To be honest, I haven’t used Blue Moon laundry detergent for a long time. There are so many similar products and there is no price advantage. Why did I choose it? Since Blue Moon invented laundry detergent, which was a costly innovation in laundry, there seems to be no "great" in

writes ｜Hu Changwei edits ｜Han Lei

To be honest, I haven’t used Blue Moon Laundry Detergent for a long time. There are so many similar products and there is no price advantage. Why did I choose it? There seems to be no "great" innovation since Blue Moon invented laundry detergent, a costly innovation in laundry. Behind the decline in stock prices, the market seems unwilling to be Hillhouse Capital's "takeover".

As the "Laundry Detergent Brother", Blue Moon Group (6993.HK, hereinafter referred to as Blue Moon), which was once hailed as "China's Procter & Gamble " by Hillhouse Capital, did not develop smoothly after its listing.

As of April 1, 2021, Blue Moon Group's closing price was HK$11.4 per share, which has already fallen below the issue price of HK$15.3 per share. The stock price fell 9.52% from when the company released its preliminary annual results announcement for 2020. If calculated from the year to date, the stock price has fallen as much as 25.3%.

In fact, judging from various financial indicators, the company seems to be developing very steadily. According to the report, Blue Moon achieved revenue of HK$7 billion in 2020, a year-on-year decrease of 0.8%; net profit attributable to the parent company was HK$1.31 billion, a year-on-year increase of 21.3%.

However, "Blue Chip Enterprise Review" believes that researching a company must not just look at changes in superficial financial data. If combined with the company's development trend in recent years, Blue Moon's position as the "No. 1 laundry detergent brother" will be difficult to secure.

Growth is sluggish, and laundry detergent is the "backbone"

At present, Blue Moon's business is the production and sales of clothing detergents (mainly laundry detergents), personal cleaners, and furniture cleaners.

As of the end of 2020, clothing cleaning, personal cleaning, and household cleaning have achieved revenue of HK$5.60 billion, HK$840 million, and HK$560 million respectively, accounting for 80%, 12%, and 8% of the revenue respectively. It can be seen that laundry detergent is still the "backbone" of Blue Moon.

Blue Moon said in the report that the company's revenue was the same as the previous year because of the dual impact of the epidemic. The sales of clothing cleaning products decreased, and the sales of personal cleaning products and furniture cleaning products increased, which offset the two. But Blue Chip Business Review doesn't entirely agree with this seemingly reasonable statement.

As Blue Moon Group said, in the second half of 2020, normal production and life have begun in China. According to financial report data, the company’s clothing cleaning revenue in the second half of the year was 3.915 billion yuan, which was 3.814 billion yuan in the same period last year. There is no difference. Significantly. It can be seen that the slowdown in its own business development is the main reason for the lack of revenue growth.

This view can also be verified from the revenue growth rate in recent years. From 2018 to 2020, Blue Moon's revenue growth rate was divided into 20.2%, 4.2%, and -0.8%, showing a trend of slowing down year by year.

Reduce expenses and lay off 60% of sales staff

In addition to the slowdown in revenue, if we explore it from the two dimensions of product gross profit margin and sales expense ratio , there are also doubts about the continued growth of Blue Moon's net profit.

Judging from the data in the prospectus, the sales unit price of Blue Moon Group's products has not fluctuated much, and the gross profit margin of the company's products has steadily increased, mainly due to the decline in the prices of raw materials palm oil and LDPE in the past four years.

Among them, palm oil is mainly used for product production, while LDPE, a downstream petroleum plastic product, is used for packaging materials. The two raw material products account for more than 80% of the sales cost. From 2017 to 2019, the prices of palm oil and LDPE both showed a downward trend, with both declines exceeding 15%.

However, since the first quarter of this year, the price of raw materials has continued to rise. Both raw materials, palm oil and LDPE, have increased by 10%. It is expected that the company's gross profit margin will be under pressure in the first quarter of this year.

From the perspective of sales expenses, from 2017 to 2020, Blue Moon Group’s sales expense rate dropped from 36.73% to 28.82%, promoting the continued growth of net profit. Sales expenses generally showed a downward trend, mainly due to the company's continued reduction of sales personnel. The company's sales personnel decreased from 10,432 to 4,582, and employee salary and welfare expenses decreased.Currently, Blue Moon has reduced nearly 60% of its sales staff, and the optimization of its employee structure has basically been completed. It will be more difficult for the sales expense rate to continue to decline in the future.

In summary, the two driving forces that have driven net profit growth in the past four years have continued to decline. At the same time, considering the weak growth in laundry detergent sales, in the short and medium term, it will be difficult for Blue Moon's net profit to return to the high growth rate before the listing.

It is difficult to sink, and laundry beads appear

If all short-term costs have been compressed to the "extreme", it has brought Blue Moon's profit growth. So in the medium and long term, Blue Moon is bound to find new market space in order to cultivate new profit growth points.

However, according to the "Blue Chip Enterprise Review", it is still difficult for Blue Moon to continue to sink into the third and fourth tier cities. Coupled with the threat of substitutes, the development space will be further hindered.

Data shows that more and more consumers are trying laundry detergent in all first- and second-tier cities in China. With the overall improvement of people’s living standards, the main battlefield of laundry detergent is shifting from first- and second-tier cities to lower-tier cities.

Data source: Qianzhan Research Institute

Due to serious homogeneity of laundry detergents and unclear differentiation, people in third-tier and other cities are highly sensitive to the price of laundry detergents and are more inclined to buy cheaper laundry detergents. Price wars Hard to avoid.

Currently, Blue Moon is in a dilemma. On the one hand, Blue Moon has a single brand of laundry detergent. If it wants to accelerate the sinking of third-tier and other cities, Blue Moon needs to reduce the gross profit margin of its own products. If it wants to maintain its products High gross profit will result in loss of market share.

On the other hand, the company's laundry detergent is also being threatened by substitutes. The emergence of laundry beads is deeply loved by young people. It has the characteristics of convenience, high concentration, high cleaning power, good fragrance and quality, and has gradually become the new favorite of clothing cleaning.

Currently, Blue Moon does not have any laundry beads products, but the impact of laundry beads on laundry detergent has already appeared. From the data of Blue Moon and Liby’s Tmall official flagship store, the number of fans of Liby’s official flagship store is 181 million, the best-selling product is laundry gel beads, with monthly sales of 50,000+, and Blue Moon official flagship store has 2.5 million fans. The best-selling product is lavender-scented laundry detergent, and the price of both products is around 60 yuan, with monthly sales of 1 Ten thousand+.

Of course, the threat of laundry beads replacement needs to continue to be monitored. In this regard, "Blue Chip Enterprise Review" has asked Blue Moon Group's investor relations email address how the company will respond to the impact of laundry beads, but no feedback has been received as of press time.

Hillhouse has persisted for 10 years, who will "take over"?

Once upon a time, Zhang Lei said firmly, "Don't make short-term money, but have the courage to enter new categories, defeat multinational companies, and become the number one laundry detergent in China."

Indeed, relying on a series of "combination punches" ", Blue Moon has become the "biggest laundry detergent" in China, but the company's stock price has continued to fall, and investors are not buying it.

Hillhouse Capital is Blue Moon’s earliest and largest institutional investor. As early as 2010, Hillhouse invested US$45 million in Blue Moon’s Series A financing, and added an additional US$1.03 million in 2011. After

was listed, Pan Dong, the wife of Blue Moon founder Luo Qiuping, held a total of 77.36% of the shares, and Hillhouse held 9.27%. Based on the current stock price, this means that Pan Dong is worth more than 50 billion Hong Kong dollars, and the value of Hillhouse’s equity is also 6 billion Hong Kong dollars.

Although this investment brought huge returns to Hillhouse Capital. However, there is no optimism for shareholders who bought Blue Moon at the beginning of the year.

"Blue Chip Enterprise Review" believes that in the short term, Blue Moon laundry detergent sales have slowed down and various costs have been compressed to the "extreme". In the long term, it will be difficult for products to reach third- and fourth-tier cities, and it will be difficult for net profits to continue to grow in the future.

Faced with this situation, it will be a difficult choice for Hillhouse to continue to build "China P&G" or to find a "successor".

Articles produced by Ruilan Finance are for reference only. The market is risky and investment needs to be cautious.

Source: Ruilan Finance (ID: ruilan808)