Dark Market Trading | Oversubscribed by 5,662 times, Hong Kong star Guo Jinan establishes health brand today in the dark market

Annual income exceeds HKD 250 million, "TVB Emperor" Guo Jinan "exits" before the IPO

According to the prospectus, HERBS GROUP was founded in 1999 and is a diversified supplier of health and beauty products in Hong Kong, China. In the past years from 2021 to 2023 and the first half of 2024, HERBS GROUP's operating revenues were HKD 189 million, HKD 208 million, HKD 251 million, and HKD 118 million, with corresponding net profits of HKD 23.181 million, HKD 27.972 million, HKD 39.502 million, and HKD 7.483 million.

It is worth mentioning that the brand was co-founded by the famous TVB star Guo Jinan and his sister Guo Zhiyin, with the former being the actor of the popular Hong Kong drama "The Gentle Crackdown." During the brand's development, Guo Jinan frequently attended store opening ceremonies and filmed product advertisements to enhance the brand awareness of HERBS GROUP through his personal influence.

The star halo of the "TVB Emperor" undoubtedly attracted considerable attention to HERBS GROUP in its early days, but during the group's development, Guo Jinan's shareholding ratio has been declining. According to public information, as of March 2022, Guo Jinan gradually transferred all his shares to his sister Guo Zhiyin and brother-in-law Li Risheng, completely exiting the shareholder ranks of HERBS GROUP, which thus became a truly "couple-run brand."

Guo Jinan, who has exited the shareholder ranks, currently serves as a non-executive director of the group, mainly responsible for providing strategic advice for the company's marketing business. Moreover, on HERBS GROUP's official website, he still appears as the brand's "star spokesperson." As for the reasons behind Guo Jinan's complete exit from the group's shareholder ranks, there were speculations in the Hong Kong media at the time that it was related to changes in his marriage.

According to a report by Frost & Sullivan, in 2023, among international and local suppliers in the Hong Kong health product consumption market, HERBS GROUP ranked in the TOP 5 in terms of retail sales of immune system health products, with a market share of approximately 4.9%. If ranked by retail sales of health products, HERBS GROUP's position drops to tenth, with a market share of about 3.6%.

NMN products sold fifty million in three years, highly dependent on "big clients"

From the perspective of product matrix, the currently active nutritional health product companies in the market can be roughly divided into "small but beautiful" brands focusing on niche demands and "large and comprehensive" brands pursuing category coverage, with HERBS GROUP undoubtedly belonging to the latter. Its business areas cover multiple fields, including nutritional health products and beauty skincare products, with over 70 products under its brand and eight proprietary brands incubated.

According to the prospectus, in 2023, the revenue from HERBS GROUP's health product business accounted for as much as 90%, making it the core business segment of the company. In terms of segmented product lines, the revenue from immune system and post-COVID care products accounted for 33.2%, being the largest contributor to the segment's revenue; revenue from metabolic syndrome care products accounted for 18.9%; other health products accounted for 15.8%; and revenue from male and female health and anti-aging products each accounted for 11.5%It is worth noting that in the fiscal year 2023, the group's anti-aging NMN products achieved a gross profit margin of 84.6%, with an average product price of HKD 501.7 per box. Both the gross profit margin and product pricing are the highest among its products. From the fiscal year 2021 to the fiscal year 2023, HERBS GROUP sold a total of 127,000 anti-aging products, generating total sales revenue of HKD 58.897 million.

While focusing on anti-aging products, the group also launched a pet health product brand "Enchong" in April this year, continuously expanding its product matrix.

The "large and comprehensive" product matrix of HERBS GROUP also has a significant characteristic of "relying on major clients" in its distribution channels. According to the prospectus, the sales channels of HERBS GROUP are divided into three main categories: retail, wholesale, and consignment. Among them, the revenue from retail business accounts for 49.9% of total revenue, while the revenue from wholesale business accounts for 47%.

In the wholesale business segment, HERBS GROUP established a business relationship with "Client A" in the year following its establishment, and the cooperation has continued for over 20 years. This partner, known as "Client A," has a total of 300 stores in Hong Kong and is one of the largest health product chain retailers in Hong Kong. From 2021 to 2023, the revenue generated from sales to Client A was HKD 90.3 million, HKD 90.2 million, and HKD 111 million, respectively, accounting for nearly 50% of the group's total revenue.

As HERBS GROUP is about to open dark pool trading, we will wait and see how it performs.

Source: Nutritional Products Intelligence, Internet