Makeup Artist Mao Geping Close To Billionaire Ahead Of Hong Kong IPO

Mao Geping, the Chinese makeup artist who established an eponymous cosmetics brand more than 20 years ago, is on the cusp of becoming a billionaire as his company prepares for a Hong Kong initial public offering that could value it at up to $1.8 billion.

The 60-year-old chairman of the company has amassed wealth of $830 million mostly based on a family stake in Mao Geping Cosmetics Co., according to Forbes estimates. Headquartered in the scenic city of Hangzhou, the company is trying to raise up to $270 million by selling 70.6 million shares in a range of HK$26.3 ($3.40) to HK$29.8 apiece, according to its prospectus.

At the higher end, HK$29.8, the company would have a market capitalization of $1.8 billion.

Mao Geping Cosmetics will use the proceeds for branding, boosting its sales network and overseas expansion, the prospectus says. Six cornerstone investors including private equity firms CPE Investment and Loyal Valley Capital have agreed to purchase $100 million worth of shares, according to the prospectus. Trading is expected to start on Dec 10.

The company didn’t respond to an e-mailed request for comment. Mao, who worked for a local opera troupe for five years before establishing his cosmetics brand in 2000, now enjoys some advantages over premium international rivals such as Estée Lauder and L’Oreal, says Hwee Chung, Shanghai-based China beauty sector director for research firm Kantar Worldpanel.

The company’s products can be more suitable to Asian consumer’s skin, she says. Mao Geping Cosmetics is also riding a trend called guo chao–a term that roughly refers to consumer’s growing preference for local brands versus foreign ones, as they have come to believe domestic products are just as good.

“Before they [Chinese consumers] didn’t have a lot of trust in Chinese brands,” says Chung. “Now the trust that Chinese brands can deliver what they want is there. And Mao Geping is able to continually deliver in terms of quality satisfaction and product innovation.”

Mao himself gives makeup tutorials and tips on social media platforms such as Douyin, TikTok’s sister app in China. The entrepreneur, who according to the prospectus studied Chinese opera performance at the Zhejiang Vocational Academy of Art, received makeup-related training in his early 20s, according to local media reports. Using his company’s products, Mao has over the years done makeup for many Chinese celebrities and social media influencers. He is so good that some internet users joke that Mao can perform the feat of huan tou—to make someone look completely different.

Those selling points have translated into rapidly growing revenue. In the first six months of this year, the company’s revenue jumped 41% year-on-year to almost 2 billion yuan ($271 million). Net profit was 492.5 million yuan, also up 41% from the same period a year earlier. Mao Geping Cosmetics depended on its premium brand for over 99% of sales, but it also generated revenue from Love Keeps, a mass market cosmetics brand it launched in 2008.

Mao runs the company with his family. His wife and two sisters are shareholders and sit on its board of directors. An executive named Song Hongquan, who according to the prospectus bears no relationship to the family, is president.

Mao Geping Cosmetics tried to list on mainland bourses as early as 2016, but no attempt panned out. Securities regulators in mainland China once asked the company to disclose more information about its suppliers, shareholding structure and sales model. Earlier this year, Mao Geping Cosmetics withdrew an application for a listing in Shanghai. It opted for Hong Kong partially because the city offers direct access to international capital markets, the company wrote in its prospectus. The previous listing attempts won’t adversely affect the Hong Kong IPO, according to the company.

Mao Geping Cosmetics has challenges on other fronts as well. China’s economic malaise has hurt consumption across the board and it remains uncertain whether the company can maintain rapid growth, says Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International.

Competition is also fierce. Although Mao has managed to carve out a niche, his brand only had 1.8% of China’s premium beauty market in terms of retail sales in 2023, according to Frost & Sullivan data cited in its prospectus. The top five brands—all international—collectively had 32.1% of the market, according to the prospectus. Mao Geping ranked 7^th in terms of market share, its prospectus shows.

To survive such competition and grow more, the company must continue to engage consumers and spend on marketing, says Kantar Worldpanel’s Chung.

“Consumers are becoming fickler than ever,” she says. “They are becoming more pragmatic and careful as to where they choose to spend money. It is very challenging.”