Newtimespace | IPO Decoding Driven by "Flagship Products": Domestic Beauty Brand Dream Garden Submits Listing Application to HKEX
Shandong Huawutang Cosmetics Co., Ltd., the entity behind the domestic beauty brand Dream Garden, recently submitted a listing application to the Hong Kong Exchanges and Clearing Limited (HKEX). According to the Frost & Sullivan report, based on retail sales in 2024, the company ranks first among domestic brands in China across three categories: body lotion, body scrub, and facial cleansing mousse. The prospectus shows that the company recorded revenue of RMB 1.895 billion in the first nine months of 2025, representing a year-on-year increase of 76.7%, with a net profit of RMB 125 million during the same period. Notably, revenue from its hair care segment surged by 496.1% year-on-year, emerging as a new growth driver.
Growth Dynamics: Dramatic Category Restructuring and the Balance between "Volume Expansion via Price Reduction"
The core of the company's growth story lies in the successful restructuring of its product category mix. In 2023, its revenue was dominated by facial care (50.1%) and body care (43.5%). By the first nine months of 2025, however, hair care business rose abruptly, with its revenue share skyrocketing to 25.4%, while the share of facial care halved to 24.4%. This indicates that the company has successfully replicated its "flagship product" strategy from body care to the shampoo sector, but it also means that growth is extremely reliant on the explosive performance of a single new category.
More granular data reveals the quality of this growth: volume-driven growth far outweighs price-driven growth. In the first nine months of 2025, the company's total sales volume reached 88.01 million units, already exceeding the full-year sales volume of 2023 (54.78 million units). Nevertheless, the average selling price (ASP) of all three core categories showed a downward trend: the ASP of facial care products dropped from RMB 20.7 to RMB 16.5; the ASP of body care products edged down slightly from RMB 23.6 to RMB 23.0; even for the fast-growing hair care segment, its ASP fell from RMB 15.9 in 2024 to RMB 13.1, before rebounding to RMB 20.8 in 2025 through product upgrades. This clearly demonstrates that growth is achieved through a more cost-effective product portfolio and aggressive volume expansion, rather than an increase in brand premium.
Profitability Analysis: "Volume Growth with Price Decline" in Revenue Structure; Profit Improvement Backed by "Traffic Dependency"
Judging from the core data of the income statement,Dream Garden exhibits distinct characteristics of "revenue volume expansion and profitability improvement". From 2023 to 2024, the company's revenue stood at RMB 1.199 billion and RMB 1.499 billion respectively, with gross profit reaching RMB 789 million and RMB 933 million; net profit came in at RMB 20.504 million and RMB 49.413 million.
In the first nine months of 2025, its revenue surged to RMB 1.895 billion, a substantial year-on-year increase of 76.7%; gross profit hit RMB 1.2 billion, maintaining a healthy gross profit margin of 63.3%; ultimately, net profit reached RMB 125 million, with the net profit margin rising significantly from 1.7% in 2023 to 6.6% in the first nine months of 2025.
However, the engines driving revenue and profit growth are not the same. Revenue growth is mainly fueled by "volume expansion via price reduction": total sales volume surged from 54.78 million units in 2023 to 88.01 million units in the first nine months of 2025, while the average selling price (ASP) of multiple core categories trended downward, such as the ASP of facial care products dropping from RMB 20.7 to RMB 16.5. This implies that growth is achieved through larger sales volume and a more cost-effective product mix, rather than brand premium.
The improvement in profit margin is mainly attributed to expense amortization and structural optimization under economies of scale. But a closer look at the expense structure reveals the inherent characteristics of its business model: it is a business sustained by continuous and high "traffic costs".
Sales and marketing expenses are the absolute "cost center". In the first nine months of 2025, they amounted to RMB 896 million, accounting for 47.3% of revenue. Although the proportion decreased from 53.2% in 2023, the rapid growth in absolute terms (a year-on-year increase of 79.3%) was basically in sync with revenue growth. This directly confirms its "growth via traffic acquisition" model–every increment in revenue requires sustained and substantial marketing investment to drive.
In contrast, research and development (R&D) expenses remain low and their proportion is declining. In the first nine months of 2025, R&D expenses were RMB 28.14 million, with the expense ratio dropping from 2.4% to 1.5%. This stands in contrast to its title as a "National High-Tech Enterprise", suggesting that the company's innovation focuses more on product formula application, concept marketing, and rapid iteration, rather than underlying core technology R&D. Its competitive moat lies more in its ability to create blockbuster products and its channel operation efficiency.
Operational Underpinnings: Surging Inventory and Ambiguous Boundaries
Rapid growth has brought direct pressure to operations. The company's inventory balance surged from RMB 61 million at the end of 2023 to RMB 186 million at the end of September 2025, a growth rate far exceeding that of revenue. In the skincare industry, which features rapid product iteration and high obsolescence risks, such a large inventory poses severe challenges to the company's sales forecast, capital turnover, and impairment risk management.
Another noteworthy detail is the overlap between customer and supplier relationships. The prospectus discloses that some of the top five customers were also suppliers during the reporting period. The company explained that this was due to normal business activities such as paying promotion fees to online platforms or purchasing auxiliary materials from distributors. While such related transactions are common, their fairness and transparency will be key points of ongoing attention.
Industry Context: Opportunities and Gameplay in the Rise of Domestic Brands
The company is positioned in a window period where the penetration rate of domestic brands is on the rise. Reports indicate that in the body and hair care markets, domestic brands account for approximately 30%-34% of the market share, and their growth rate (CAGR 6.9%-7.5%) outpaces that of international brands (CAGR 4.9%-5.4%).Dream Garden has emerged as a beneficiary of this dividend, leveraging its precise insight into local consumers and flexible online marketing strategies.
For the proceeds from this IPO, the company stated that the funds will be used for R&D, omni-channel construction, and supply chain optimization. This is a targeted move to address potential shortcomings in its business model, such as "weak R&D", "over-reliance on online channels", and "inventory pressure".
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