billion yuan from 2022 to 2024. With this IPO move, attention is now focused on whether CHANDO can rejuvenate its growth engine.

A "Step Behind" in Online Transition As an established domestic beauty brand, CHANDO has taken a cautious approach to its IPO journey. In contrast, its contemporaries, Proya and ShuMei, entered the capital market as early as 2017 and 2022, respectively. Also, newer companies like Huaxi Biological (688363.SH), Juzi Biological (2367.HK), and Beitai have already completed their IPO processes.

It wasn't until 2023 that news of CHANDO’s potential Hong Kong listing first emerged, stating that it was collaborating with Huatai and UBS for its IPO, planning to raise no more than $500 million, with a target listing date as early as 2024. Subsequently, CHANDO welcomed strategic investors like L'Oréal and JiaHua Capital to optimize its equity structure, moving away from a single-family ownership model.

As the prospectus was published, the public finally gained insight into CHANDO's financial standings. From a revenue perspective, CHANDO appears to be trailing in the industry, with its performance even falling behind Beitai, which focuses on the sensitive skin segment. In 2024, CHANDO's revenue of 4.601 billion yuan was only around 80% of Beitai's.

This underperformance can largely be attributed to CHANDO's failure to capitalize on the transition to online channels. Since 2020, external environmental changes have shifted beauty sales channels increasingly online, allowing many domestic beauty brands to flourish. During the 2023 Double 11 shopping festival, Proya topped the Tmall beauty sector, marking the first time in five years for a domestic beauty brand to secure the top position. This growth resulted from channel innovation, with online revenue proportion climbing from 70.01% in 2020 to 93.07% in 2023—a more than 20 percentage point increase over four years.

New entrant Beitai successfully carved out its niche in a competitive beauty market by focusing on online channels, which contributed over 70% to its revenue in 2022. In contrast, CHANDO's online sales transition has been "a step behind." In 2022, CHANDO's online channel share was just 59.7%, rising to only 68.8% by 2024. This relatively slow pace has hindered CHANDO's competitiveness.

In 2023, while Proya, ShuMei, and Beitai all achieved double-digit revenue growth, CHANDO managed a mere 3% growth rate. Nonetheless, the company is making moves to penetrate the offline channel. Since 2025, CHANDO has been further solidifying its offline channel strategy by opening flagship stores in key shopping centers. For example, it opened its first flagship store in Shenzhen in July, with three additional stores set to launch in Shanghai, Wuhan, and Chongqing later this year.

"We believe our omnichannel sales network enables us to actively seize opportunities arising from new sales channels, reach a broader customer base, and enhance customer loyalty and brand recognition," stated CHANDO. However, the challenges brought by offline channels in the cosmetics industry are far from resolved.

Since 2024, Sephora, backed by the world's largest luxury conglomerate LVMH and with stores across high-end commercial districts, has begun restructuring in the Chinese market by downsizing. Similarly, the cosmetic retail brand Sa Sa International (0178.HK) has been steadily closing its offline locations to focus more on online opportunities.

In this context, whether CHANDO can leverage its offline flagship stores to dig deeper into offline market potential remains uncertain.

Working for Channels The main brand, CHANDO, continues to represent the core of the company, contributing over 90% of revenue from 2022 to 2024. However, due to reaching a certain growth ceiling with its main brand, CHANDO has sought new growth avenues by launching additional brands. It introduced new lines like Pofyuan, Misu, and Spring/Summer, tailored to different price points and demographics.

In 2017, CHANDO launched Spring/Summer, a skincare brand specializing in sun protection targeting younger consumers, with prices generally under 100 yuan. Its subsequent brand, Pofyuan, focuses on sensitive skin priced between tens and two hundred yuan, portraying itself as a budget version of “Winona,” whose products typically exceed 200 yuan.

Currently, among the new brands, only Pofyuan has shown significant scale and growth, generating 121 million yuan in revenue in 2024, marking over 90% year-on-year growth. Building on this success, CHANDO plans to continue incubating new brands, including those focused on oral care and herbal products, and explore acquisition opportunities to create synergistic effects with existing brands.

However, the multi-brand strategy has inevitably increased pressure on CHANDO's marketing expenditures. From 2022 to 2024, its sales expenses were 2.445 billion yuan, 2.406 billion yuan, and 2.717 billion yuan, representing 57%, 54.2%, and 59% of total revenue, respectively. This means that for every 100 yuan CHANDO earns, nearly 60 yuan must be invested in marketing.

Such a high expenditure is significantly above the industry average. In 2024, the average sales expense ratio for six domestic beauty companies, including ShuMei and Proya, was 47.78%, about 11 percentage points lower than CHANDO. This persistent high marketing investment reduced CHANDO's net profit margin to 4.13% in 2024, which is over 6 percentage points below the average for the aforementioned six domestic beauty brands.

As part of this IPO, one of CHANDO's fundraising projects will focus on enhancing its marketing efforts. Online, the company plans to strengthen collaborations with KOLs and ramp up marketing on mainstream e-commerce and social media platforms; offline, it intends to invest in out-of-home advertising and media. However, how to improve the conversion effectiveness of marketing investments may remain an important challenge for CHANDO moving forward.