New stock preview | Positive holding: From "Inflammation off" to the capital market: The breakthrough and limitations of a Hong Kong health product leader.

Another Hong Kong health product market to go to Hong Kong IPO. On July 29, Genuine Holdings Limited (hereinafter referred to as Genuine Holdings) submitted an application for listing on the main board of the Hong Kong Stock Exchange, with Bo Capital Limited as its exclusive sponsor. The prospectus shows that Genuine Holdings is mainly engaged in the development, sales, marketing, and distribution of health and beauty supplements and products in Hong Kong. The group outsources the production of products to suppliers (including manufacturers) and mainly distributes the group's products through Watsons' retail stores in Hong Kong under the group's own brand and third-party brands. According to Frost & Sullivan data, based on the retail value of health and beauty supplements and products in 2024, the group ranks seventh among all local health and beauty supplement and product suppliers in Hong Kong, with a market share of approximately 1.6%. Revenue growth fails to conceal profit fluctuations In the local health and beauty supplement and product market, the group has a diverse product portfolio, covering the needs of men, women, and children of all ages, and focusing on niche markets related to deer health supplements, joint and pain products, and topical pain relief products. According to Frost & Sullivan data, in 2024, the group ranked first in the retail value of deer-related health supplements and products in Hong Kong, with a market share of approximately 29.4%; the joint and pain products and topical pain relief products under the group's own brand "Yan Tong Xiao" were among the top five best-selling joint and pain supplement and products in Watsons' retail stores in 2024. As of the last practicable date, the group operates a total of six own brands, namely (a) "Genuine"; (b) "Yan Tong Xiao"; (c) "Organicpharm"; (d) "Nippo-do"; (e) "Vitaregen"; and (f) "Profix"; and a total of six third-party brands, including (a) "iPro+"; and (b) "Boiron". In terms of performance, for the three financial years ending March 31, 2025 (hereinafter referred to as the reporting period), the company achieved revenues of approximately 43 million Hong Kong dollars, 110 million Hong Kong dollars, and 130 million Hong Kong dollars; during the same period, net income and comprehensive income totaled approximately 11.31 million Hong Kong dollars, 35.48 million Hong Kong dollars, and 36.257 million Hong Kong dollars respectively. It is worth noting that the gross profit margin has been decreasing year by year, reaching 81.59%, 78.62%, and 75.02% respectively; the net profit margin first rose and then fell, reaching 32.37% in 2024 and falling to 27.84% in 2025, reflecting that the company's profit efficiency indicators fluctuated while income and scale indicators grew. During the reporting period, the company's revenue mainly came from the sales of own and third-party brand health and beauty supplements and products, accounting for approximately 98.8%, 98.8%, and 98.2% of the total revenue respectively. Almost all revenue came from sales in Hong Kong. In addition to selling health and beauty supplements and products, the company also generated revenue by providing sales promotion services and management and packaging services to third-party brand owners or brand groups. It is understood that Genuine Holdings' "hidden killer" eroding profits is costs. Specifically, sales and administrative expenses have soared: sales and distribution expenses have grown 2.4 times in three years, accounting for 28% of revenue in 2025 (compared to 34.5% in 2023), although the percentage has slightly decreased, the absolute value increase rate (19% year-on-year in 2025) is the same as the revenue growth rate, indicating that market promotion efficiency has not significantly improved. Administrative expenses have grown at an average rate of 50% per year, exposing risks of management redundancy. In addition, financial costs are high: although financial costs decreased slightly in 2025, they increased by 113% over the three years, possibly due to debt expansion. If interest rates rise in the future, profits may be further squeezed. The financial report of Genuine Holdings confirms the business paradox of "easy growth, difficult profitability". In the capital market, such high-growth companies often receive short-term valuation premiums, but if they cannot solve the deep-seated contradictions of costs and efficiency, they may find it hard to escape the outcome of "increasing revenue without increasing profits". The "hidden champion" and the breakthrough challenge under Watson's channel dependence According to Frost & Sullivan data, the Hong Kong health product and beauty market in 2024 exhibited characteristics of an "oligopoly": First, the market share of the top 10 enterprises is 31.1%, with Genuine Holdings ranking seventh with a 1.6% share, belonging to a typical "long-tail player"; second, the channels are highly concentrated, with Watsons accounting for 34.4% of retail market share, almost monopolizing terminal traffic. In this landscape, the essence of Genuine Holdings' business model is that of a "supply chain enterprise" rather than a brand owner - its fate is deeply tied to Watsons. The advantage lies in the fact that the company can achieve "low-risk growth". On the one hand, with a channel moat, Watsons has 346 stores in Hong Kong and Macau (as of June 2025), providing a ready-made sales network for Genuine Holdings and saving huge costs of building its own channels. The decrease in the proportion of sales and distribution expenses in the financial report (28% in 2025 vs. 34.5% in 2023) confirms the channel synergy effect. On the other hand, with strengthened regional brand awareness, as the seventh largest local supplier in Hong Kong, the company may gain priority display rights within the Watsons system, forming a regional "channel brand". However, the disadvantage lies in the lack of bargaining power under a single channel. As a channel leader, Watsons may squeeze supplier margins. Genuine Holdings' gross profit margin has declined by 6.6 percentage points over three years (81.6% to 75%), partly due to channel cost transfers. The Hong Kong health product market is limited (approximately 7 billion Hong Kong dollars in 2024), and Watsons' market share has reached its peak (34.4%); it is difficult to break through the scale bottleneck relying on a single channel. Focusing on industry growth, the Hong Kong beauty supplement and product market recorded sales of 2,375.0 million Hong Kong dollars in 2020, and increased to 2,709.0 million Hong Kong dollars in 2024, with a compound annual growth rate of approximately 3.3%. The return of travelers after the COVID-19 outbreak is revitalizing the purchasing power of offline beauty chain stores and tourist retail stores, driving retail value growth, especially in 2023 and 2024. Looking ahead, it is expected that sales in this category will reach 3,537.6 million Hong Kong dollars by 2029, implying a compound annual growth rate of 5.5% between 2025 and 2029. The future five-year 5.5% compound growth rate of the Hong Kong health product market provides Genuine Holdings with a moderate industry dividend. But the real test lies in whether the company can use IPO funds to complete the transformation from being a "Watsons supplier" to a "health ecosystem builder".