Good News on Listing | Frost & Sullivan Assists Shubao International Group Co., Ltd. on Successful Listing in Hong Kong (2569.HK)

Shubao International Group Co., Ltd. (hereinafter referred to as 'Shubao International') plans to issue 250 million H shares for this listing, of which 90% will be international offerings and 10% will be public offerings. The maximum selling price per share is HK$0.6, with an estimated net raise of approximately HK$150 million.

During the process of listing on the Hong Kong Stock Exchange, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), helping the issuer communicate with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

• The company focuses on product categories with high market potential and strong growth, especially in the Eurasian markets where living standards and hygiene awareness are continuously improving;

   

• The company has established solid relationships with large retailers and well-known brands to work together with customers;

   

• The company continues to expand its D2C layout (directly targeting consumers) to increase market penetration;

   

• The company has strong operational efficiency driven by productive capabilities;

   

• The company is a Chinese personal hygiene product manufacturer in the Eurasian emerging markets. According to a Frost & Sullivan report, in 2023, among all disposable hygiene product suppliers in China, the company ranked second in terms of exports of disposable baby hygiene products to Russia;

The revenue generated from the production of disposable sanitary products (reflecting sales and production value) increased from approximately RMB 925 billion in 2019 to RMB 963 billion in 2023, with a compound annual growth rate of about 1.0%. It is expected that by 2028, it will further increase to approximately RMB 1136 billion, with an average annual compound growth rate of about 3.4% starting from 2023.

The export production and sales value achieved a significant increase, rising from about RMB 12.6 billion in 2019 to RMB 20.4 billion in 2023, with a compound annual growth rate of about 12.8%. It is expected that by 2028, it will reach about RMB 28.5 billion, with an average annual compound growth rate of about 6.9% starting from 2023. The proportion of export value in production and sales value increased from about 13.6% in 2019 to 21.2% in 2023, and is expected to reach about 25.1% by 2028.

Data source: China Pulp and Paper Association, General Administration of Customs, Frost & Sullivan analysis

The export market for disposable sanitary products for infant care is one of the fastest-growing segments, increasing from about RMB 7 billion in 2019 to RMB 12 billion in 2023, with a compound annual growth rate of about 14.4%. It is expected to reach RMB 17 billion by 2028, with an average annual compound growth rate of about 7.2% starting from 2023.

Source: General Administration of Customs, Frost & Sullivan analysis

The main export destinations of disposable sanitary products in China are ASEAN, the United States, and Russia. The proportion of exports to these three regions increased from 19.7%, 10.7%, and 4.6% in 2019 to 31.6%, 10.4%, and 9.1% in 2023, respectively. It is expected that by 2028, the proportions of these three markets will be 33.0%, 13.0%, and 11.0% respectively. The driving force for growth mainly comes from China's production and technological progress as well as strengthened trade relations.

Source: General Administration of Customs, Frost & Sullivan analysis

China's exports of disposable sanitary products to Russia have increased significantly, rising from approximately 600 million yuan in 2019 to about 1.8 billion yuan in 2023, with a compound annual growth rate of up to 31.6%. It is expected that by 2028, exports will reach approximately 31 billion yuan, with a compound annual growth rate of about 11.5% starting from 2023.

During the period from 2019 to 2021 (before the implementation of international sanctions), China's annual exports to Russia remained stable at around 500 million to 600 million yuan. After the international sanctions in 2022, China's exports soared significantly to about 1.4 billion yuan (a year-on-year increase of 133.3%), and further grew to 1.8 billion yuan (a year-on-year increase of 28.6%) in 2023. The main reasons for this growth include an increase in orders from local retailers and diaper brands after global brands withdrew from Russia. As local brands prefer to cooperate with independent contract manufacturers rather than OEM partners of leading global companies, this trend has driven the export growth of Chinese independent producers.

Despite the low birth rate in Russia, demand for local diaper brands and retailers is strong, especially benefiting from raw material shortages and rising logistics costs, which have driven growth in demand for branded products.

Source: General Administration of Customs, Frost & Sullivan analysis

Disposable sanitary products include disposable baby and child care products, disposable feminine care products, and disposable adult incontinence products. The decline in China's birth rate has led to a significant contraction in the population structure, with the number of people aged 0 to 6 years decreasing from about 9.76 million in 2019 to about 7.07 million in 2023 (compound annual growth rate -7.7%). It is expected that by 2028, this number will further decrease to about 4.68 million (compound annual growth rate -7.9%). The group aged 0 to 3 years is directly affected by the decline in birth rates, decreasing from 4.68 million in 2019 to 2.91 million in 2023 (compound annual growth rate -11.2%), and is expected to further decrease to 2.14 million in 2028 (compound annual growth rate -6.0%). Affected by the continuous decline in China's birth rate and the severe impact of the COVID-19 pandemic, from 2019 to 2023, the retail sales of disposable baby and child care products in China decreased from about 75.5 billion yuan to 50.4 billion yuan, with a compound annual growth rate of about -9.6%. Therefore, the retail sales of the disposable sanitary products market decreased slightly from about 142.1 billion yuan in 2019 to 130.9 billion yuan in 2023, with a compound annual growth rate of about -2.0%. It is expected that by 2028, it will reach about 148 billion yuan, with a compound annual growth rate of about 2.5% starting from 2023.

The adult incontinence disposable market is one of the fastest-growing segments within the disposable sanitary products market. Its retail sales increased from approximately RMB 9.4 billion in 2019 to RMB 14.2 billion in 2023, with a compound annual growth rate of about 10.9%. It is expected to reach approximately RMB 18.4 billion by 2028, with a compound annual growth rate of about 5.3% starting from 2023. The main users of adult incontinence disposable products are people aged 65 and above. As physical functions decline with age and incontinence becomes more common, demand is growing. With the increase in life expectancy, China's elderly population increased from approximately 1.777 billion in 2019 to 2.168 billion in 2023 (with a compound annual growth rate of 5.1%), and is expected to exceed approximately 2.418 billion by 2028 (with a compound annual growth rate of 2.2%). In 2023, the elderly population accounted for about 15.4% of the total population, and is expected to increase to about 17.2% by 2028.

The market for disposable feminine care products is relatively stable, with sales increasing from about 572 billion yuan in 2019 to 663 billion yuan in 2023, a compound annual growth rate of about 3.8%. It is expected to reach about 716 billion yuan by 2028, with a compound annual growth rate of about 1.5%. The main consumer group is women aged 12 to 49, and as the age of menarche is getting earlier and the age of menopause later, market demand has also expanded accordingly. According to the data on female population divided into five age groups (i.e., 10 to 14 years old, 15 to 19 years old... 45 to 49 years old) released by the National Bureau of Statistics of China, the female population aged 10 to 49 decreased from about 3.783 million in 2019 to 3.52 million in 2023 (compound annual growth rate -1.4%), and is expected to further decrease to about 3.41 million by 2028 (compound annual growth rate -0.6%). Nevertheless, the proportion of the female population in the total population is expected to remain relatively stable, at about 25.0% in 2023 and 24.3% in 2028.

From 2019 to 2023, the compound annual growth rate of China's disposable sanitary products market was negative, mainly due to the contraction of the infant and toddler care disposable sanitary products market from 2019 to 2022 and the impact of the COVID-19 pandemic. The infant and toddler care disposable sanitary products market decreased from about RMB 755 billion in 2019 to RMB 505 billion in 2022, with a compound annual growth rate of about -12.5%. In 2023, the market scale of infant and toddler care disposable sanitary products was RMB 504 billion, a slight decrease of only 0.2% compared to 2022. In contrast, the market for female care disposable sanitary products and adult incontinence disposable products during this period was growing.

After the implementation of the three-child policy in August 2021 and the government's introduction of multiple policies to support childbirth, the downward trend in birth rates is expected to ease and gradually reverse. In addition, with the improvement in purchasing power among Chinese consumers and the increasing demand for disposable sanitary products for high-quality infant care, prices of higher-end baby walkers have emerged in the Chinese market for disposable sanitary products for infant care, favored by the market due to their distinct functional characteristics. The rebound in birth rates and the increased frequency of baby walker consumption are expected to drive the development of the disposable sanitary products market in China between 2023 and 2028.

Data source: China Pulp and Paper Association, National Bureau of Statistics, Frost & Sullivan analysis

China's disposable sanitary products for infant care have about 300 participants in Russia's export market, which is highly concentrated. In 2022 and the first three quarters of 2023, the combined export value of the top three suppliers of disposable sanitary products accounted for approximately 56.4% and 77.0% of the market share respectively.

In 2022 and 2023, among all disposable sanitary products suppliers in China, our company ranked second in terms of export volume of disposable sanitary products for infants and children to Russia. Our revenue mainly comes from contract production business. Due to international sanctions on Russia, revenue from Russia was substantial and has continued to increase during the previous reporting period.

The baby care disposable sanitary products sold in Russia by the world-leading diaper company are not entirely domestically produced. As Chinese companies continuously accumulate rich production experience and their technology becomes increasingly mature, they are now able to produce high-quality products that meet international standards. Therefore, well-known diaper companies such as Company C (a subsidiary listed on the New York Stock Exchange, specializing in various personal care/consumer goods, personal care, and sanitary products) and Company G (a subsidiary listed on the Tokyo Stock Exchange, specializing in various personal care and pet care products) have cooperated with Chinese OEM manufacturers.

In addition, economic sanctions against Russia may disrupt the raw material supply chain or increase raw material prices, thereby raising the production costs of local producers. In contrast, China has a mature supply chain and strong production capacity and can maintain stable supplies to Russia even under sanctions. This gives Chinese infant and toddler care product manufacturers competitiveness in the Russian market.

● Cost competitiveness

China's manufacturing industry benefits from cost advantages, including low labor costs and economies of scale. This advantage enables Chinese disposable sanitary products manufacturers to produce at a lower cost than many other countries. Therefore, Chinese products are competitive in the global market and attractive to buyers seeking affordable disposable sanitary products.

● Technological progress

Continuous investment in research and development has consolidated technological innovation in China's disposable sanitary products industry. The upgrading of machinery, production processes, and materials has improved product quality, efficiency, and innovation capabilities. The progress in technical strength has enabled producers to produce products that meet international standards, ensuring reliability and satisfying the needs of consumers around the world.

● Trade partnerships and market penetration

China actively promotes trade partnerships for single-use sanitary products and expands market coverage. Investments in emerging markets or consolidation of existing markets have significantly increased China's export markets for single-use sanitary products. An effective distribution network, targeted target markets, and an understanding of local consumer preferences have driven export growth. In 2023, China exported single-use sanitary products to 193 trading partners. Market penetration rate was calculated by dividing China's export value of single-use sanitary products by the global market size of single-use sanitary products outside of China, increasing from 0.9% in 2019 to 1.4% in 2023.

● Moving towards sustainable development and eco-friendly products

Global attention to the environment has driven a shift towards environmentally friendly products, including China's exports of disposable sanitary products. Producers will invest in the research and development of environmentally friendly and biodegradable materials to reduce their impact on the environment, and adopt environmentally friendly production processes to meet consumers' demand for environmental protection.

● Innovate through custom products

China's sanitary products exports will give priority to customization and innovation, using advanced materials and technologies to customize products according to different consumer needs to enhance global competitiveness. These customizations will open up markets for its own brands and contract production.

● Demand continues to expand

The improvement in health and hygiene awareness has brought opportunities to China's disposable sanitary products export market. With the enhancement of personal health care awareness, especially in emerging markets, there is an increasing demand for high-quality disposable sanitary products. China can provide diverse and affordable products targeting different consumer groups, taking advantage of this expanding market.

● Intense market competition

The export market for disposable sanitary products in China faces fierce competition from domestic and foreign producers. Products produced in different countries are highly homogenized, making price, quality, and brand key competitive factors. This competition requires continuous innovation, cost management, and differentiated strategies to maintain market share.

●Quality and compliance standards

Meeting international quality standards and complying with regulations remain a major challenge for Chinese manufacturers. In different export markets, maintaining strict quality control and compliance with regulations can be complex. To ensure consistent quality, safety, and certification requirements across regions, manufacturers need to invest a significant amount of resources in research and development, testing, and production.

●Large initial investment

The production of disposable sanitary products is a capital-intensive industry, requiring new entrants to make substantial initial investments in production equipment, raw materials, and production line construction. In addition, manufacturers also need to continuously invest in technological upgrading and product research and development.

●Technical knowledge and production experience

The production of disposable sanitary products involves complex processes, including raw material selection, absorption performance optimization, and product design. Producers need to master relevant technical knowledge to ensure that product quality meets domestic and international standards as well as consumer expectations.

● Brand Building and Marketing

In a highly competitive market, establishing a brand and increasing awareness are key to success. New entrants need to invest resources in marketing and brand building to attract consumers and build a loyal customer base, and customize marketing strategies according to local consumption habits. Given that existing brands have already occupied market share, new entrants need to develop differentiated strategies to stand out.